What
‘Indebted to Nature’ is a joint study by De Nederlandsche Bank (DNB) and PBL Netherlands Environmental Assessment Agency exploring biodiversity risks for the Dutch financial sector.

Goal
The study sought to explore the extent to which, and how, the financial sector in The Netherlands is exposed to risks from the loss of biodiversity. The report attempted to categories in detail which business processes are most dependent on ecosystem services, and the finance sector companies which have the greatest impact on biodiversity. It set out to map the magnitude and type of financial risks that are generated by biodiversity for banks, pension funds, and insurance companies, identifying physical, transition, and reputational risks.

Recent activities
The study examined the biodiversity footprint of the financial sector in The Netherlands. Over 8,000 companies representing 80% of the portfolio of Dutch financial institutions were included in the analysis. The report identifies ecosystem services on which business processes are dependent by using the ‘ENCORE database’, which details the dependencies on 21 ecosystem services for 86 business processes. The report also described the exposure to transition risks, using two examples: possible expansion of protected areas, and measures taken in response to the Dutch nitrogen crisis.

Benefits
The report revealed the degree to which Dutch financial institutions are exposed to biodiversity risks, and the impacts of the finance sector on biodiversity. Key findings include:

• Within the financial sector of The Netherlands, a total of EUR 510 billion is highly or very highly dependent on one or more ecosystem services, representing 36% of the total EUR 1,421 billion portfolio examined.

• The biodiversity footprint of the financial sector of the Netherlands is comparable with the loss of over 58,000 km² of pristine nature. This is an area more than 1.7 times the land surface of The Netherlands.

• Dutch financial systems have a high degree of dependence on ecosystems which provide groundwater and surface water. Of every Euro invested, approximate 25% is dependent on these ecosystems.

• Dutch financial systems also showed a high dependence on ecosystems which provide pollination. Exposure of financial institutions to pollination dependent products totals EUR 28 billion.

The study has put biodiversity higher on the agenda of many financial institutions. The cooperation between PBL and DNB was innovative, the first time the two have cooperated so closely.

Lessons learned
Beyond the results of the study, the report resulted in a number of follow-up actions:

• Recommendations from the Dutch National Bank that financial institutions identify the physical, transitional, and reputational risks related to biodiversity loss. The National Bank now actively asks all financial institutions to report on biodiversity-related risks.

• Follow-up reports by the Banque de France, the European Central Bank, The Central Bank of Malesia, and others, as well as the establishment of the Taskforce for Biodiversity Loss and Nature-related Risks by the Network for Greening the Financial Sector (NGFS).

The report, and those subsequent studies and initiatives that is inspired, provides new understanding and evidence of the high dependence of financial sectors on nature. It also demonstrated the potential of Central Banks to influence wider financial sector behavior and practice, and that cooperation between science and practice is essential.

The study also shows that, despite concerns about lack of data and methodology, there is a lot of data already available that can be calculated now with existing methodologies. The subsequent reaction shows the power of coalitions, networks, and communities to scale-up and advance a topic on the agenda of financial institutions.

Relevant links and resources
The report: https://www.dnb.nl/media/4c3fqawd/indebted-to-nature.pdf

The report shows that our economy cannot exist without nature (Dasgupta report: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/962785/The_Economics_of_Biodiversity_The_Dasgupta_Review_Full_Report.pdf)