Biodiversity preservation is contending with climate change as the most pressing environmental challenge. The World Economic Forum’s Global Risk Report 2025 identifies biodiversity loss and ecosystem collapse as the second-greatest risk in the next 10 years.
Three interconnected aspects of our ecosystem are crucial for its health and stability as well as for the wellbeing of all life on Earth: species diversity, genetic diversity within species and ecosystem diversity, including different habitats such as forests, water bodies, wetlands and field crops. In this context, it is also important to take a closer look at the impact of climate change on ecosystems and the impact of ecosystems on climate change.
Biodiversity risks
Climate change poses two main risks to biodiversity. First, it is happening faster than many species can adapt to genetically or migrate away from. Second, the diverse interactions between species may be disrupted. This could have far-reaching economic consequences. For instance, agriculture could potentially suffer losses in products that depend on pollinators.
Healthy ecosystems absorb vast quantities of greenhouse gases and mitigate the effects of extreme weather events. They ensure that vital services such as clean water and fresh air will be available to everyone in the future.
Nature and climate are therefore inextricably linked. To meet the 1.5-degree Celsius target set out in the 2015 Paris agreement, it is essential to implement nature-based solutions that combine climate protection, biodiversity conservation and the sustainable use of natural resources. It is therefore crucial to prevent imbalances on both sides as these can trigger negative domino effects.
Nature in capital markets
For a long time, nature-related topics played only a minor role in capital markets. Many sustainable and responsible investors considered it marginally. The tide has been turning for some time now. Biodiversity is becoming an increasingly important issue, with investors and stakeholders recognising its importance and potential financial benefits.
Nature-related risks are not non-material risks, as is often cited, but rather extra-financial risks. Similar to climate risks, biodiversity risks can negatively impact individual companies, industries and entire economies, thereby affecting investors.
According to the WEF, more than half of global gross domestic product is moderately or highly dependent on natural assets and their ecosystem services. Research by S&P Global Sustainable1 finds that 85% of the companies that make up the S&P Global 1200 Index are significantly dependent on nature in their direct operations.
Central banks and financial supervisory authorities now regard biodiversity loss as a systemic risk and emphasise the need to assess and manage economic and financial risks associated with nature loss. The Network for Greening the Financial System presented a framework for nature-related financial risks in 2023, and the Organisation for Economic Co-operation and Development has also developed a framework for risk management.
Risks and opportunities
Where there are risks, there are also opportunities. Preserving nature is both an economic necessity and a significant business and investment opportunity.
Consequently, a variety of strategies have emerged for investing in nature on the capital market. These range from excluding companies whose business model endangers biodiversity to investing in companies whose products and processes positively impact nature or specialised financial instruments.
The most prominent example of the latter is the World Bank’s Rhino Bond to help increase the population of the endangered black rhino species in South Africa. It is an outcome-based sustainable development bond, with proceeds going to sustainable programmes run by the International Bank for Reconstruction and Development around the world.
However, instead of a traditional coupon going directly to the investors, $10m will be paid to conservation programmes in South Africa that aim to increase the number of black rhinos. Investors’ returns will be determined directly by population growth during the term of the bond.
Nature-positive business models
The development of new nature-related policies and guidance is creating newer investment opportunities as more and more issuers are adopting nature-positive business models.
The International Finance Corporation’s Biodiversity Finance Reference Guide provides a structured approach for investors to determine the permissible use of proceeds that constitute financing for biodiversity. Building on the Green Bond Principles and Green Loan Principles, the guidance includes an indicative list of investment projects, activities and components that contribute to the protection, conservation or enhancement of biodiversity and ecosystem services and the promotion of sustainable natural resource management.
The Task Force on Nature-Related Disclosures has developed a set of disclosure recommendations and guidelines for business and finance to enable companies to incorporate nature into their decision-making and support a shift in global financial flows away from nature-damaging outcomes and towards nature-positive outcomes.
Marcus Pratsch is Global Head of Sustainable Bonds and Finance at DZ BANK.
This article appeared in the most recent edition of the SPI Journal.
Interested in this topic? Subscribe to OMFIF’s newsletter for more.