Biodiversity Obligations in Financial Decision-Making – From Principle to Operation

Biodiversity finance is emerging as a critical component of sustainable finance frameworks, yet the

allocation of responsibility within financial institutions remains conceptually and operationally

underdeveloped. While financial actors have long been perceived as causally distant from

environmental harm, this assumption is increasingly challenged as biodiversity loss generates

physical, regulatory, transition, and systemic risks. Recent regulatory developments in the EU, and

evolving approaches to nature-related risk assessment, signal a shift from voluntary stewardship

toward more binding expectations, even though uptake and acceptance—witness the debate

around the CSDDD—remain highly contested. These developments raise fundamental questions

about how financial institutions should operationalise biodiversity-related accountability, assess

nature dependencies, and embed ecological value in financial decision-making and long-term value

creation.

This paper examines these shifts through an interdisciplinary and practice-informed analysis. It is coauthored

with a practitioner who has been closely involved in developing sustainability-linked

financing instruments within a global financial institution. Pairing insider experience with a valuesbased

ethical perspective, the paper offers a grounded account of how regulatory expectations,

fiduciary mandates, disclosure obligations, and emerging biodiversity frameworks are interpreted

and negotiated within daily financial operations. Drawing on insights from ethics, corporate social

responsibility, and organisational practice, we explore how financial institutions can meaningfully

shape biodiversity-positive markets by integrating biodiversity risks and impacts into lending,

underwriting, and investment screening.

Using this unique practice-and-values methodology, we evaluate the potential of emerging

mechanisms such as nature credits, taxonomies, biodiversity KPIs, transition plans and disclosure

frameworks. We assess how tensions between financial logics, risk-based approaches, and ecological

realities shape implementation. Particular attention is given to where responsibility sits across

governance structures, risk teams, and external partnerships (e.g. bank-client relationships), as well

as how duty-based approaches intersect with market-led mechanisms.

By bridging theoretical scholarship, evolving policymaking, and practitioner insights, the paper aims

to advance dialogue on how biodiversity finance can move beyond symbolic compliance toward

transformative financial practice with an impact on the real economy. Our contribution seeks to

support scholars, policymakers, and industry actors working to align capital flows with ecologically

viable and ethically just futures.