This session explores how different financial actors engage with biodiversity in investment analysis, stewardship practices, and risk and regulatory frameworks. It aims to assess current approaches and identify opportunities for enhancing the role of capital markets in supporting biodiversity restoration and conservation.
We welcome both empirical and theoretical contributions. Topics of interest include, but are not limited to:
- Definitions and perceptions of biodiversity risk among capital market actors
- Pricing of biodiversity-related risks and opportunities in financial markets
- Integration of biodiversity considerations into institutional investment strategies
- Approaches to biodiversity risk management by insurers and banks
- Active ownership and stewardship strategies linked to biodiversity
- Use of biodiversity indices and benchmarks in portfolio construction and evaluation
- Comparison of biodiversity and climate considerations in investor decision-making
- Market-based incentives and disincentives for biodiversity-aligned finance
- Assessment of current incentive structures and their sufficiency in fostering biodiversity-positive investing
- Role of financial policymakers, regulators, and central banks in shaping biodiversity finance
- Market failures and corrective policy instruments
Biodiversity loss is now widely recognized as an environmental crisis of our times. Besides ecological harm, biodiversity loss carries substantial potential economic costs. In an earlier study we document elevated levels of toxic chemicals around plants operated by firms that have likely boosted earnings to meet earnings benchmarks (MEB). It appears that these firms release more toxic chemicals because they cut pollution abatement to save costs in those years.
In this study, we first show that the increased pollution leads to biodiversity loss. Drawing on a novel dataset of millions of birdwatching records, collected across the U.S. from 2002 to 2018, we document a significant decline of 2.4 percent in bird abundance (population size) and a significant decline of 0.5 percent in richness (number of unique species) near manufacturing plants that release toxic chemicals during MEB quarters.
We then document answers to three related issues. First, from a temporal perspective, we find that the impact on birds begins at least as early as the second month in the MEB quarter and is only partially reversed even 8 quarters later. Second, from a spatial perspective, the birds move to distant locations as they do not resurface in areas within a 10-kilometer radius of the plants Finally, we find cross-sectional variation in the impact of different emission types and across different bird species. The biodiversity loss varies with toxicity of emissions and bird traits, such as resident varieties are affected more than migratory ones and small birds more than large ones. Which confirms that the diversity loss is likely due to the chemical releases from these plants.
We provide the first large-scale evidence of biodiversity loss due to the activity of US public firms. The immediacy, magnitude, and persistence of biodiversity loss is remarkable given that the cause is a relatively innocuous effort to meet financial targets. If minor corporate activities are associated with so much discernable harm, the biodiversity harm from more substantial corporate events could be greater still. Our results strengthen the case for firm-level disclosure of biodiversity impact.
How to cite: Thomas, J., Yao, W., Zhang, F., and Zhu, W.: Silent Skies: The Biodiversity Consequence of Meeting Earnings Benchmarks , World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-14, https://doi.org/10.5194/wbf2026-14, 2026.
This paper provides the first rigorous assessment of the financial sectors’ resilience to biodiversity transition risk. A wide range of indicators point to rapid realized and projected biodiversity loss (IPBES, 2019). Biodiversity richness provides economic value through ecosystem services such as pollination. Biodiversity loss is, therefore, costly. The World Bank (2021) projects real GDP losses of expected biodiversity loss to equal $225 billion globally by 2030. Under stress scenarios assuming the collapse of ecosystem services, projected losses rise to $2.7 trillion. Therefore, financial regulators are concerned that these losses are large enough to cause financial instability.
To evaluate this risk, we employ two complementary approaches which allow us to get a very comprehensive picture of the potential losses from biodiversity transition risk: We provide a “bottom-up” stress test using comprehensive euro-area credit registry data (AnaCredit) and a market-based “top-down” stress test based on banks’ stock return sensitivities to biodiversity risk. Our findings reveal that industries exposed to biodiversity transition risk represent roughly 16% of total bank credit to non-financial firms, compared to 27% for those exposed to climate transition risk. Stress test scenarios indicate that even under severe conditions, additional losses in biodiversity-exposed industries would constitute only 0.27 to 0.4% of the financial system’s corporate loan portfolio. A top-down market-based approach yields similar results with capital short-falls following a biodiversity shock peaking at 0.1% of banks’ assets.
Overall, our results suggest that the financial stability risks associated with biodiversity transition remain moderate. Both our credit-based and market-based analyses find little evidence that biodiversity or climate transition risks significantly impact Euro Area banks. Importantly, biodiversity-related financial risks are consistently smaller than those from climate transition. Therefore, financial stability considerations should not impede the adoption of robust biodiversity policies. Instead, effective biodiversity conservation should be pursued as an essential component of sustainable economic growth.
How to cite: Arlt, S., Berg, T., Hut, X., and Streitz, D.: A Biodiversity Stress Test of the FinancialSystem, World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-17, https://doi.org/10.5194/wbf2026-17, 2026.
Abstract
This study focuses on the consequences of the threat of biodiversity loss for bank lending in the US economy. Enlarged biodiversity risks are expected to reduce bank lending to biodiversity risk exposed industries in order to reduce the expected non-performing loans due to biodiversity losses. Accordingly, we examine the role of biodiversity risk in bank lending growth. Thus, the study fills an important gap in the literature and answers the call by Karolyi and Tobin-de la Puente (2023) who argue that the biodiversity-related financial risks have not been adequately framed. The study contributes to the literature on environmental risks in banking and augments the studies of Becker et al. (2025), Bruno and Lombini (2023), and Aslan et al. (2022). A key strength in our study is the use of county-level data.
Our sample consists numerous US banks over the 2010–2020 period. As the biodiversity measure, we use a biodiversity index developed by Giglio et al. (2020). The bank-specific data is based on the county of domicile. This strategy improves the precision of the results because differences in biodiversity risk are much larger between counties than between states. Our results lend support that banks consider biodiversity risks because increasing biodiversity risks reduce bank lending growth. Along to Becker et al. (2025) this lend support that banks incorporate nature-related information into their financing decisions.
Our results reveal that especially smaller banks are more exposed to biodiversity risks and especially in the latter half of the 2010s. This may be an implication of the increasing awareness of biodiversity-related matters in the 2010s and that the lending growth of the larger banks is not affected by biodiversity risk. The latter might stem from the fact that larger banks have more diversified banking operations and are hence less exposed to local biodiversity risks than those of smaller community banks. Overall, the results strengthen the importance of preserving biodiversity because losses in diversity ultimately lead to losses in economic activity.
JEL codes: G2, G21, Q53, Q54, Q56
Keywords: banks, lending, bank risk, biodiversity risk
How to cite: Heimonen, K., Lehkonen, H., Meriläinen, J.-M., and Kamburugamuwa Loku Acharige, C.: Impact of Biodiversity Risk on Bank Lending, World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-463, https://doi.org/10.5194/wbf2026-463, 2026.
How do international investors adjust portfolios in response to biodiversity risk? Using monthly data on investment fund portfolios from the commercial data provider EPFR Global and a difference-in-differences identification strategy, we show that the 2021 Kunming Declaration led fund managers to reallocate portfolios from high-biodiversity risk countries to less risky ones, while ultimate fund investors remained unresponsive. Fund managers reduced exposures to extremely high biodiversity risk without seizing low biodiversity risk as an opportunity for profit, characterizing biodiversity as downside risk factor. In economic terms, our estimates imply a decrease in portfolio capital flows into high-risk countries of up to 0.46 billion USD, or 0.45% of the median country-level annual GDP in the sample. Actively managed funds’ portfolio allocations are more sensitive to biodiversity risk shocks, as allowed by a higher tracking error relative to benchmark-bound ETFs. Moreover, funds are more likely to tilt portfolios in favor of less risky countries if the pre-KD country-specific position was underweight relative to a fund’s historic allocation. Funds with a larger fraction of share classes marketed to retail instead of institutional investors also reallocate portfolios more significantly. This is consistent with the notion that institutional investors pursue long-term investments, resulting in lower sensitivities to biodiversity risk materialization. We further show that investment funds drive cross-country spillovers as the reallocation triggers significant capital flows benefiting low-biodiversity risk countries in the same geographic region, but outside of a fund’s hitherto established portfolio. Using a novel measure of legal action to protect nature, we demonstrate that countries taking more legal acts are partially shielded from funds reducing their exposure to high-biodiversity risk countries. Policies only indirectly related to nature conservation, such as mitigating climate change and strengthening macroeconomic fundamentals, are not effective in modulating portfolio reallocations. The results are robust to a wide range of sensitivity checks.
How to cite: te Kaat, D. M. and Raabe, A.: Financing Nature: Investment Funds and Biodiversity Risks, World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-89, https://doi.org/10.5194/wbf2026-89, 2026.
This paper examines whether and how banks price nature-related risks in the U.S. syndicated loan market. Motivated by large global declines in natural capital and a substantial biodiversity financing gap, we link loan pricing information from Thomson/Refinitiv LoanConnector to firm-level measures of nature dependency and impacts from S&P Sustainable1 for U.S. firms. Our baseline results show a positive association between a firm's material dependency on natural and loan spreads in the syndicated loan market. A 1% increase in material dependency corresponds to a 0.32% increase in spreads, implying a roughly 0.61 basis points increase from the sample mean. Results are robust to lender × industry × time fixed effects and standard loan controls.
The study exploits the August 2019 relaxation of the U.S. Endangered Species Act in order to identify a mechanism of transition risk relared to nature-dependency of firms. Using a difference-in-differences framework, we find that loan spreads for firms exposed to protected or key biodiversity areas declined in the four quarters after the amendment; a 1% higher material dependency score is associated with a 0.25–0.30% decrease in spreads post-reform. Pre-trend tests and additional controls for climate exposure and ESG ratings support the interpretation that lenders adjusted pricing in response to the policy change. We interpret this as banks pricing the transition risk related to nature-dependency.
Additional analyses confirm the stability of nature-dependency measures, show similar findings using an alternative measure. Banks also adjust non-price contract terms—reducing maturities and increasing collateral for more nature-dependent firms—and seem to price potential refinancing risk for firms with heavy short-term debt. The paper contributes to literature on biodiversity risks in financial markets and on environmental risk pricing in banking by providing evidence that lenders consider natural-capital dependency in lending decisions. These findings inform directing finance to sustainable projects and help regulators better account for nature-related risks in credit markets.
How to cite: Kundu, S., Tresl, J., Canipek, A., and Zimmermann, L.: Nature-Related Risks in Syndicated Lending, World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-788, https://doi.org/10.5194/wbf2026-788, 2026.
This paper investigates whether and how firm-level biodiversity risks are reflected in equity markets and analyzes the role of investor attention in shaping the pricing of these risks. We distinguish between two forms of biodiversity exposure: impact risks, arising from firms’ adverse effects on ecosystems, and dependency risks, linked to firms’ reliance on ecosystem services. In theory, both sources of exposure should generate systematic risk premia or sustainability preference premia, yet existing empirical evidence provides only mixed support for either mechanism. We propose instead that variation in investor attention to environmental topics plays a central role in how biodiversity risks enter asset prices.
Using firm-level biodiversity and climate risk metrics from Iceberg Data Lab, we construct hedge portfolios on the biodiversity and climate risks, applying several portfolio formation strategies and evaluating both raw and risk-adjusted returns. To capture investor attention, we build several Google search-based indices for biodiversity and climate-related topics. We examine the short-run influence of attention on the portfolio returns and also study the long-run dynamics between attention and portfolio performance using cointegration methods. This dual perspective allows us to assess whether rising environmental attention signals a structural shift in investor preferences toward green assets.
Our portfolio results show that firms with higher biodiversity and climate risks consistently underperform on a risk-adjusted basis. High-risk portfolios also exhibit substantially larger tracking errors, indicating greater uncertainty, whereas low-risk portfolios deliver more stable and predictable returns. These patterns are more consistent with a demand-driven mechanism, where investors bid up low-risk stocks, than with compensation for bearing environmental risk.
The cointegration analysis reveals a stable long-run equilibrium between climate attention and green asset performance: increases in attention predict future green-over-brown outperformance, while feedback from returns to attention is weaker. Overall, our findings support an attention-based explanation for the pricing of environmental risks.
To our knowledge, this is the first study to document a feedback mechanism between shifts in biodiversity attention and corresponding asset-price movements.
How to cite: Meskinimood, S., Asgharian, H., Pourkhanali, A., and Mirghaffari, S.: Pricing Biodiversity Risk: The Role of Investor Attention Dynamics., World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-543, https://doi.org/10.5194/wbf2026-543, 2026.
Amid growing regulatory scrutiny and stakeholder expectations, firms are increasingly expanding their environmental focus beyond greenhouse gas (GHG) emissions to include biodiversity impacts. While divesting GHG-intensive assets has become a common corporate strategy to reduce emissions, the broader ecological implications of such divestitures remain poorly understood. Because GHG emissions represent only a portion of a firm’s overall corporate biodiversity footprint (CBF), it is crucial to assess whether divesting carbon-intensive operations generates unintended spillovers—either positive or negative—on other dimensions of environmental performance. Addressing this issue may therefore help improve corporate strategy and policymaking for biodiversity conservation, since the degradation of ecosystems not only threatens wildlife but also undermines essential services that support human well-being, including food security, clean water, and disease regulation.
This study presents the first international, large-sample analysis of how GHG-intensive asset divestitures affect firms’ CBF. We find that such divestitures are associated with a reduction not only in GHG-related impacts but also in non-GHG biodiversity pressures, including land use, water pollution, and air pollution. When focusing on a subsample of firms with sufficient data on both the divesting and acquiring entities, we observe a net decrease in non-GHG CBF intensity, likely driven by operational and technological improvements among buyers. However, we do not detect a corresponding net reduction in GHG-related CBF, suggesting that emissions are largely being relocated rather than eliminated.
Cross-sectional analyses reveal that the positive spillovers on non-GHG CBF are stronger among firms with high-quality biodiversity disclosures, those operating in countries with mandatory sustainability reporting requirements and strong informal enforcement, and those with robust external biodiversity monitoring. In contrast, these benefits are muted among financially constrained firms that prioritize short-term liquidity and survival over long-term ecological objectives.
Overall, the findings highlight the need for policymakers, regulators, and investors to adopt a systemic, multi-dimensional approach to decarbonization, ensuring that corporate divestitures deliver genuine and enduring environmental benefits.
How to cite: Porumb, V. A., Hope, O.-K., Rusanescu, S., and Vyas, D.: The Biodiversity Impact of Corporate Divestitures, World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-25, https://doi.org/10.5194/wbf2026-25, 2026.
Using a novel dataset constructed through natural language processing of corporate sustainability reports, we examine how firms’ exposure to biodiversity risk drives their actions to conserve biodiversity and the stock market implications of such initiatives. We categorize initiatives into four types, Capacity building, Community engagement, Innovation strategies, and Operational strategies, based on whether they are internally driven, reputational or outcome-oriented, and expected to materialize in the short or long term.
Over half of the biodiversity initiatives that firms undertake are Community engagement (e.g., donations and funding), while climate-related initiatives are mainly Operational strategies, indicating that biodiversity action is less embedded in core operations due to measurement complexity, weak regulation, and limited integration into production and supply chains.
We first investigate whether firms with greater exposure to biodiversity risks are more likely to engage in biodiversity initiatives. Using a two-step Heckman selection model to account for the selection bias in sustainability reporting, we find that firms with larger biodiversity footprints are more likely to undertake such initiatives. The effect is strongest for capacity-building initiatives and primarily reflects reputational risk stemming from environmental controversies, while biodiversity dependency shows no significant effect.
Next, we analyze the stock market consequences of biodiversity initiatives. Panel regressions show no significant link between biodiversity initiatives and stock returns in the full sample or after the Kunming Declaration. However, using a stacked difference-in-differences design exploiting the staggered introduction of biodiversity-related taxes and fees across countries, we find that firms undertaking biodiversity initiatives earn higher returns after these policy changes. Moreover, markets respond more rapidly to visible, reputation-driven actions while recognizing the value of capacity-enhancing initiatives with delay.
We make several contributions. First, we provide evidence on how firms translate biodiversity risk exposure into concrete actions. Second, we extend the literature by shifting attention from risk exposure to firm-level initiatives. Third, we show that biodiversity-related taxes can amplify the market relevance of corporate action. Finally, to our knowledge, this is the first study to analyze how market reactions differ across types of initiatives based on their visibility and speed of impact.
How to cite: Asgharian, H., Dzielińsk, M., Jonsson, S., and Liu, L.: Biodiversity actions, investor reactions: The stock market impact of biodiversity initiatives, World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-154, https://doi.org/10.5194/wbf2026-154, 2026.
This study examines how institutional investors respond to biodiversity risk, both physical and transition risks, by analyzing whether they increase (decrease) short positions in firms with greater exposure to biodiversity-related shocks. Using a European daily short-selling dataset covering 19 countries from 1st January 2021 to 31st December 2024, and a difference-in-differences (DiD) approach, we investigate how short-selling activity changes around 15th Conference of the Parties (COP15) to the United Nations Convention on Biological Diversity (CBD). COP15 the United Nations Biodiversity Conference, took place in Montréal, Canada, from December 7 to 19, 2022, resulted in issuance of a global framework and an agreement to conserve 30 percent of lands and oceans by 2030. Biodiversity risk exposure is measured by classifying firms as high-risk, taking value 1, if they operate in industries identified by financial professionals as having substantial biodiversity risk exposure, and zero otherwise. We separately analyze exposure to physical and transition biodiversity risks.
We find that short-selling by institutional investors increases significantly after COP15 for firms operating in high transition-risk industries, whereas no significant effect is observed for firms exposed to physical biodiversity risk. This indicates that financial markets interpret COP15 primarily as a regulatory shock rather than a change in physical biodiversity risk. The estimated coefficient on the interaction term (High Transition Risk × post-COP15) is 0.00139, meaning that high transition-risk firms experience on average a 0.14% increase in net short positions relative to low-risk firms. In our sample, the mean value of the net short position is 0.84% and this effect represents an increase of about 16.5% relative to that mean, which is economically meaningful. Overall, the results of this study highlight that biodiversity-related global agreements like COP15 have increased awareness and generated a significant shift in how investors view future biodiversity-related regulation, inciting them to take short positions to sectors expected to face higher compliance costs or tighter scrutiny related to biodiversity concerns.
How to cite: Kalhoro, M. R. and Khatri, I.: Biodiversity transition risk in capital markets: Evidence from European short sellers, World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-167, https://doi.org/10.5194/wbf2026-167, 2026.
This study investigates the relationship between corporate biodiversity risk and firm value. Biodiversity loss is increasingly recognized as a material financial risk, as it may affect firms through both physical disruptions and transition pressures (Flammer et al., 2025; Lucey & Vigne, 2025). Building on the sustainable investing framework of Pástor et al. (2021), firms with greater biodiversity-related vulnerabilities may experience lower investor demand for riskier or less sustainable firms and a corresponding increase in their cost of capital (e.g., Chen, 2025). These effects can impose financial burdens and limit strategic flexibility (e.g., avoiding short-term debt; see Duong et al., 2025), ultimately leading to lower firm value.
To examine these relationships, the study employs a comprehensive panel dataset of US firms covering the period 2015-2024. This period focuses on the post-Paris Agreement era, when attention to sustainability increased. Limiting the sample to these years also ensures that biodiversity-related disclosures are more relevant, consistent, and less affected by earlier data noise. The dataset includes company financial information, firm-level biodiversity risk, and ESG performance. Biodiversity risk is measured using the indicator developed by Giglio et al. (2025), which captures whether a firm is exposed to biodiversity-related risks in a given year. Firm valuation is assessed using standard financial metrics, Tobin's Q and the market-to-book ratio, constructed from LSEG Eikon. LSEG ESG ratings are utilized as a measure of the ESG performance in this research.
The results indicate that firms exposed to biodiversity risk exhibit, on average, lower valuation. Firms with stronger ESG performance experience a smaller decline in value, suggesting that strong sustainability practices can help reduce the financial impact of biodiversity risk. In contrast, the "biodiversity commitment" indicator from LSEG ESG metrics does not show a significant moderating effect. However, the data on this indicator is too limited to draw robust conclusions. Finally, the link between biodiversity risk and firm value becomes much weaker after 2021, in line with broader studies on sustainable investing, which show that the market's pricing of sustainability has been declining in recent years (Badía et al., 2020; Long et al., 2024; Vu et al., 2025).
How to cite: Vu, T. N.: Biodiversity risk, market valuation, and the moderation of ESG performance, World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-625, https://doi.org/10.5194/wbf2026-625, 2026.
Biodiversity finance represents a burgeoning frontier in the global effort to mitigate climate change, yet the field currently suffers from a fundamental disconnect between financial modeling and ecological reality. While nature-based solutions are increasingly funded through mechanisms like the Voluntary Carbon Market (VCM), the literature has thus far failed to reconcile the complexities of natural environments with the incentives of economic systems. Economists often lack the nuance to model biological complexity, while ecological studies frequently overlook market mechanics. This lack of interdisciplinary collaboration has led to biased research and severe information asymmetries, creating a risk of ineffective policy and market misinformation.
This paper addresses these structural weaknesses by bridging the gap between ecology and economics. We introduce a novel framework that integrates scientifically robust, high-resolution spatial biodiversity datasets into economic impact evaluations. Our research specifically targets forest carbon credit projects, the most prevalent nature-based solution for emissions, to determine whether carbon financing delivers genuine, quantifiable biodiversity benefits or merely theoretical ones. Unlike existing financial research that relies on distant proxies, our approach is informed by the dynamic scientific literature on biodiversity and ecosystem health.
Methodologically, we leverage multiple spatial datasets over long time horizons to construct a rigorous spatial regression framework. By establishing proper controls and examining trends both pre- and post-implementation, we aim to isolate the causal effect of forest carbon credit projects on biodiversity outcomes. Furthermore, we evaluate the efficacy of market signals by testing whether projects carrying "Climate, Community & Biodiversity" (CCB) and related labels yield statistically significant benefits in ecological integrity over time compared to non-labelled counterparts.
Ultimately, this study aims to correct the informational imbalances plaguing the market. By validating a statistical framework that accounts for the true complexity of nature, we provide a blueprint for how biodiversity outcomes should be evaluated in future economic research. These findings are critical for moving the field forward, limiting the risks of greenwashing, and ensuring that policy decisions are grounded in robust, quantitative evidence rather than optimistic assumptions.
How to cite: Nowak, E., Kling, L., and Mitchard, E.: Biodiversity Co-Benefits in Carbon Markets - The Importance of Counterfactual Baseline Additionality, World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-851, https://doi.org/10.5194/wbf2026-851, 2026.
Biodiversity loss is emerging as a material risk to financial markets, yet the tools for integrating ecological value into financial decision-making remain underdeveloped. In response, the Asian Development Bank (ADB) has revised its Environmental and Social Standard 6 (ESS6), establishing a science-based and ethically grounded framework for biodiversity risk governance across both sovereign and non-sovereign lending portfolios.
ESS6 requires the application of the mitigation hierarchy, quantification of biodiversity impacts and ecosystem service dependencies, and achievement of no net loss—or net gain—in natural or critical habitats. The standard imposes financing restrictions in areas of irreplaceable biodiversity value, including Alliance for Zero Extinction (AZE) sites, UNESCO World Heritage Sites, and free-flowing rivers exceeding 500 km, unless the project demonstrably contributes to conservation. These requirements move beyond reputational safeguards to embed ecological materiality into investment evaluation and project design.
To operationalize the standard, ADB has developed a detailed Guidance Note that equips borrowers with practical tools for biodiversity screening, risk classification, offset feasibility assessment, and the valuation of ecosystem services. The Guidance Note emphasizes the use of credible science, meaningful stakeholder engagement, and inclusion of Indigenous knowledge in biodiversity planning and risk management.
Further strengthening this approach, ADB is preparing a technical paper on biodiversity offsetability. The paper will provide transparent criteria for assessing when offsets are ecologically appropriate—and when residual impacts are too severe or uncertain to be offset. By clarifying the boundaries of offset viability, this work aims to guide credible biodiversity-positive outcomes and reduce reliance on unverified nature credit schemes.
This presentation reflects on how ESS6 offers a replicable model for aligning capital flows with ecological integrity and the goals of the Kunming–Montreal Global Biodiversity Framework. It explores how biodiversity safeguards can serve as instruments of fiduciary responsibility, enabling financial institutions to operationalize nature-related risks and avoid financing projects with irreversible impacts, even where theoretical compensation is proposed. The discussion concludes with reflections on the ethical challenges of integrating biodiversity into financial logics and the importance of drawing firm boundaries for responsible finance.
How to cite: Ricciardi, F.: Translating Ecological Risk into Financial Governance: ADB’s Biodiversity Standard (ESS6) and the Future of Biodiversity-Positive Lending, World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-46, https://doi.org/10.5194/wbf2026-46, 2026.
Despite rapid growth in biodiversity finance, most capital-market approaches remain anchored in valuation: ecosystem services are measured, priced, and translated into project-level credits or disclosures. While these tools have improved visibility and legitimacy, they have struggled to constrain capital formation at scale. In practice, finance continues to expand against ecological systems treated as effectively unbounded, exposing both ecosystems and balance sheets to cumulative risk.
The authors examine an alternative design pathway that emerged from a multi-year institutional design inquiry into ecological capital formation. Rather than asking how ecological value can be better priced or monetized, the work reframes the problem as one of risk governance: how to limit the volume and leverage of financial claims on ecological systems in line with their underlying capacity. Drawing on insights from macroprudential regulation, reserve governance, and ecological economics, the presentation argues that the key missing function in biodiversity finance is not improved valuation, but binding constraint for economization.
We introduce a layered approach to ecological risk governance in which ecological evidence performs different institutional roles—informational, attributional, legitimating, and prudential—without being asked to directly generate financial value. Within this framework, ecological indicators inform issuance ceilings, buffers, and impairment triggers, rather than prices. Capital remains allocated by markets and institutions, but only within ecologically defensible envelopes that expand or contract as conditions change.
By shifting from valuation-led capitalization to constraint-led governance, this approach offers a way to scale biodiversity finance while reducing integrity risk, greenwashing, and systemic over-claiming. It also provides a conservative bridge to existing capital-market practices, enabling adoption through familiar instruments such as risk weights, eligibility criteria, and capital buffers rather than new asset classes or moral commitments.
We conclude by discussing practical implications for investors, regulators, and standard-setters, and outlines how biodiversity finance could evolve from voluntary, project-based mechanisms toward system-level ecological risk management consistent with long-term financial stability.
How to cite: Adler, J., Boyd-Davis, S., and Phillips, R.: From Valuation to Constraint: Limiting Ecological Risk Governance in Finance , World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-980, https://doi.org/10.5194/wbf2026-980, 2026.
Under the “Omnibus” initiative, the European Commission is currently revising its European Sustainability Reporting Standards (ESRS), including disclosure requirement E4, Biodiversity and Ecosystems. Simultaneously, global standard setters such as the International Sustainability Standard Board (ISSB) are in the process of developing biodiversity reporting standards to serve as a global baseline. While normative disclosure frameworks define “what” companies must report, they do not provide the “how” in the form of tools, workflows, or methodologies needed to translate firm-level activities into measures of impact, risk, and opportunity across environmental, social, and governance dimensions. Researchers have yet to build a bridge between reporting indicators and the transmission mechanisms that determine the physical and financial materiality of biodiversity for corporations. By launching the Competence and Transfer Center (CTC) for Sustainable Finance and Regulation in 2024, the House of Finance took a step toward closing this gap.
The CTC serves as a platform for transdisciplinary dialogue and collaboration among experts from economics, law, the social sciences, and the natural sciences, with the aim of supporting global standard setters in advancing sustainability reporting. Funded by the State of Hesse and established through a Memorandum of Understanding with the International Sustainability Standards Board (ISSB), the CTC works in partnership with institutions including Leibniz Institute for Financial Research SAFE, the Institute for Social-Ecological Research (ISOE), the Senckenberg Gesellschaft für Naturforschung, the Helmholtz-Centre for Environmental Research (UfZ), the Faculty of Biological Sciences at Goethe University Frankfurt, and the Deutsche Rechnungslegungs Standards Committee e.V. (DRSC).
We will present insights developed through a series of workshops organized by the CTC in 2024 and 2025, which brought together participants from NGOs, the finance sector, ISSB board members, and EU policymakers. These findings, synthesized in a dedicated publication, highlight examples of underexplored transmission channels, propose concrete actions to strengthen research practices, and call on researchers to engage in a coordinated effort built on interoperable datasets, robust empirical identification strategies, and multi-method approaches. Without such transdisciplinary cooperation, reporting standards risk becoming a mere bureaucratic exercise, disconnected from ecological, economic, and social realities, and thus having little real impact on sustainability.
How to cite: Salg, J., Sylvester, F., Hollert, H., and Peter, S.: Biodiversity Sustainability Disclosure Standards Need a Matching Scientific Base of Evidence, World Biodiversity Forum 2026, Davos, Switzerland, 14–19 Jun 2026, WBF2026-159, https://doi.org/10.5194/wbf2026-159, 2026.
