Biodiversity and ecosystem services underpin the world economy, yet their ongoing degradation now threatens the socioeconomic activities that rely on them (‘physical risks’). Nature protection policies, though essential for long-term stability, could temporarily disrupt production and prices, especially if implemented in a disorderly way (‘transition risks’). Progress has been made in mapping business, government, and financial impacts and dependencies on nature, offering a high-level indication of potential exposure to these biodiversity-related economic risks.
Yet, how risk exposures at the firm level can cascade towards systemic macroeconomic and financial (‘macrofinancial’) risks remains poorly understood. Key channels include ecological feedback loops such as tipping points, cascades through global supply chains, compounding interactions between physical and transition risks, and amplification via existing macroeconomic and financial fragilities like currency risk and indebtedness. Excluding these macro-financial dynamics from biodiversity risk scenarios may result in underestimated impacts, leaving economic policymakers such as central banks and ministries of finance with major blind spots affecting risk management and nature transition planning.
Targeted at academics and policymakers, this session will present cutting-edge research on the macrofinancial risks of biodiversity loss and transition policies. In scope are policy-relevant empirical contributions focusing on the feedback effects between ecological, economic, and/or financial dynamics. Led by UCL IIPP, this session welcomes both quantitative and qualitative approaches, with a special focus on showcasing diverse approaches to macroeconomic modelling. We especially welcome contributions from policymakers.