Biodiversity-Related Risks: Impacts, Dependencies and Regulation

Giuseppe Rimo () and Simona Cosma ()
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Giuseppe Rimo: University of Bologna, Department of Management
Simona Cosma: University of Bologna, Department of Management

Chapter 2 in Biodiversity and Banks, 2026, pp 7-25 from Palgrave Macmillan

Abstract: Abstract This chapter examines how nature degradation can affect financial stability, with a focus on the Eurozone. Through real-world examples and modelling work from the European Central Bank, we show that financial institutions are already exposed to the economic consequences of the decline of ecosystems. However, finance is not neutral: it directs capital flows, and it can either fuel biodiversity loss or help to halt it. That is why financial institutions need to adopt a dual role: they must enhance their assessment and management of nature-related risks, while also supporting the transition to activities that protect and restore biodiversity. We draw on economic principles and recent EU regulatory steps, including the Taxonomy, CSRD, SFDR, and ECB/EBA guidance, to show how nature is being brought into the financial rulebook. What is needed now is not just environmental awareness, but a more profound rethink of how finance works, so it can manage risks more wisely and help build a more sustainable future.

Keywords: Biodiversity loss; Biodiversity risk; Physical risk; Transition risk; Financial institutions (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:pal:psifcp:978-3-032-17631-8_2

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DOI: 10.1007/978-3-032-17631-8_2

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