Hardwiring green: how banks account for biodiversity risks and opportunities

Abstract

This article aims at providing better insight into the way in which banks currently deal with biodiversity in their business operations, what their underlying motivations are for doing so, and how the banking sector perceives biodiversity as a business risk or opportunity. Analysis of publicly available information telephone interviews and a questionnaire revealed that only five of the 50 banks have taken considerable steps to account for biodiversity risks and opportunities on an organizational level and within lending portfolios (scores higher than 67%). Most banks, however, remain at the starting grid, with scores to address biodiversity issues on a group or holding level and within lending products and services lower than 33%. In terms of risks related to biodiversity, banks believe that their sector is primarily exposed to reputational risk and, perhaps surprisingly, to credit risk. Motivations for banks to develop policies to account for biodiversity centre on reducing reputational risk and the wish to act ecologically responsible, while being able to differentiate from competitors is seen as a major business opportunity.

Keywords:

• biodiversity; bank
• business opportunity
• business risks
• ecosystem
• financial institution

Acknowledgements

The authors would like to thank Annelisa Grigg, Director of Global Balance, Dr Joshua Bishop, Chief Economist of the International Union for the Conservation of Nature (IUCN), and Frank Vorhies, Director of Earthmind, a non-profit organization in Geneva, for fruitful discussions and for reviewing this article. We are also indebted to Floryt van Wesel (Utrecht University) for her valuable contributions on the article's statistical analysis. We would also like to thank all bank representatives who participated in this study for their dedicated time, valuable insights and comments.

Notes

Fortune Global 500. See http://money.cnn.com/magazines/fortune/global500/2008/industries/192/index.html (consulted November 2008).

See http://www.ifc.org/ifcext/sustainability.nsf/content/EnvironmentalGuidelines

GRI environment indicators that are directly relevant for biodiversity: EN 11-15. GRI environment indicators that indirectly affect biodiversity: EN 6, 8, 10, 16, 17, 19, 20, 21, 22, 23, 25, 26 and 29.

The Natural Value Initiative developed an Ecosystem Services Benchmark for investors and companies. See www.naturalvalueinitiative.org

The Forest Footprint Disclosure project is an initiative backed by 45 investors with over $4 trillion in collective assets under management to help investors identify how an organization's activities and supply chains contribute to deforestation, and link this ‘forest footprint’ to their value.

Additional information

Notes on contributors

Ivo Mulder

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