According to a report by the Carbon Disclosure Project (CDP), financial institutions (FIs) are failing to account for nature-related dependencies, risks and opportunities in their financial decision-making.
The report, which identifies significant gaps in how FIs oversee, implement, manage, and measure nature-related impact compared to climate change, urges that action must first begin with system-wide recognition of the intrinsic link between impacts on climate and those on nature. The CDP report concludes that success in building a green and resilient financial system necessitates leadership and action from Fis, backed by credible and comprehensive data.
New CDP report reveals nature consistently overlooked in financial decision-making by most financial institutions, despite stepping up climate considerations.
Gaps in accounting for nature reported across governance, strategy and implementation, risk management, and metrics and mechanisms of most financial institutions.
The ‘Nature in Green Finance’ report is based on an analysis of disclosure made by CDP in 2022, by over 550 of the world’s largest banks, insurers and asset owners, representing over US$8 trillion in market capitalisation. The report finds that while nearly 95% of FIs’ business strategies or financial planning is now influenced by climate change, less than a third is influenced by forest issues and water security.
Failure to integrate nature and climate considerations impedes the ability of FIs to fully identify and assess and disclose their impact, dependencies, risks, and opportunities.
Most FIs lack the necessary governance mechanisms and board-level expertise to integrate nature-related issues across operations and just one in ten FIs currently have the metrics to measure their portfolio impact for forests and water.
Moreover, despite greater opportunities, estimated at over US$5 trillion for climate, forest, and water combined, being identified than risks, less than 30% of financial institutions are capitalising on these opportunities.
About the Authors
Associate Director, Investment Banking
Prachurjya has over 16 years of experience in investment banking with Acuity Knowledge Partners. At Acuity, he has led sector and product-specialist pilot teams across Capital Markets, ESG, Debt Advisory, Loan Syndications, Metals & Mining and Real Estate. He has been actively involved in setting up and on-boarding new ESG Advisory, ESG DCM and Sustainable Finance teams for various bulge bracket investment banks. Within DCM and Rating Advisory, he has been instrumental in helping the clients achieve over 30% in annual savings on both regular and adhoc tasks through standardization of the outputs and deployment of our proprietary BEAT tools.
Delivery Manager, Investment Banking
Puja has 6 years of extensive experience in ESG, Climate Change & Sustainability and she is supervising the ESG team at Acuity. She also has diverse experience in conducting ESIA, EHS compliance audits, ESG Risks and Controls, EHS & ESG Due Diligence assessments. Prior to joining Acuity, she was working with companies like KPMG Global Services, EY India and ERM India. She has expertise in provisioning extensive research requirements for clients through preparation of Peer Benchmarking, Target Compilation, Sustainability report, Sustainable Finance Updates and Sectoral ESG Thematic Detailing Engagement.
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