From “Land” to “Ecosystems”—Paving the Way for Ecosystem Services in Sustainable Finance

Although biodiversity loss is acknowledged as one of the main drivers of financial risk, there is still no clear understanding of how impacts and dependencies on biodiversity affect the financial sector. In fact, nature degradation does not manifest itself as a systemic risk because it does not threaten the very nature of the financial system. There are transmission channels between nature and finance that need to be investigated: the many intermediate cause-and-effect relationships should be identified and assessed. Such a process involves multiple disciplinary domains, ranging from ecology and economics to finance. An Ecosystem Services-based approach may represent a comprehensive framework to (i) reconcile coherently different environmental issues such as climate change, biodiversity loss, pollution and sustainable use of resources, and (ii) connect ecosystems and socio-economic systems. Not only can ecosystem services be assessed, but also ecosystem vulnerabilities which are at the origin of nature-related financial risks. Adopting an ecosystem services-based perspective can be the first step toward building ecologically meaningful and economically useful transmission channels for financial risks.