Biodiversity and Finance: Why Nature Risks Are Financial Risks

Global forest area continues to shrink, with approximately 10 million hectares lost annually between 2015-2020; around one million plant and animal species now face extinction, many within decades, at rates tens to hundreds of times higher than the background rate over the past 10 million years. The WWF (2024) Living Planet Index reveals an alarming 73% average decline in monitored wildlife populations from 1970 to 2020. Ecologists now openly debate whether Earth’s 6th mass extinction is on the horizon, or already here. Yet the financial sector – the system of institutions that channel capital through lending, investment, insurance, and asset management – has, until very recently, remained largely unresponsive.

This gap is what motivated our new Ecological Economics Special Issue on “Biodiversity and Finance: Risk, Disclosure, and Double Materiality.” Emerging from the 2022 BIOECON Conference, and guest edited by Ben Groom, Mark Freeman, Emily McKenzie and me, the issue brings together pioneering research that bridges ecology, economics, and finance. It demonstrates why biodiversity loss is not a distant environmental problem, but a pressing financial risk—one that markets, regulators, and investors must confront head-on.

Why Biodiversity Matters for Finance

Biodiversity loss creates direct and systemic risks for financial markets. Investors exposed to agriculture, food, pharmaceuticals, insurance, and tourism face declining aggregate returns as ecosystem services erode. For example, reduced pollination or natural pest control lowers crop yields, raising input costs and depressing agribusiness profits—translating into stock price volatility and credit risk. Emerging infectious diseases linked to biodiversity loss can trigger global economic shocks, as COVID-19 demonstrated. On the upside, firms that harness biodiversity for new medicines, sustainable value chains, and eco-tourism generate alpha opportunities. Markets that fail to price biodiversity risk misallocate capital; those that integrate it gain resilience, preserve long-term returns, and capture innovation-driven growth.

This Special Issue builds on a growing movement to bring science into finance and business education. Earlier this year, I argued in Nature that business schools must integrate ecological and planetary sciences into their teaching, research, and faculty structures. Without this integration, future business leaders will be ill-equipped to manage the risks and opportunities of a net-zero, nature-positive economy. The Special Issue reinforces that message: financial systems cannot operate as if they are separate from the biosphere.

Looking Ahead

As biodiversity loss accelerates, the financial sector faces a choice: continue treating nature as an externality, or recognise it as a foundational asset underpinning global prosperity. The contributions in this Special Issue underscore that finance has a critical role to play—not only in managing risks, but also in directing capital toward conservation and restoration.

The research agenda ahead is clear. We need better evidence on how biodiversity risks translate into financial impacts, more coherent disclosure standards, and innovative instruments that channel investment into nature-positive outcomes. Above all, we need cross-disciplinary collaboration to ensure that financial systems operate within planetary boundaries.

Biodiversity is not optional capital—it is the very foundation of life on Earth. By bringing finance into the conversation, and by urging collaboration between finance, economics, and ecology, this Special Issue aims to catalyse the research, policies, and practices needed to protect both nature and investors in an age of ecological uncertainty.

Read the Special Issue

This blog is a summary of an introductory article published in Ecological Economics Special Issue

Acknowledgements: This research was made possible by the UKRI/NERC funded projects BIOESG (NE/X016560/1) and RENEW project (ref: NE/W004941/1). BG would like to thank the BIOPATH research programme funded by the Swedish Foundation for Strategic Environmental Research MISTRA (F 2022/1448) for generous funding. BG and CG would also like to thank Dragon Capital for funding the Dragon Capital Chair in Biodiversity Economics. MA acknowledges generous support from the Bennett Foundation. The authors would like to thank the participants of the 23^rd BIOECON conference held at the University of Exeter. Finally, we thank the editors and the reviewers for expediting the review process and for excellent comments. The usual disclaimer applies.