Climate Policy

ISSN: 1469-3062 (Print) 1752-7457 (Online) Journal homepage: www.tandfonline.com/journals/tfocoll

Biodiversity loss and climate change interactions:

financial stability implications for central banks
and financial supervisors

Katie Kedward, Josh Ryan-Collins & Hugues Chenet

To cite this article: Katie Kedward, Josh Ryan-Collins & Hugues Chenet (2023) Biodiversity loss
and climate change interactions: financial stability implications for central banks and financial
supervisors, Climate Policy, 23:6, 763-781, DOI: 10.1080/14693062.2022.2107475

To link to this article: https://doi.org/10.1080/14693062.2022.2107475

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CLIMATE POLICY
2023, VOL. 23, NO. 6, 763–781
https://doi.org/10.1080/14693062.2022.2107475

REVIEW ARTICLE

Biodiversity loss and climate change interactions: financial stability

implications for central banks and financial supervisors
Katie Kedwarda, Josh Ryan-Collins a
and Hugues Chenetb,c,d
a
UCL Institute for Innovation and Public Purpose, London, UK; bUCL Institute for Sustainable Resources, London, UK; cIESEG
School of Management, Lille, France; dChair Energy and Prosperity, Paris, France

ABSTRACT ARTICLE HISTORY

Financial risks related to climate change and biodiversity loss are currently being Received 26 October 2021
addressed in a largely siloed manner. Neglecting their interconnections, however, Accepted 22 July 2022
may lead to ‘blind spots’ and misestimations of systemic financial risk, potentially
KEYWORDS
undermining progress on both climate finance policy and emerging policy on Sustainable finance; financial
biodiversity-related financial risks (BRFR). In particular, the ‘risk measurement– risk; climate change;
based’ approach dominating climate finance policy, which is now being taken up biodiversity loss; central
to address BRFR, is poorly equipped to address the radical uncertainty that banks; tipping points
characterises both types of risks. Furthermore, many BRFR may materalise over a
more immediate horizon than climate risks. In this paper, we examine how central
banks and financial supervisors are approaching the topic of BRFR in relation to
climate-related financial risk. We argue that policymakers should focus upon the
broader concept of systemic environmental-financial risks to account for the
interactions and trade-offs between both domains of biodiversity and climate
change. Instead of seeking evidence of financial materiality before acting, focusing
on how the financial system is actively facilitating direct drivers of environmental
damage offers a way for financial policymakers to assess potential sources of such
risks on the basis of information available today. In turn, policy interventions
should aim to reduce harmful flows of finance that may lead to the crossing of
dangerous ecological tipping points.

Key policy insights:

. Financial policymakers need to think beyond siloes, and act on a precautionary
basis to manage climate- and biodiversity-related financial risks concurrently.
. Financial authorities, coordinating with relevant government departments, should
define business activities that are most harmful to climate and biodiversity,
especially those contributing to ecological tipping points, e.g. activities linked to
tropical deforestation, which will damage both domains.
. To aid transparency and supervisory risk assessment, financial supervisors could
require the mandatory disclosure of portfolio composition, risk management,
and due diligence procedures relating to the financing of identified harmful
activities.
. Financial regulators could use their toolkits to discourage the financing of such
activities, e.g. by applying punitive capital requirements.
. This approach may require greater coordination between central banks and other
government departments to maintain democratic legitimacy and support existing
central bank mandates.

CONTACT Josh Ryan-Collins [email protected]

© 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group
This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.
org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and
is not altered, transformed, or built upon in any way. The terms on which this article has been published allow the posting of the Accepted Manuscript in a repo-
sitory by the author(s) or with their consent.
764 K. KEDWARD ET AL.

1. Introduction
Central banks and financial supervisors have acknowledged that climate change poses material risks to the
financial system and that the management of climate-related financial risks (CRFR) falls within their mandates
to preserve price and financial stability (Bank of England, 2017; ECB, 2020; NGFS, 2019a NGFS, 2020a). With the
majority of biodiversity and ecosystem indicators precipitously declining (IPBES, 2019), attention is now also
turning to the economic and financial threats posed by biodiversity loss (Dasgupta, 2021; NGFS-INSPIRE,
2022; OECD, 2019).
As with climate change, financial institutions are exposed to the dependencies and impacts of businesses on
biodiversity through their lending, investing, insurance, and advisory activities (Kedward et al., 2021a). These
biodiversity-related financial risks (BRFR) have been conceptualised in a similar manner to CRFR (Herweijer
et al., 2020; NGFS-INSPIRE, 2022). Physical risk factors refer to disruptions to business inputs, operating environ-
ments, or consumer demand resulting from biodiversity loss, e.g. declines in pollinators adversely affecting crop
yields. Transition risk factors refer to economic losses stemming from actions taken to mitigate biodiversity loss,
including shifts in policy, regulation, technology, trade, or consumer preferences, e.g. the EU’s proposal to
remove deforestation-risk commodities from EU supply chains (European Commission, 2021a).
The real economy impacts of biodiversity-related physical and transition risk factors – just as with climate
change – could include disrupted production, (global) value chains, and productivity; lower corporate profit-
ability; reduced cashflow; or impaired insurability. In turn, these effects can feedback through to the
financial system via impaired asset valuations, reduced ability to service debts, liquidity difficulties, reputational
damage, or legal costs; or through broader macroeconomic variables, such as shocks to exchange rates, volatile
commodity prices, or sovereign debt sustainability (Pinzón & Robins, 2020; Rudgley & Seega, 2021). An emer-
ging literature reveals potentially material exposures to BRFR within banks (Calice et al., 2021; Svartzman et al.,
2021a; Van Toor et al., 2020), insurers (SIF, 2021), global asset managers (Galaz et al., 2018; Springer et al., 2020),
pension funds (Global Canopy, 2022), development finance institutions (Dixon, 2020), and central bank asset
portfolios (Kedward et al., 2021b).
Although at an early stage, financial initiatives focusing on biodiversity are following a similar trajectory to
CRFR, with an emphasis on developing reporting and disclosure mechanisms to enable financial institutions to
identify and manage financial risks (Finance for Biodiversity, 2021; NGFS-INSPIRE, 2022). For example, the Task-
force for Nature-related Financial Disclosures (TNFD) aims to establish a harmonised framework for financial
institutions to report on BRFR from 2023 onwards (TNFD, 2021), following the model established by the Task-
force on Climate-related Financial Disclosures (TCFD).
Within the central banking community, researchers have undertaken studies to estimate BRFR exposure
(Svartzman et al., 2021a; Van Toor et al., 2020). In a joint study group with external researchers, the Network
for Greening the Financial System (NGFS) – a group of over 100 central banks and financial supervisors –
also explored the implications of biodiversity loss on financial stability, concluding its relevance to primary man-
dates (NGFS-INSPIRE, 2022). Whilst its final report identifies a comprehensive research agenda and explores
possible policy options for financial policymakers, it stops short of recommending concrete policy interventions
to mitigate BRFR, citing a prerequisite need to develop risk assessment methodologies and capacity building
within institutions.
This paper takes this important agenda a step further by exploring how central banks and financial super-
visors can assess and manage BRFR in the context of existing policy agendas on climate finance. We find that
BRFR and CRFR are being addressed in a siloed and sequential fashion, with insufficient focus on integrating
biodiversity-related factors into existing approaches for assessing and managing CRFR. By neglecting the inter-
connections that exist between these two categories of risk, existing efforts to assess climate risk may be
subject to ‘blindspots’ and significant misestimations, which could have adverse consequences for financial
stability.
Financial policymakers are also largely pursuing a ‘risk measurement-based’ agenda to mitigating both CRFR
and BRFR, which assumes that supporting the disclosure of relevant environmental information will be
sufficient to ensure the management of potential financial risks via market price adjustments. This approach
has been critiqued extensively in the context of climate change (Ameli et al., 2020; Bolton et al., 2020;
 CLIMATE POLICY 765

Chenet et al., 2021; Christophers, 2017). We build on this literature to show that addressing climate and biodi-
versity risks together is a vastly more complex task than is recognised by current policy agendas due to the
presence of radical uncertainty. Financial policymakers are also focusing too narrowly on attempting to quan-
tify the materiality of both climate change and biodiversity loss to the financial system (‘single materiality’), with
insufficient focus on the relevance of the negative impacts of the financial system on the climate and environ-
ment (‘double materiality’ – Adams et al., 2021).
In light of the limitations of risk measurement-based approaches, we propose new ways forward for central
banks and financial supervisors to manage radically uncertain climate-related and biodiversity-related financial
risks. Building upon recent calls for a ‘precautionary approach’ to financial policy (Chenet et al., 2021), we show
how focusing on where and how the financial system is actively facilitating direct drivers of climate change and
biodiversity loss offers a way for policymakers to assess potential sources of endogenous risk on the basis of
information available today. Given that the capital allocation decisions of financial actors today will
influence future climate and biodiversity trajectories, there is a case for financial policymakers to manage
both CRFR and BRFR by taking more direct interventions to reduce harmful flows of finance, and support
the transition of capital to more sustainable forms of economic activity. Such an approach warrants coordi-
nation between central banks and broader government objectives regarding environmental policy to maintain
democratic legitimacy.
In this paper, we refer to environmental-financial risks to encompass climate change, biodiversity loss, and
the broader deterioration of ecosystems – as well as the interconnections between them.1 We focus on
central banks and supervisors as actors whose actions have already accelerated the uptake of CRFR manage-
ment within financial institutions, and whose regulatory power is capable of expanding and shaping the
climate finance policy agenda to include other interconnected environmental risks. However, our arguments
also remain relevant to a broader range of financial institutions and policymakers.
The paper proceeds as follows. Section 2 outlines how financial institutions and supervisors are currently
attempting to understand and manage BRFR in relation to their climate policy agendas, and the weaknesses
of these approaches in light of the interactions between climate change and biodiversity loss. Section 3 con-
siders the intellectual underpinnings of the CRFR measurement approach and its limitations when applied to
biodiversity risks. Section 4 explores how financial policymakers can assess both CRFR and BRFR subject to
radical uncertainty, focusing on the double materiality perspective. Section 5 considers alternative policy tra-
jectories in the management of environmental-financial risks, and reflects on the institutional role of central
banks. Section 6 outlines urgent areas for further research, and concludes.

2. The climate–biodiversity nexus and the emergence of financial risk

Progress by financial actors in addressing environmental-financial risks has so far focused mainly on climate
change (Crona et al., 2021; NGFS, 2020c NGFS, 2021a). A number of novel frameworks focusing on broader
environmental exposures are now under development by financial institutions (e.g. Finance for Biodiversity,
2021), although these remain exploratory and heterogenous (see Supplementary Information). Exploratory
research on BRFR undertaken by researchers within central banks has aimed at quantifying the magnitude
of potential financial risk exposure within domestic jurisdictions. For example, the Dutch central bank, De
Nederlandsche Bank (DNB), quantitatively mapped the physical and transition risks of domestic biodiversity
loss, estimating that 36% of Dutch financial institutions are highly dependent on at least one ecosystem
service (Van Toor et al., 2020). Using an extended methodology that accounts for upstream effects, other
central bank researchers have found that all securities held by French financial institutions are to a greater
or lesser extent dependent on all ecosystem services through their supply chains (Svartzman et al., 2021a).
These emerging developments within the central banking community are welcome and are urgently needed
in order to address the prominent knowledge gaps surrounding financial system exposures to biodiversity loss.
However, it is revealing to contrast this very early research focus on biodiversity loss with equivalent

In line with the emerging terminology in this field (e.g, NGFS-INSPIb122RE, 2022), we refer to the more precise terms of biodiversity and eco-
1

systems, rather than ‘nature’ – which is less specific conceptually, but is used by some to encompass biodiversity and/or the environment.
766 K. KEDWARD ET AL.

workstreams on climate change, where the significance of CRFR is well-established and where some central
banks and supervisors are now actively exploring and implementing policy options to manage such risks
(Bank of England, 2021b; ECB, 2021) – albeit with this policy implementation itself still at an early stage
(D’Orazio, 2021). Similarly, central bank speeches on climate change are now plentiful but, at the time of
writing, there has yet to be an official speech that comprehensively presents the specific topic of BRFR, and
its interconnections with CRFR, by any major central bank. A key concern at the current juncture is that
financial policymakers are approaching CRFR and BRFR on different tracks and at different speeds, which
may lead to them to neglect the potential interconnections that exist between these categories of environ-
mental risk.
The European Central Bank (ECB) is an illustrative example in this regard. Despite President Christine Lagarde
stating that ‘climate and biodiversity are two sides of the same coin; it is vital that we look at them together’,2
the ECB’s concrete policy developments regarding environmental risk – namely, the strategy review for mon-
etary policy, the economy-wide climate stress test, and the supervisory climate risk stress test – focus on climate
change and do not mention the potential relevance of BRFR (Alogoskoufis et al., 2021; ECB, 2021). Similarly,
whilst the ECB’s supervisory guidance does emphasise the relevance of broader environmental risks, in practice
this document is vague about the definition and transmission mechanisms of these risks and does not discuss
how they may interact with CRFR (ECB, 2020).3 Existing studies by central bank researchers also underplayed
the financial stability implications of interactions between CRFR and BRFR (Svartzman et al., 2021a; Van Toor
et al., 2020); although the NGFS-INSPIRE Study Group identified this as an important research gap (NGFS-
INSPIRE, 2022, pp. 18–20).
There are a number of concerns with this siloed and sequential approach to understanding environmental-
financial risks. First, climate change interacts with and is reinforced by other environmental risks, especially bio-
diversity loss. Second, some biodiversity-related physical risk factors may become financially material within a
much shorter time frame than the worst expected climate-related impacts. Third, the trade-offs and synergies
between climate mitigation policies and biodiversity impacts, and vice versa, are neglected with implications
for the estimation of transition risks. We now discuss each of these ‘blind spots’ in turn and their implications
for effective financial policymaking.
From the physical risks perspective, the biophysical dynamics driving climate change and biodiversity loss
are strongly interlinked and mutually reinforcing (Lade et al., 2020; Rockström et al., 2009; Steffen et al.,
2018). The physical impacts of climate change – especially higher temperatures, shifting rainfall patterns,
higher frequency of extreme weather events, and the acidification and oxygen depletion of water bodies –
put ecosystems under stress and contribute to biodiversity loss (IPBES, 2019). In turn, the loss of key habitats
and adverse changes in biodiversity negatively affect the climate system, through changes in the carbon, nitro-
gen, and water cycles, and via adverse effects on the carbon sequestration capabilities of biomass (IPBES and
IPCC, 2021). Critically, changes affecting both the climate and biosphere are non-linear. Once critical thresholds
or ‘tipping points’ are breached, natural systems can undergo rapid regime shifts with catastrophic and poten-
tially irreversible consequences for biodiversity, the climate, and human activity (Lenton, 2013; Sharpe &
Lenton, 2021; Steffen et al., 2015).
Importantly for businesses, financial institutions, and policymakers, the complex feedback loops governing
these interactions mean that associated financial risks will be compounding rather than additive. Yet these non-
linear dynamics are largely neglected by Environmental, Social, and Governance (ESG) frameworks, which for
the most part simplistically aggregate estimations of risk factors without considering potential interactions
between them (Crona et al., 2021). Similarly, by neglecting the interactions between various environmental
dynamics, financial policymakers are likely to be generating potentially significant misestimations of
financial exposure to climate change and biodiversity loss. This is because compound risks significantly
magnify the impacts of individual shocks, in terms of both severity and duration (Ranger et al., 2021).

2
Comments at the IUCN Congress in Marseille, 4th September 2021, and posted on Lagarde’s official Twitter: https://twitter.com/Lagarde/
status/1434170468525871109?s=20&t=gmNm-G5yVWD9b2tUX3-7bQ
3
Indeed, the term ‘biodiversity loss’ is mentioned in the main body of the report’s text only six times, and ‘ecosystem services’ only twice.
 CLIMATE POLICY 767

Figure 1. Interconnected climate- and biodiversity-related physical impacts may have compounding economic impacts that result in higher
than expected financial risks. Source: Authors’ own illustration

With reference to two sectors both exposed and contributing to climate change and biodiversity loss – agri-
culture and infrastructure (IPBES, 2019; UNEP-WCMC, 2020), Figure 1 illustrates how selected financial risks
resulting from climate change, e.g. lower crop yields and higher infrastructure damages, are also exacerbated
by the effects of biodiversity loss. These, in turn, may generate larger than expected financial losses for financial
institutions.
The significance of these interconnections is that current efforts to establish and measure climate-related
physical risk exposures are likely to be misestimations unless other environmental dynamics are considered.
Whilst existing climate-economy models that underpin the scenario analyses currently used by financial policy-
makers do include some feedback loops in the climate system (e.g. land use dynamics), at present these
768 K. KEDWARD ET AL.

scenarios do not account for how biodiversity-specific physical risk channels may affect the resilience of the
financial system (NGFS-INSPIRE, 2022).4 The ECB’s economy-wide climate stress test, for example, included
only flooding, wildfires, sea-level rise, water stress, heat stress, earthquakes and hurricanes in its calculation
of firm-level forward-looking physical risk scores (Alogoskoufis et al., 2021).
This oversight becomes even more problematic when considering the differing time horizons of climate-
and biodiversity-related physical impacts. For example, the ECB expects physical risks to ‘primarily materialise
in the medium to long term’ (ECB, 2020, p. 13). Similarly, the NGFS reference scenarios consider that the effects
of climate change will adversely affect crop yields only from 2060 onwards (NGFS, 2020b; NGFS and INSPIRE,
2021). Yet it is increasingly acknowledged that agriculture is also exposed to shorter-term biodiversity-
related physical risks, such as pollinator loss and soil erosion (Garibaldi et al., 2011; IPBES, 2016; Sartori et al.,
2019) that may have financial impacts in the nearer term. Additionally, at the regional scale, several critical
biomes involving tropical rainforests and coral reefs are considered to be rapidly approaching ‘tipping
points’ (Lovejoy & Nobre, 2019; Schellnhuber et al., 2016; Staal et al., 2020; van Hooidonk et al., 2016).
Tipping dynamics are also relevant to climate change (Lenton, 2013; Steffen et al., 2015). The presence of
these non-linear dynamics suggest that some environmental-financial risks may materialise in the nearer
term. As we discuss further in Section 3, this implies a trade-off between knowledge-building and policy inter-
vention that is at present underappreciated by financial policymakers.
Climate change and biodiversity loss are also interconnected from a transition risks perspective, sharing
common anthropogenic drivers of change. Yet the integrated assessment models (IAMs), which underpin
the scenario risk modelling methodologies used by central banks, primarily focus on greenhouse gas (GHG)
emitting sectors as the main sources of transition risk (e.g. using shadow carbon prices to proxy for the intensity
of climate mitigation actions) (Ghersi et al., 2021; Hansen, 2022; Svartzman et al., 2021b). More recent studies
have explored actions to mitigate the loss of biodiversity, focusing on the transition risks associated with the
post-2020 Global Biodiversity Framework’s proposed target to conserve 30% of the earth’s surface (Waldron
et al., 2020), or nitrogen-intensive fertiliser use (Van Toor et al., 2020). In general, however, the interactions

Figure 2. Selected sector-based examples of potential trade-offs and synergies between selected climate and biodiversity solutions. Source:
Authors’ own illustration, based on literature detailed in the text
 CLIMATE POLICY 769

between climate-related and biodiversity-related transition risks remain under-researched. By focusing on

these risks in isolation, policymakers may be failing to account for the fact that actions designed to mitigate
various environmental problems are not necessarily mutually supportive.
Figure 2 visualises where trade-offs and synergies between biodiversity and climate solutions may emerge.
In the top left quadrant are some examples of climate mitigation activities that may have negative conse-
quences for biodiversity. For example, several studies have shown that the land use change implied by low
emission scenarios relying on bioenergy crops may have severe impacts upon biodiversity (Hof et al., 2018;
Immerzeel et al., 2014; Tarr et al., 2017).5 If policy actions to protect biodiversity become more developed
and widespread – as is the ambition following the forthcoming COP15 Biodiversity Conference – the climate
mitigation activities in the top-left quadrant may become subject to biodiversity-related transition risks that
are at present unaccounted for in environmental-financial risk analysis.
In other sectors – depicted in the bottom-left quadrant of Figure 2 – negative climate impacts are well-estab-
lished, but there has been insufficient focus by financial actors on other sources of transition risk. The emissions
associated with mining and real estate, for example, are well known but are considered largely abatable
through electrification. Yet, these sectors may face additional and potentially significant financial risks
should targets such as those proposed in the post-2020 draft Global Biodiversity Framework be enacted.
The target to conserve 30% of land and sea areas globally, for example, could create stranded mining and infra-
structure assets as conservation policies restrict development across certain ecosystems (Caldecott et al., 2013;
Waldron et al., 2020). The bottom-left quadrant hence depicts where current efforts to understand transition
risks may be significant underestimations.
Conversely, there are also important synergies to be gained from climate mitigation activities that are also
protective or restorative for ecosystems, such as the ‘nature-based solutions’ shown in the top-right quadrant
(IPBES and IPCC, 2021; Smith et al., 2019), which has implications for the appropriate definition and design of
green financial instruments (Deutz et al., 2020; The Nature Conservancy, 2019). Indeed, an IPBES-IPCC joint
report on climate and biodiversity found that ‘on balance, the evidence suggests more mutually synergistic
benefits than antagonistic trade-offs between conservation actions and [climate] mitigation objectives’
(2021, p. 20). One exception – depicted in the bottom right quadrant – might be the negative impacts on
GHG emissions of ‘ecotourism’, which has been proposed as one type of market-based mechanism for
funding conservation efforts (Deutz et al., 2020), given that tourism today accounts for around 8% of global
emissions (Lenzen et al., 2018). Overall, the precise dynamics of potential climate–biodiversity trade-offs and
synergies from a financial risk perspective are not well-established and remain in need of further research.
In summary, the interconnected dynamics of climate- and biodiversity-related physical risks together with
the interactions between various types of mitigation policies mean that CRFR and BRFR cannot be considered
in isolation to each other. Policymakers should be cognisant that the siloed and sequential approach that cur-
rently characterises environmental-financial risk assessment may result in ‘blind spots’ and potentially signifi-
cant underestimations of financial risk exposure.

3. Current financial policy approaches to environmental-financial risks

The most prominent sustainable financial policy initiatives (e.g. BEIS, 2019; European Commission, 2018) take
the position that the measurement and disclosure of environmental-financial risks is itself a means of managing
these risks (Chenet et al., 2021). This approach is grounded in a ‘market failure’ understanding of environmental
threats, which are assumed to result from negative externalities, i.e. the fact that environmental damages are
not priced into existing markets (Christophers, 2017; Ryan-Collins, 2019). According to this perspective,
encouraging firms to disclose the risks that environmental threats pose to their own private balance sheets
will, through increased awareness of financial materiality, lead to more sustainable resource allocation and miti-
gate potential sources of financial risk (e.g. TCFD, 2017).

4
For a review of emerging biodiversity-economy models, see NGFS-INSPIRE (2022) and Svartzman et al. (2021a).
5
Scientific studies relating to the conservation/climate mitigation interconnections of the other examples in this Table are summarised in the
Supplementary Information.
770 K. KEDWARD ET AL.

This market-led perspective has dominated central bank and financial supervisors’ approaches to managing
CRFR in advanced economies (Baer et al., 2021; Bailey, 2020; Brainard, 2021; Schnabel, 2020; Weidmann, 2021).
Risk disclosure and transparency is central to Pillar 3 of the international Basel III regulatory framework and has
accordingly become one of the key recommendations of the NGFS with respect to CRFR management (NGFS,
2019b). So far, financial authorities seem to be prioritising the same logic in their early explorations of BRFR. For
example, Dutch supervisors identified material exposures to BRFR within the Dutch financial sector, yet their

Table 1. Frameworks and indicators for understanding and measuring BRFR compared to CRFR.
Climate-related financial risks Biodiversity-related financial risks
Clear, quantifiable goal The 2015 Paris Agreement sets the ambition to The UN Convention on Biological Diversity has
limit global average temperature increases published the first draft of a proposed new
since the industrial revolution to below 2°C, global biodiversity framework comprising of 21
and ideally below 1.5°C. headline targets to resolve biodiversity loss
(CBD, 2021). The targets await further
negotiation and finalisation at the forthcoming
COP15 Biodiversity Summit.
Acknowledgement of role of finance The Paris Agreement Article 2.1(c) sets the The various conventions/agreements on
expectation to align financial flows with the biodiversity do not yet express the need for
headline goal. public or private finance flows to be aligned
with environmental protection, and the need
to transition business models.
Ecological metrics and indicators: The tonnes of CO2 equivalent metric is well- Multiple metrics required to track multiple
measuring drivers of change and established for measuring the drivers of problems across different time and spatial
overall outcomes climate change, whilst global mean average scales and types of local environment. Drivers
temperature change is the single indicator for are multi-dimensional, meaning there is no
measuring progress. single indicator, analogous to GHG emissions,
for tracking human impacts. There is also no
established scientific consensus on most
comprehensive and relevant set of indicators
for biodiversity loss (Mace et al., 2018).
Corporate metrics and tools:
– Risk disclosure frameworks Established and in use by financial institutions, Under development. The European Commission
although take-up remains slow. E.g. the released draft criteria for the biodiversity-
Taskforce on Climate-related Financial related extension of the EU Sustainable
Disclosures; EU Sustainable Taxonomy Taxonomy in August 2021(European
Commission, 2021b). The Taskforce on Nature-
related Financial Disclosures (TNFD) aims to
launch in 2023.
– Impact measurement tools Established frameworks for reporting and Under development. Various market-led
recording CO2 emissions from human initiatives but these are heterogenous and not
activities in many jurisdictions, e.g. the EU’s widely established (Finance for Biodiversity,
Non-Financial Reporting Directive. 2021). E.g. Biodiversity Footprint for Financial
Institutions (BFFI) by ASN Bank; Global
Biodiversity Score by CDC Biodiversité.
– Risk management tools A wide variety of portfolio-level tools in use, Under development. Risk management tools in
including Climate VaR, Carbon Earning at Risk, use are early-stage and not widely established.
Paris Agreement Capital Transition E.g. Exploring Natural Capital Opportunities,
Assessment (PACTA). Risks and Exposures (ENCORE); Science-based
Targets for Nature.
Materiality of financial risks Widely acknowledged as material, including at Awareness is growing but empirical research
the systemic level, and well-established in demonstrating the materiality of financial risks
academic literature. associated with broader environmental threats
remains a prominent research gap (Bassen
et al., 2019; NGFS-INSPIRE, 2022).
Actions by central banks and Widely acknowledged to be of relevance to Relevance to mandates not widely
financial supervisors operational mandates. Central banks acknowledged, though a few central banks
(especially NGFS members) increasingly have quantified BRFR exposures within their
putting in place infrastructure for climate jurisdictions (Calice et al., 2021; Svartzman
stress testing, e.g. the Bank of England’s et al., 2021a; Van Toor et al., 2020). The NGFS
(2021a) Biennial Exploratory Scenario, as well and the Sustainable Insurance Forum (SIF) have
as adjusting monetary policy operations to both separately begun to explore BRFR from a
account for climate risk. supervisory perspective.
Source: Authors
 CLIMATE POLICY 771

recommendations focused on the development of BRFR disclosure and risk modelling frameworks (Van Toor
et al., 2020). For both climate and non-climate environmental risks, the ECB’s supervisory guidance advises
financial institutions to estimate the magnitude of their environmental exposures, using tools such as
forward-looking scenario-based risk modelling, and to adapt their operating procedures and risk limits accord-
ingly (ECB, 2020). The NGFS Study Group’s recommendations focused on developing risk assessment method-
ologies and signaling the importance of BRFR to financial institutions under their supervision (NGFS-INSPIRE,
2022).
Indeed, a challenge facing financial policymakers is that the conceptual framework for measuring and under-
standing BRFR is less advanced compared with progress made in climate finance, as summarised in Table 1.
These emerging policy initiatives are laudable in their ambitions. Yet, market-led approaches to managing
environmental-financial risks suffer from several flaws that limit their effectiveness.
First, financial authorities have so far failed to acknowledge that they face a trade-off between knowledge-
building and policy action to reduce the materiality of future risks. Whilst it is true that policymakers’ under-
standing of environmental risks can be improved through more research and that this may enable more
effective interventions, it is also true that some biodiversity-related impacts may become financially material
within a much shorter time frame than climate-related physical risks – as discussed in Section 2. Comprehensive
accounting, reporting, and risk modelling methodologies may take years to become established, by which time
some biodiversity-related threats may already be undermining economic and financial stability. The same
concern applies to some climate risks that are also becoming increasingly financially material over the
nearer term, e.g. Californian wildfires. The slow progress of voluntary climate risk initiatives does not provide
encouraging evidence of a favourable outcome from this trade-off. Since the TCFD launched in 2017,
climate risk disclosures have yet to materially affect investment decisions for the majority of financial insti-
tutions (Ameli et al., 2020; Christophers, 2019; Hook & Vincent, 2020).
Second, biodiversity-related physical risks are arguably even more complex to estimate in financial terms
than CRFR (Chenet, 2019; Kedward et al., 2021a). Unlike climate change, which at its core concerns the
effect of anthropogenic GHG emissions on atmospheric temperature increases, biodiversity loss encompasses
multiple distinct phenomena, in turn the result of multiple anthropogenic drivers, acting upon different scales –
from local ecosystems to the planetary level. Quantitative estimations will hence require multiple indicators to
capture progress across various spatial and ecological dimensions, posing extraordinary challenges for financial
risk modelling (Chenet et al., 2021). Impacts are most directly identifiable at the micro-level: one firm will be
both exposed to multiple biodiversity-related threats with differing effects within different local ecosystems
and across different points in time. Replicating such granular analysis from asset location to financial portfolio
level implies an unmanageable degree of complexity unless very broad and aggregative abstractions are made,
which may reduce the reliability, and hence utility, of the exercise as a justification for policy intervention.
Third, biodiversity-related transition risks also face significant uncertainty in terms of identification and
measurement. Unlike CO2 emissions, many features of biodiversity and ecosystems cannot be conceptualised
as a fungible concept; gains in one location cannot fully offset losses elsewhere via a ‘compensation scheme’.
Consequently, there is no obvious carbon price equivalent for biodiversity loss, which complicates the design of
‘transition pathways’ for financial risk modelling. Emerging policy consensus suggests that reversing biodiver-
sity loss will require a mixture of institutional, policy, and regulatory reform at local, national, and global scales
(e.g. European Commission, 2020; G7 Leaders, 2021). Such reforms will be unavoidably political and will vary
considerably in implementation across sectors and jurisdictions, raising questions about the feasibility of select-
ing meaningful transition assumptions for scenario-based risk modelling.
Fourth, even if a sophisticated database of asset-level environmental information could be imagined,
financial policymakers should be aware of the inherent limitations of financial risk modelling approaches to
generate even broadly accurate estimations of environmental-financial risk exposure at the systemic level
due to the presence of complex system dynamics. Both climate and biodiversity transmission channels are
interconnected and governed by non-linear processes, such as feedback loops, emergent phenomena, rapid
regime shifts, and tipping points (Dasgupta, 2021; Lenton, 2013; Steffen et al., 2018). Importantly, whilst the
physical phenomena alone are subject to significant modelling uncertainty, so too are the second- and
772 K. KEDWARD ET AL.

third-order effects that cascade from interactions with socioeconomic phenomena (Keys et al., 2019), such as
complex global supply chains and highly interconnected financial networks (Liu et al., 2015).
Furthermore, the current trajectories of both climate change and biodiversity loss are unprecedented within
recorded human history (Barnosky et al., 2011), impeding the calculation of probabilities needed to estimate
future outcomes in conventional financial models. For these reasons, environmental-financial risks cannot be
easily conceptualised as probabilistic risks, which form the basis of traditional financial models, or even as
forward-looking risks that would become precisely measurable through scenario-based risk modelling. Just
as with climate change (Chenet et al., 2021), biodiversity loss and its socioeconomic consequences are
subject to radical uncertainty, where future outcomes are inherently unknowable. No matter the quality of
the input information, therefore, scenario-based modelling approaches cannot reliably quantify all of the poss-
ible future outcomes resulting from the dynamic interaction of multiple human and environmental variables
(Chenet et al., 2021; Svartzman et al., 2021b).
Central banks and financial supervisors traditionally operate by establishing evidence on the characteristics
of particular risks as a prerequisite to formulating policies to manage them. However, financial policymakers
should be cognisant that disclosure and reporting initiatives may never obtain sufficiently good data on
CRFR and BRFR, whilst quantitative financial risk assessment methods cannot be relied upon to capture all rel-
evant tail risks. Quantitative approaches may be important in exploring environmental-financial risks and raising
awareness among financial players, but these limitations mean that alone they are insufficient to ensure the
effective risk management. Indeed, the ‘measurement-first’ approach currently favoured by financial authorities
may leave them failing to deliver on their primary mandates to protect price and financial stability – if, as is
feared, physical risks emerge over the nearer-term. To better manage the trade-off between knowledge-build-
ing and policy action, financial policymakers should consider how to assess and manage on the basis of infor-
mation available today. It is to this question that we now turn.

4. Assessing environmental-financial risks under radical uncertainty

An emerging literature has argued for more considered use of quantitative modelling for assessing CRFR,
whereby limitations on estimates of risk are appreciated within the context of radical uncertainty (Chenet
et al., 2021; Svartzman et al., 2021b). These authors called for policymakers to explore nonequilibrium-based
methodologies, such as input-output analysis (Cahen-Fourot et al., 2019), network-based approaches (Battiston
et al., 2017), agent-based models (Balint et al., 2017), and stock-flow consistent modelling (Dafermos et al.,
2018), in order to capture some of the financial and non-linear dynamics not usually accounted for in traditional
climate-economy models. Chenet et al. (2021) also call for more qualitative means of understanding climate
risk, building on indicator-based approaches already used by financial authorities to assess thresholds for
the implementation of macroprudential policies (e.g. simple indicators of size, leverage, and institutional
interconnectedness).
The extension of these alternate risk assessment methods to BRFR is an important avenue for future research
and is even more warranted given its enhanced complexity. For example, policymakers could also focus their
quantification efforts on key transmission channels where dynamics and drivers of critical environmental
threats – such as ‘tipping points’ (Lenton, 2013) – are particularly interlinked with the financial system, comple-
menting these efforts with qualitative assessments to evaluate the degree of potential systemic risk (Svartzman
et al., 2021b).
Recent studies provide some examples of emerging approaches, including those already mentioned (Svartz-
man et al., 2021a; Van Toor et al., 2020). Kedward et al. (2021b) qualitatively assess supply-chain linkages related
to deforestation-linked commodities in the ECB’s corporate bond portfolio. Ranger et al. (2021) incorporate
compounding risks into macroeconomic scenario analysis, focusing on linkages between climate change
and pandemics. Galaz et al. (2018) estimate financial interactions with ecological tipping points, linking large
equity exposures to industries modifying critical forest biomes. While not precise measures of financial risk,
per say, such approaches can still give financial authorities valuable insights into where physical and transition
risk factors may become material.
 CLIMATE POLICY 773

As mentioned, current financial supervisory approaches consider environmental changes from a financial
materiality perspective, i.e. in terms of the impacts environmental threats may have on the balance sheets of
firms and financial institutions. More recently, there have been increasing calls for financial policymakers
also consider environmental materiality – i.e. the negative environmental impacts that result from certain
financing activities (Adams et al., 2021; Kedward et al., 2021a). Double materiality was first formally proposed
by the European Commission (2019) and has since been adopted by the five leading sustainability reporting
standards bodies (CDP et al., 2020). Building on these developments, we argue that understanding the
harmful impacts of finance may help policymakers to better assess environmental-financial risks at a more sys-
temic level and design effective policy on the basis of information available today.
Researchers within central banks exploring BRFR have emphasised that understanding the environmental
impacts of finance can contribute to building a comprehensive understanding of potential risks posed to
the financial system (Boissinot et al., 2022). First, exposure to environmentally-harmful activities may provide
an operational proxy for identifying potential climate and biodiversity transition risks. Second, given that
one firm’s impact upon the environment may affect other firms’ ability to operate, negative impacts may con-
tribute to the emergence or accumulation of physical risks elsewhere, or at a systemic level.
These arguments are important because they reveal the existence of feedback loops between financial
impact and financial risk. Environmental-financial risks are at least in part endogenous because financial insti-
tutions facilitate business activities driving climate change and biodiversity loss through their capital allocation
choices (Kedward et al., 2021a). For BRFR, Svartzman et al. (2021a) and NGFS-INSPIRE (2022) both explore poten-
tial ‘biodiversity alignment’ strategies for the financial sector but stop short of suggesting concrete policy
actions to directly mitigate biodiversity-harmful finance, citing the need for further research in this area –
including, for example, the development of methodologies to quantify the alignment of financial portfolios
with biodiversity policy goals.
Yet, given the critical ‘research versus action’ trade-off articulated in the previous section, we go beyond
these perspectives to propose that the feedback effects of negative financing impacts do not have to be
established in terms of losses to the financial system in order for policymakers to take action. Indeed, as
others have argued, evidence of environmental materiality should itself be sufficient evidence for financial
actors, including policymakers, to act upon negative impacts associated with financing activities (Galaz
et al., 2015; Scholtens, 2017). This is because the financial system is not just a passive intermediary of
capital flows responding only to pricing mechanisms, but it has considerable agency in shaping the direc-
tion of economic activity (Campiglio, 2016; Ryan-Collins, 2019; Schumpeter, 1934). In other words, the
alignment of financial flows should not just be seen as an implementing mechanism, but a policy objective
itself that is necessary to achieve climate and biodiversity goals (Likhtman et al., 2022). Whilst the potential
for new green financial instruments to mobilise financing for decarbonisation and conservation has
attracted much attention (e.g. Deutz et al., 2020), financial institutions and policymakers have arguably
paid less attention to the concurrent need to define and reduce harmful financing practices (Schreiber
et al., 2020).
Such an oversight represents a missed opportunity for better understanding sources of CRFR and BRFR. The
continued financing of environmentally-harmful activities enables damaging stakeholders, technologies, and
infrastructures to retain a persistently dominant position in the economy, thus making the transition to
more ecologically-sustainable alternatives more difficult and costly – i.e. ‘lock-in’ effects (Galaz et al., 2018;
Unruh, 2000). Indeed, the Dasgupta Review on the Economics of Biodiversity has noted that ‘existing private
financial flows that are adversely affecting the biosphere outstrip those that are enhancing natural assets,
and there is a need to identify and reduce financial flows that directly harm and deplete natural assets’ (Das-
gupta, 2021, p. 474).
A prominent gap in proposed risk assessment approaches for both CRFR and BRFR is a systematic assess-
ment by financial authorities into how financial institutions are financing key activities that drive climate
change and biodiversity loss, such as fossil fuels and agriculture. We propose that financial policymakers
also complement quantitative risk assessments with measures including the mandatory disclosure of port-
folio composition and due diligence procedures related to the financial of identified harmful activities.
Whilst existing policy approaches focus on quantifying risks in terms of losses to private balance sheets,
774 K. KEDWARD ET AL.

we go beyond this to argue that the identification of financial flows to climate- and biodiversity-negative
activities is a more precise and measurable exercise to identify drivers of potentially endogenous risks.
Additionally, such an approach may be more achievable within the limited timeframes remaining for
action, rather than the time-intensive evolution in disclosure and modelling required to fulfil market-led
approaches.

5. Discussion: alternative policy trajectories

One implication of the endogeneity of environmental-financial risks is that using financial policy to mitigate
financial flows supporting environmentally-harmful activities may be a simpler mechanism by which to
manage the emergence of CRFR and BRFR – given the limitations of market-led approaches. Indeed, some
have called for the alignment of the private financial system with governments’ Net Zero transition policy as
more direct means of mitigating systemic CRFR (Barkawi & Zadek, 2021; Robins et al., 2021). Others have
called for more interventionist financial policy, focused on steering capital away from harmful and towards sus-
tainable activities, that is justified by the need to take precautionary action where the consequences of inaction
would be catastrophic and potentially irreversible (Chenet et al., 2021; Chenet et al., 2022). The potential need
to act sooner in order to avoid the worst environmental risks is increasingly acknowledged by some central
bankers (e.g. Elderson, 2021).
But beyond protecting the financial system from the compounding interactions of climate change and bio-
diversity loss, there is also a strong case for financial authorities to use their policy toolkits because a climate-
and biodiversity-positive transition is unlikely to be achieved without aligning the financial system with
environmental targets such as the Paris Agreement and the forthcoming Post-2020 Global Biodiversity Frame-
work. Of course, financial policy is not a panacea; national policy defining a green transition should be led by
governments. Yet assessing how capital flows determine human-environment interactions offers the potential
to identify ‘sensitive intervention points’ (Farmer et al., 2019) or ‘positive tipping points’ (Sharpe & Lenton, 2021)
where financial policy interventions may stimulate positive feedback loops that accelerate a green economic
transition.
One immediate step is for financial policymakers, in coordination with government-led green industrial
strategy (Mazzucato, 2021), to define harmful business activities that are incompatible with mitigating
climate change and reversing biodiversity loss. A combination of approaches could be used to define the
list of excluded practices, such as scientific consensus linking the activity to negative impacts, or clear policy
direction (e.g. the EU’s Biodiversity Strategy). Policymakers could focus initially on sectors most directly impli-
cated negative drivers of change, such as fossil fuel infrastructure and agriculture, and harmful practices taking
place in critical biomes (e.g. coral reefs, rainforest, and tundra) – the loss of which would accelerate tipping
points (Mace et al., 2014).
Policy developments in the EU give some relevant examples of how this approach could be applied. As well
as the ‘do no significant harm’ (DNSH) principle which already features in the Taxonomy Regulation (EU, 2020),
the EU Platform on Sustainable Finance recently advised that the Taxonomy should be extended to classify
harmful activities including those that are ‘always significantly harmful’ and ‘where urgent, managed exit/
decommissioning is required’ (European Commission, 2022, p. 8) – suggesting activities such as thermal coal
mining and peat extraction, for climate mitigation, and the destruction of high biodiversity-value ecosystems,
for environmental protection.
A taxonomy might have the advantage of being a more systematic approach of designating harmful activi-
ties in relation to green alternatives, but the EU’s Taxonomy experience has not been without controversy –
criticised especially for bowing down to vested interests (Schreiber et al., 2020; Rauhala, 2022). A faster and
potentially less politically-contested alternative could be for public bodies to use their discretion to designate
priority harmful activities based on scientific consensus. One proposal has called for new institutional configur-
ations (e.g. a ‘Green Finance Action Taskforce’) to formalise the coordination required between central banks,
financial supervisors, and government departments for finance, industrial policy, and the environment (Dafer-
mos et al., 2021).
 CLIMATE POLICY 775

Once harmful activities are democratically defined, financial policies can then be targeted to influence
capital reallocation. For instance, assets linked to harmful activities could also be excluded from collateral oper-
ations and monetary policy operations (Jourdan & Kalinowski, 2019) and micro- and macroprudential tools
could be used to disincentivise or restrict harmful financing (D’Orazio & Popoyan, 2019), such as through
levying punitive capital requirements (Philipponnat, 2020). Indeed, the use of macroprudential tools is
especially warranted by the fact that harmful financing contributes endogenously to the build-up of systemic
macrofinancial risk – as explored in Section 4.
Financial authorities could also explore using credit guidance tools to directly prohibit certain forms of
financing (Kedward et al., 2022). Such quantity-based mechanisms may be more effective than price-based
approaches in managing the non-linearities associated with tipping points (Dasgupta, 2021). Regardless of
the chosen policy tools, the onus of proof should be on the financial institution to demonstrate that they
are not facilitating designated environmentally-harmful activities – a requirement that can help to strengthen
due diligence and risk management procedures across the financial sector.
Central banks and supervisors can build on the fact that many financial institutions already define excluded
practices within sector-specific ESG investment criteria. In practice, these voluntary exclusion policies are incon-
sistent across firms and often not ambitious enough to materially shift capital allocation (Crona et al., 2021;
Thomson, 2020), and could potentially be improved by integration into financial supervision. Targeted inter-
ventions are also not without precedent within central banks. For example, the Brazilian central bank restricted
rural credit in the Amazon to firms compliant with environmental regulations under Resolution 3545 in 2008,
resulting in a material reduction in deforestation between 2003 and 2011 (Assunção et al., 2020). Investigating
the environmental outcomes of other quantity-based central bank interventions – such as those featured in
Dikau and Ryan-Collins (2017) – would be a worthy avenue for future research.
The use of financial policy to directly steer finance presents some trade-offs for policymakers to consider. In
particular, the implementation of the policies proposed above may crystallise the emergence of transition risks
in certain sectors. We suggest that this challenge could be managed by ensuring that financial policy on
environmental risk is deployed in coordination with relevant government departments, as part of a broader
packet of industrial policy measures to alleviate the economic dislocations associated with transitioning
sectors. Additionally, financial policy could be deployed on an escalating basis – with ‘forward guidance’
clearly communicating to financial institutions when policy will be tightened in line with the environmental
transition. As part of this, financial policymakers should also require financial institutions to publish their
own transition plans for climate and biodiversity, as some have already started to do, and report their progress
on meeting timelines for reducing environmentally-harmful financing activities – as has been introduced in
France.6
A second challenge concerns the political acceptability of coordinated financial policy interventions within
current institutional paradigms, which presently emphasise central bank independence. As highlighted above,
active coordination with broader government departments will be essential to ensure the efficacy as well as
democratic legitimacy of the proposed policy interventions. However, such collaboration is hardly novel.
Since the 2008 financial crisis and 2020 pandemic, central banks have increasingly put aside notions of
market neutrality to deliver stimulus to targeted parts of the economy – often in direct collaboration with treas-
ury departments (Cavallino & De Fiore, 2020). Furthermore, a recent systematic analysis of 135 central bank
mandates showed that over 50% have a mandate to support government policy objectives on sustainable
development (Dikau & Volz, 2021). Ultimately, central bank mandates are always interpreted and reflect
what is politically acceptable at the time. The limitations of market-led approaches outlined in this paper
would suggest that an institutional shift from ‘prudential’ to ‘promotional’ policy approaches (Baer et al.,
2021) is necessary for central banks to deliver on their primary mandates.
Finally, central banks and financial supervisors may be faced with the prospect of being unable to proceed
with the policy approach outlined here if their national governments are not willing to take the lead in design-
ing long-term industrial strategy for a green transition. This is especially a risk for BRFR, where biodiversity

6
See Article 29 of the French Energy and Climate Act: https://www.tresor.economie.gouv.fr/Articles/80af1116-2fcd-47d0-ad1d-ea24352e6295/
files/273f9026-bbc4-4fc2-ba60-f86f6fe16c1f
776 K. KEDWARD ET AL.

policy remains in its infancy and lags far behind the Net Zero emissions commitments made by various nations.
As has been argued for climate change, a role that financial authorities should consider in this scenario is to
actively lobby governments to take action due to the implications on systemic macrofinancial risks (Svartzman
et al., 2021a).7 Given that the financial risks of environmental threats escalate the longer that mitigation action is
delayed, such a lobbying role for the central bank should be understood as an integral part of taking precau-
tionary action to deliver on its primary mandates of preserving price and financial stability.

6. Conclusion
Financial authorities are beginning to recognise the importance of environmental risks beyond climate change
to their financial and price stability mandates. As with CRFR, emerging policy initiatives for BRFR have cited a
need for new disclosure frameworks, quantitative risk modelling methodologies, and more research on
financial materiality as a prerequisite to further policy interventions (e.g. NGFS-INSPIRE, 2022).
This paper explored the limitations of the ‘measure in order to manage’ approach that currently dominates
climate finance policy. We proposed alternate options for policymakers to both assess and manage CRFR and
BRFR on the basis of information available today, emphasising the importance of identifying and reducing flows
of finance that are facilitating the persistence of environmentally-harmful economic activities, that contribute
to climate and biosphere tipping points.
Nevertheless, it is true that critical research gaps remain. First, the interconnections between BRFR and CRFR
remain underexplored; there is a particular need to understand how trade-offs and synergies between climate
and biodiversity solutions will affect transition risks. In particular, identifying climate mitigation and biodiversity
protection synergies could then enable central banks to use their policy toolkits to incentivise and steer finance
to these activities. Second, future developments in risk modelling should focus on accounting for climate–bio-
diversity risk interactions into the environment-economy models that underpin supervisory risk assessment
processes. Quantitative approaches should also focus on quantifying key risk transmission channels, such as
potential ecological tipping points. Finally, financial policymakers should conduct a systematic assessment
into how financial institutions are financing key sectors implicated in driving climate change and biodiversity
loss, in order to inform the design of policy instruments to reduce such activities.

Acknowledgements
The authors are grateful to the Editor and three anonymous referees for suggestions to improve the paper. The research received
financial support from Partners for a New Economy, the Laudes Foundation and INSPIRE. Chenet acknowledges the support of the
Chair Energy and Prosperity, under the aegis of the Fondation du Risque.

Disclosure statement
No potential conflict of interest was reported by the author(s).

Funding
This work was supported by Laudes Foundation: [GR-071997]; Partners for a New Economy: [Central banks, financial regulation and
nature].

ORCID
Josh Ryan-Collins http://orcid.org/0000-0003-4498-6329

The Bank of England is reported to have lobbied the UK Treasury to ‘green’ its monetary policy remit (Giles & Binham, 2021).
7
 CLIMATE POLICY 777

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