For years, climate risks have dominated investor conversations, regulatory agendas, and boardroom discussions. Now the focus is broadening. Forests, wetlands, pollinators, and coral reefs – that were long considered environmental issues – are moving to the centre stage of financial risk management. The logic is simple: without biodiversity, even the most ambitious climate strategies are likely to fail. But what exactly is ‘biodiversity’?

Biodiversity is complex, and this article does not attempt to cover the full spectrum. Instead, it offers a concise introduction to help decision-makers bring the topic to their next meeting, or at least to the agenda for serious discussion.

The UN Convention on Biological Diversity defines biodiversity as …

“The variability among living organisms from all sources, including, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are part; this includes diversity within species, between species and of ecosystems.”

In practical terms, biodiversity is the infrastructure of life. It is the reason people have breathable air, drinkable water, fertile soil, and food on their plates. Consider the following:

• Over 75% of food crops depend on pollinators such as bees.
• More than half of modern medicines can be traced back to plants and fungi.
• And forests alone absorb 2.6 billion tonnes of CO₂ annually – an indispensable climate buffer.

(Source: WHO, Biodiversity fact sheet)

From a financial perspective, nature is now recognised as an asset (or liability) for businesses, as companies depend on these services and can suffer damage if they deteriorate.

For example, a bank's loan portfolio could be at risk if its customers in agriculture suffer losses due to soil depletion or water pollution causes the collapse of fisheries.

Biodiversity loss and climate change are closely linked, but they are not identical challenges. Both are global, systemic problems that are often referred to together as part of the ‘triple planetary crisis’ (Source: UNFCCC) of climate change, biodiversity loss, and pollution, according to the United Nations. 

The UN Foundation notes that climate change accelerates biodiversity loss, (Source: UN Foundation) for example, through warming and droughts that cause forest fires or coral bleaching. At the same time, biodiversity loss exacerbates climate change, such as when deforestation releases CO₂ and reduces carbon sinks. A key difference lies in the measurement. 

Climate risk can be measured in tonnes of CO₂ and degrees of warming. These are globally standardised metrics. Biodiversity risk is more fragmented, highly localised, and therefore more difficult to model and manage.

However, there is still a demand to further understand the interplay between biodiversity and climate risks.

When people call biodiversity “the new climate risk", it means they believe the loss of biodiversity could destabilise the global economy and the financial system in a similar way to climate change. Awareness of this risk seems to be reaching a turning point. Several recent analyses underscore this:

1. Global risk rankings: In 2023 and 2024, biodiversity loss remained among the top global risks in the coming decade. This reflects expert consensus that deterioration poses a systemic threat to our way of life, according to the World Economic Forum.
2. GDP and financial stability at risk: Nature underpins economic activity, and its decline carries massive financial costs. A recent WEF article notes that more than 50% of global GDP, around $44 trillion, is moderately or highly dependent on nature’s services.
3. Physical and transition risks: Much like climate change, biodiversity loss manifests as physical risks, such as direct impacts on operations, assets, and supply chains. These are joined by transition risks including financial risks from the shift in policy, markets, and technology as governments and organisations respond to the crisis. 

Biodiversity deserves a place alongside climate in the risk registers of banks, insurers, and corporates. However, the new paradigm for risk management is actually “twin crises, twin opportunities” – in other words, tackling climate change and biodiversity loss together.

If organizations want to manage risk comprehensively, they cannot ignore either component. Board members, executives, and other leaders are therefore increasingly likely to discuss biodiversity in the context of corporate strategy and financial stability.