François Villeroy de Galhau: Launch of the NGFS Conceptual Framework for nature-related financial risks "to guide action by Central banks and supervisors on nature-related risks"

Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Launch of the NGFS Conceptual Framework for nature-related financial risks"to guide action by Central banks and supervisors on nature-related risks", Paris, 7 September 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Ladies and gentlemen,

It is a great pleasure to introduce, together with DNB's President Klaas Knot, this NGFS conference that launches its conceptual framework on nature-related risks. One year ago, we were together in Amsterdam for a pioneering conference on biodiversity from a central bank and supervisor perspective. At the time, our grasping of nature-related risks was roughly the same as on climate change some years earlier, and we acknowledged the need to refine our understanding and methodology. Indeed, our economic reliance on natural resources such as water, and more broadly on services provided by nature and, at the same time, the impact our economies have on nature, are becoming more and more obvious and are increasingly documented. As Ravi Menon, Chair of the NGFS, stressed it recently, "along with the climate crisis, the nature crisis is the existential challenge of our times. We cannot focus on one and hope the other will take care of itself."

The new conceptual framework released today by the NGFS therefore marks an important milestone. It offers a shared language and sketches out a common method to assess nature-related financial risks and ensure that our collective work is both consistent and joined up. The common understanding we have reached together is both science-based and geared toward bridging the gap with assessing the economic and financial implications of nature-related risks. As Frank Elderson recently put it, "this is not some kind of a flower power, tree-hugging exercise. This is core economics."

According to one estimate, reversing the decline in nature loss could require approximately 500 billion dollars per year until 2030, while the world currently spends less than 150 billion dollars on nature conservation and harmful subsidies represent 300 billion dollars. Whatever the right figures, the gap is such that it is all the more important that financial actors start acting on nature-related risks to shift nature-blind financial flows. At Banque de France, we have started doing so through our sustainable investment policy by partnering with a data provider to carry out a detailed assessment of impact on biodiversity of the equity and corporate bond components of our non-monetary portfolios.