Frank Elderson: Nature-related risk - legal implications for central banks, supervisors and financial institutions
Keynote speech by Mr Frank Elderson, Member of the Executive Board of the European Central Bank and Vice-Chair of the Supervisory Board of the European Central Bank, at the ESCB (Central banks of the European System) Legal Conference 2024, Frankfurt am Main, 6 September 2024.
The views expressed in this speech are those of the speaker and not the view of the BIS.
As a lawyer, I am always glad to discuss the novel legal issues affecting the work of central banks and supervisors.
At last year's conference I spoke to you about climate-related litigation and its impact on the financial sector. This year I want to talk about the risks that nature degradation poses to the economy and the financial sector.
As I have said before, assessing nature-related risk is not some kind of tree-hugging exercise. We are talking about material financial risks, which – like any other type of risk – must be assessed, analysed and managed.
Today, I want to focus on the legal implications of nature-related risk for our central banking and supervisory work. I will first outline the growing trend of nature-related litigation. Then I will look at how nature-related risk should be considered in the context of the mandates of central banks and supervisors.
Nature degradation: risks for the economy and the financial sector
Scientists worldwide agree that nature has been declining at an unprecedented rate over the past 50 years. The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) already sounded the alarm back in 2019, shortly before the outbreak of the global pandemic. The IPBES report even warned us that nature degradation was exacerbating emerging infectious diseases in wildlife, domestic animals, plants and people.