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The world is losing nature at an alarming rate. Global wildlife populations have plummeted by 73% in just 50 years, and scientists this week warned that we are reaching the planet’s first catastrophic tipping point. But even as this ecological catastrophe unfolds, dangerous misconceptions persist in the financial world. Nature finance is aimed only at conservation projects with disappointing returns and is unsuitable for mainstream capital.
This view is not just too narrow and wrong; It is actively undermining efforts to halt biodiversity loss at the scale and speed needed.
In 2023, private finance harming nature will total $5 trillion, a staggering 140 times more than the $35 billion channeled to benefit nature. Just 250 companies included in the MSCI ACWI index account for 67% of negative impacts on nature, primarily in the food production, mining and energy sectors.
These are the very companies that banks finance, investors hold in their portfolios, and insurance companies underwrite every day.
However, there is something that most financial institutions lack. Financial institutions already have the tools to redirect these harmful flows toward natural recovery. There is no need for complex new products or bespoke structures. They can act at scale today through their existing operations.
Beyond conservation: The power of green finance
Our new research reveals important differences that could generate trillions of dollars in naturally positive finance. Direct conservation projects play an important role, but incorporating nature into everyday economic decision-making creates the potential for rapid expansion.
Think of it this way. Greening finance means banks assessing natural risks in the credit process, investors engaging companies about deforestation in their supply chains, and insurance companies offering better terms for regenerative farming practices. These actions are integrated into existing workflows, do not require new asset classes, and can be replicated across portfolios with good returns.
Financial institutions also need to act in their own interests. Banks face credit rating downgrades if their customers operate in water-scarce areas. Investors are watching stock values evaporate as fertilizer regulations tighten. Insurance companies are paying out more and more claims as extreme events caused by climate change cause ecosystem degradation.
Four levers for immediate action
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Therefore, adopting a green lending mindset is in the interest of both financial institutions and the planet. Financial institutions can implement four powerful tools today to achieve this.
First, incorporate nature into your company’s management. When The Norinchukin Bank analyzed its portfolio’s dependence on nature, it used these insights to lobby Japan’s livestock feed industry on water use. By the end of 2025, BNP Paribas plans to refuse financing to beef and soy suppliers from Brazil’s rainforests unless they have a clear zero-deforestation strategy. These are not radical moves, but risk management.
Second, incorporate nature into financial decision-making. Rabobank excludes operations in major protected areas and prohibits financing of products containing certain harmful pollutants. UBP classifies companies as either ‘biodiversity leaders’ or ‘laggards’ to inform investment decisions. These policies protect long-term value.
Third, use loan terms to encourage change. Wedgetail offers nature-related loans that reduce interest rates when borrowers achieve conservation milestones. Chubb reduces crop insurance premiums for farmers who practice no-till farming, which improves soil health and biodiversity.
Fourth, engage policymakers collectively. The voice of financial institutions has demonstrated that it matters when 477 signatories, including 132 investors representing large amounts of assets, called on the EU to maintain strong sustainability rules. AXA UK’s advocacy requires new housing developments in England to have sustainable drainage systems, reducing flood risk and enhancing urban biodiversity.
Prerequisite: Understand your impact
Institutions cannot take these actions without first understanding where financial flows naturally intersect. Fortunately, this is easy to get started with tools like ENCORE that are designed to help you identify which sectors are doing the most harm.
Norges Bank Investment Management, which manages $1.7 trillion in assets, uses geospatial mapping to assess how its portfolio companies’ operations intersect with key biodiversity areas. This isn’t rocket science. It’s 21st century due diligence.
An opportunity you can’t afford to miss
The cumulative effect of these incremental improvements across mainstream finance can be transformative. When financial institutions use traditional products and existing processes to incorporate nature considerations into their portfolio construction, risk management, and engagement strategies, they can scale impact far beyond what can be achieved with targeted conservation finance alone.
No institution can manage this transition alone. But collectively, financial institutions, through their daily decisions that shape where trillions of dollars flow, can protect the global economy from destructive activity and rewire it for recovery.
The alternative is to continue pretending that business as usual is an option. That choice means further ecological collapse, increased economic losses, and ultimately an inability to function due to the collapse of the natural systems on which the economy depends.
The train has left the station. The question is whether financial institutions will participate voluntarily or if they will be forced to do so by increasing nature-related risks that threaten the stability of the entire system. For the sake of both nature and long-term financial stability, they should choose to act now through the mainstream financial tools already at their disposal.
