The World Wide Fund for Nature (WWF) is calling on central banks, financial regulators and supervisors to take steps to limit capital flow to deforestation activities. In a new report, the NGO also called on the authorities to design rules ensuring investment portfolios are not contributing to biodiversity loss and climate change as a result of forest destruction. Deforestation and other forms of ecosystem conversion are linked to 48% of biodiversity loss and climate change, the report claimed, with agriculture the key driver. Yet, financial institutions continue to fund activities that cause deforestation. While central banks and regulators are beginning to take steps on climate risk, few have yet extended their oversight to broader environmental risks like nature loss, the WWF said. Exceptions to this include Bank Negara Malaysia, De Nederlandsche Bank and the Monetary Authority of Singapore, which are beginning to consider deforestation risk. The report provided guidance on how central banks and regulators can begin to bring the issue into their purview, including by conducting research, communicating expectations, introducing penalties, and eventually including deforestation risk in core supervisory tools such as capital requirements and credit guidance. “Central banks, financial regulators and supervisors are not meant to replace any governmental action, but they should collaborate with policymakers and play their part,” said Maud Abdelli, WWF’s Greening Financial Regulation Initiative Lead. “The less the financial system is prepared to adapt to regulations and preferences that aim to halt deforestation and conversion, the more difficult it becomes to prevent its instability.”
