Biodiversity in the financial sector – relevance, risks and regulation

The importance of biodiversity in the financial sector

Biodiversity describes the diversity of life on earth – from the genetic differences within individual species to the ecological interactions that enable ecosystems to function. Its protection is a core concern of the 1992 Convention on Biological Diversity, which obliges signatory states to conserve biological diversity, to use it sustainably and to share the benefits of genetic resources equitably. Nevertheless, the loss of species and habitats continues apace – with tangible consequences for the environment, society and the economy.

Biodiversity is no longer a marginal issue for banks either. The decline in ecological diversity can jeopardise supply chains, increase production costs and call entire business models into question. Biodiversity is therefore becoming a risk factor that encompasses physical, regulatory and legal risks. At the same time, new opportunities arise, for example through the financing of projects for renaturalisation, sustainable land use or nature-based solutions. These activities not only promote ecological stability, but also strengthen the resilience of markets and institutions in the long term.

Current regulatory developments show that Biodiversity is no longer a secondary aspect, but a central element of sustainable corporate management. However, there is still often a lack of reliable data and clear assessment standards. Banks should therefore actively address biodiversity risks and establish appropriate data processes. After all, biodiversity harbours a new risk that has received little attention to date and which banks should integrate into their strategies and processes at an early stage – in order to fulfil regulatory requirements and secure their own future viability in the long term.

Regulatory requirements and frameworks

Biodiversity aspects are now firmly integrated into the European and national sustainability framework:

• EBA guidelines on ESG risks: The European Banking Authority defines biodiversity as an environmental risk factor that influences credit, market and operational risks. Institutions should identify and assess these risks and incorporate them into their strategic decisions.
• CSRD and ESRS E4: The Corporate Sustainability Reporting Directive requires companies to disclose biodiversity-related risks, dependencies and strategies. The ESRS E4 standard concretises these requirements.
• BaFin fact sheet on sustainability risks: BaFin requires biodiversity to be integrated into governance, strategy and risk management as a component of physical sustainability risks.
• EU Taxonomy (Objective 6): The environmental objective “protect and restore biodiversity and ecosystems” defines activities that make a significant contribution to the conservation of nature. Banks must take these criteria into account when determining their taxonomy ratios.
• MiFID II and SFDR: Both sets of regulations introduce biodiversity-related aspects into investment advice and product transparency.
• ISO standard 17298:2025: Support in understanding interactions with biodiversity, recognising opportunities for nature-positive financing and in developing and implementing a biodiversity action plan

Why biodiversity has so far been underrepresented in the banking sector

Our consulting practice shows that many of our clients recognise the importance of biodiversity, but have not yet implemented either targets or measurable key figures.

Data management as the key to assessing biodiversity risks

The integration of biodiversity aspects into risk management depends largely on the quality and availability of suitable data. Data management therefore becomes a central field of action. As biodiversity data is often available in decentralised form and in varying quality – from authorities, research institutions or NGOs – banks must develop suitable processes to make this information usable.

One possible approach is the integration of participatory data sources: As part of project financing, interested citizens or local environmental groups are involved in order to collect biodiversity data and document changes over the long term.

The overarching aim is to bring together ecological and financial data. The use of recognised classifications – such as the EU taxonomy (Objective 6) or the IUCN categories – facilitates comparability across institute boundaries. The TNFD methodology (“Locate – Evaluate – Assess – Prepare”) provides orientation, allowing dependencies and risks to be recognised step by step. In addition to standardisation, clear data governance is therefore mandatory – as is the case with classic climate data: responsibilities should be specified, quality standards defined and data sources documented transparently. Only in this way can the combination of internal customer and location data with external environmental and satellite data enable a more precise risk assessment.

Perspective and outlook

Political and regulatory dynamics will continue to place biodiversity centre stage. The Kunming-Montreal Global Biodiversity Framework, the EU Biodiversity Strategy for 2030 and the Renaturation Act create a binding framework for this. At the same time, the Taskforce on Nature-related Financial Disclosures (TNFD) is establishing a reporting format that integrates biodiversity into governance, strategy and key figures. For banks, this means a paradigm shift: biodiversity is not an additional ESG issue, but part of economic reality.

In the long term, biodiversity will become an integral part of integrated sustainability and risk strategies. The decisive factor will be whether institutions recognise it as an opportunity – as a factor that secures long-term value creation, reduces risks and enables new business models.