The economy is embedded in, and dependent on, nature. Yet, economic activity is degrading nature at an unprecedented pace. Interacting with climate change, nature loss and transformation can generate significant threats to the global economy and financial system. Work on the implications of nature-related risks for macroeconomic and financial sector policies is at an early stage. This note seeks to contribute to this emerging policy space in three main ways.
First, it proposes a conceptual framework for understanding nature-related risks by mapping out macroeconomic transmission channels, emphasising their impact on the economy and financial systems through “double materiality.”
Second, it conducts empirical analysis. It finds that nearly 38% of bank loans of the 100 largest global banks are extended to harmful subsidy-dependent sectors and 44% are exposed to conservation areas under the Global Biodiversity Framework. The note finds that industries most exposed to nature degradation are not well prepared to manage these risks.
Third, it discusses takeaways for macroeconomic and financial sector policies and frameworks.

About the Publisher
The International Monetary Fund (IMF) works to achieve sustainable growth and prosperity for all of its 191 member countries. It does so by supporting economic policies that promote financial stability and monetary cooperation, which are essential to increase productivity, job creation, and economic well-being. The IMF is governed by and accountable to its member countries.
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