Frank Elderson, Executive Board Member of the European Central Bank (ECB), opened Finance and Biodiversity Day at COP17 by arguing that nature-related risks are now immediate economic realities rather than future threats. He emphasized that protecting natural capital is an investment in resilience and prosperity, not merely an expenditure. Citing World Bank estimates, he noted that up to half of global GDP relies on biodiversity and ecosystem services. ECB analysis reveals that 72% of euro area companies depend on at least one ecosystem service, and 75% of corporate lending goes to firms with high dependency.
Elderson highlighted specific vulnerabilities, such as water scarcity and pollution. Recent droughts in Europe caused exceptionally low levels in major rivers like the Rhine, disrupting supply chains and forcing nuclear plant shutdowns. Research involving the ECB, London School of Economics, and Oxford University indicates a 1-in-100-year drought could put up to 24% of euro area output at risk. Additionally, nearly 12% of euro area economic output faces risks from insufficient flood protection. The European Commission estimates that continuing PFAS pollution levels until 2050 could cost society €440 billion, with water treatment alone exceeding €1 trillion.
The speech underscored the role of central banks in managing these systemic risks. Through the Network for Greening the Financial System (NGFS), comprising 152 central banks, common methodologies for assessing nature-related financial risks have been developed. At the ECB, nature risks are integrated into banking supervision and monetary policy assessments, particularly regarding food price inflation driven by extreme weather. Elderson stressed that while frameworks exist, implementation must accelerate to meet Kunming-Montreal Global Biodiversity Framework goals, noting that humanity currently consumes natural resources 1.7 times faster than ecosystems can regenerate them.
Elderson’s remarks signal a definitive shift in central bank mandates, moving nature-related risks from peripheral environmental concerns to core components of financial stability and price stability. By explicitly linking ecological degradation to inflationary pressures and balance sheet risks, the ECB validates the premise that natural capital depletion poses a direct threat to macroeconomic objectives. This reframing challenges the traditional view that environmental regulation competes with economic growth, instead positioning ecological security as a prerequisite for sustained prosperity and competitiveness.
However, the gap between awareness and actionable investment remains critical. While supervisory frameworks and risk assessment tools are maturing, the mobilization of private capital towards nature-positive projects lags significantly behind the scale required to reverse ecosystem collapse. The reliance on international cooperation through bodies like the NGFS highlights the fragility of this approach amid geopolitical fragmentation. Without robust mechanisms to make non-revenue-generating public goods bankable, the transition from theoretical risk management to tangible financial flows may stall, leaving economies exposed to the very shocks central banks are trying to mitigate.
