Averting extinction: the critical role of financial regulation in protecting nature

Original article posted by Profundo.

Global biodiversity loss is one of the most pressing challenges of our time. Currently, around 1 million species are at risk of extinction, while human societies and economies rely heavily on the ecosystem services these species provide. Paradoxically, the very financial institutions that underpin the global economy are major contributors to the ongoing destruction of nature. Yet amidst the urgency, there are signs of a pivotal shift. The concluding sessions of the 16^th conference of the parties (COP16) of the Convention on Biological Diversity (CBD) sowed promising results that could transform how the global financial system interacts with the natural world, marking a turning point in recognizing the critical role of financial regulation in safeguarding global biodiversity.

According to the Global Biodiversity Assessment by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) vertebrate populations have seen alarming declines: freshwater species have decreased by 74%, terrestrial species by 40%, and marine species by 35% since 1970. An astonishing 1 million species – including plants and animals – are currently threatened with extinction, and without urgent action, many of these species could disappear within just a few decades.

Yet biodiversity is not only about saving species. Human societies and economies rely heavily on healthy ecosystems for virtually all life essentials, from food security to water resources and from disease prevention to climate regulation. Nature, and the ecosystem services it provides, lies at the very foundation of human well-being. Despite these dependencies, current economic and financial governance systems are incentivising practices that degrade the environment and erode biodiversity.

Against this backdrop, the recent adoption of the global strategy for financing biodiversity under the Kunming-Montreal Global Biodiversity Framework (GBF) marks a historic and hopeful milestone. For the first time, governments have committed to mainstreaming biodiversity into financial regulation, signalling a promising shift that could potentially redirect financial flows away from nature-destructing industries.  

Big bucks poured into Big Beef & Co.

While the perpetuation of environmental harm results from a complex interplay of global political-economic factors, the focus here is predominantly on the role of finance. According to the Banking on Biodiversity Collapse report, nearly USD 400 billion has been funnelled into forest-risk sectors over the past decade. Receivers of these loans and investments include notorious beef producers such as the Brazilian giants JBS, Marfrig, and Minerva – companies that have been repeatedly linked to illegal deforestation, human rights abuses and encroachment on Indigenous lands. As highlighted in a recent Expert View published by Profundo, the industrial livestock industry is also responsible for a substantial share of global greenhouse gas emissions.

The beef industry is just one illustration of a broader, troubling pattern. Major conglomerates such as the Sinar Mas Group – active in pulp, paper, and palm oil – have been linked to the deforestation of nearly 75,000 hectares in Indonesia and Liberia between 2013 and 2022. Additionally, an estimated clearance of 3,500 hectares of peatlands in Sumatra between 2018 and 2020 were linked to Sinar Mas Group. Bunge – an American trader involved in palm oil, maize, sugarcane, biofuels, and soy – has been associated with nearly 26,000 hectares of deforestation and forest degradation in Brazil’s Cerrado region. Similarly, Sudcam, a major rubber producer controlled by Chinese companies, is tied to the clearance of over 12,000 hectares of tropical forest in Cameroon between 2011 and 2018.

Unfortunately, these examples are far from isolated. Around the world, industries tied to Agriculture, Forestry, and Other Land Use (AFOLU) sectors – including mining companies – continue to degrade natural ecosystems. From beef and soy in South America, to pulp, paper, and palm oil in Southeast Asia, and rubber and timber in Central and West Africa: ecosystem destruction remains an ongoing practice. Without a significant shift in financial priorities, this catastrophic cycle of environmental loss is likely to persist.

The Global Strategy for Financing Biodiversity

In response to the biodiversity crisis, the Kunming-Montreal Global Biodiversity Framework (GBF) – adopted in 2022 – sets out 23 targets to ensure that by 2050, “biodiversity is valued, conserved, restored and wisely used, maintaining ecosystem services and sustaining a healthy planet’’. However, achieving this vision comes with a significant financial challenge. The GBF estimates that an annual investment of approximately USD 700 billion is required to meet these goals.

In an endeavour to narrow this finance gap, the CBD signatories have pledged to mobilise USD 200 billion annually by 2030. In this context, they adopted the first-ever global strategy dedicated to financing biodiversity in February 2025. This was the result of COP16 of the CBD, which started in Cali (Colombia) in October 2024 and was finished in February 2025 in Rome (Italy). The strategy represents a clear recognition that finance must be reformed if nature is to recover.

While a USD 500 billion annual shortfall remains, the strategy introduces key commitments that bring biodiversity closer to the heart of financial policy:

• It encourages national and international financial institutions, including central banks and regulatory authorities, to assess biodiversity-related risks, challenges, and impacts, in line with their mandates and in support of sustainable development;
• It calls for the mainstreaming of biodiversity into financial regulation, urging central banks to integrate nature into their policy frameworks; and
• It emphasizes the need for businesses, especially large corporations and financial institutions, to disclose their risks, dependencies, and impacts on biodiversity.

These outcomes did not arise in a vacuum. They followed after persistent advocacy and research by civil society. Notable among these efforts were a side-event at COP16 organised by the Forests & Finance (F&F) coalition, and the publication of a key report on financial regulations for biodiversity, authored by Profundo on behalf of the coalition.

Towards better regulations

The next step is implementation by national governments. Under the GBF, countries must submit (updated) National Biodiversity Strategy and Action Plans (NBSAPs). Yet, as of the GBF implementation review in November 2024, only 44 out of 196 signatory countries had done so. For those governments still drafting their plans, the aforementioned Regulating Finance for Biodiversity report offers valuable guidance with respect to the needed regulatory reform. Key recommendations include, but are not limited to:

• Requiring financial institutions to integrate biodiversity and human rights risks and impacts into their risk management processes at the corporate group level of their clients;
• Mandating regular disclosure of investment and loan portfolios, including exposure to biodiversity risks and impacts, with verifiable proof required for biodiversity-related claims;
• Developing due diligence obligations for the financial sector to prevent the financing of embedded deforestation, forest degradation and land conversion; and
• Strengthening institutions by requiring financial authorities to develop in-house expertise on nature-related topics.

The recognition that financial reform is pivotal to protecting ecosystems globally, is now anchored in international commitments. The challenge ahead lies in translating global ambitions into concrete, enforceable policies at the national level. With species disappearing at an alarming rate, the world cannot afford further delay. Needed now are political will and regulatory follow-through. Swiftly aligning financial systems with biodiversity goals is not just an environment imperative – it is essential to the long-term well-being of humanity.