- Financial regulators and their regulated entities are under increasing pressure to consider the financial risks associated with the loss of biodiversity and ecosystem services at both macro and micro levels. Recent economic literature identifies liability as a key category of foreseeable financial risk associated with biodiversity loss. However, it does not provide further guidance on the nature and extent of litigation and legal risks that should be considered in determining the potential materiality of relevant risks to a particular financial actor or system.
- This report adds to and extends the economics literature by proposing a framework under which biodiversity-related liability risks should be considered by regulators and financial sector participants in their broader assessment of biodiversity-related financial risks.
- Consistent with the emerging nature of biodiversity-related financial risk assessment, this report takes a forward-looking view of potential liability risks. It recognizes that biodiversity-related liability risks are not limited to the prevailing categories of "environmental law" claims. Rather, it draws on analogies to legal developments in other dynamic risk issues, such as climate change, to propose an expanded framework of potential liability risks under environmental, commercial, tort, and other laws.
- The framework provides a holistic perspective on the range of biodiversity-related liability risks that should be considered as part of a broader analysis of associated financial risks, and provides general commentary on the circumstances and actors that are likely to raise heightened concerns. As such, it provides a basis for further analysis of the materiality of relevant biodiversity-related liability risks in the unique context of each financial institution and system.