Aligning Development Finance with Nature’s Needs: Estimating the nature-related risks of development bank investments

This paper is an updated and expanded version of the one released in November 2020 ahead of the inaugural Finance in Common Summit. It aims at demonstrating that Public Development Banks (PDBs) can and should perform a stress test of the nature-related risks and impacts on their balance sheets nowadays. This report employs an approach exclusively and deliberately using readily available data to estimate the dependency of development banks’ balance sheets on vulnerable nature (‘dependency risk’), alongside the potential damage to nature from their lending activities (‘nature at risk’). Using portfolio data from 12 key development banks, we estimate ‘dependency risk’ and ‘nature at risk’ using publicly available information on their lending activities. The results are scaled up to reflect the total value of assets held by public development banks (PDBs) globally. The application of this methodology shows that any financial institution can make a credible, first-pass, biodiversity-related stress test of its balance sheet.