How can we translate biodiversity risks into financial risks? Do we need a common baseline both conceptually and methodologically, acknowledging different national circumstances, and make it applicable for central banks, supervisors and commercial banks across different countries, and yet channel the findings into decision-ready policy messages? The event is recommended for people in finance, policy making, and anyone interested in nature related financial risks.

A growing number of financial authorities have been considering whether risks stemming from biodiversity loss are relevant from a financial risk perspective and what are the potential implications. The question is no longer if and why, the question is rather what types of risks will materialize, for who, how and when.

The Financial Stability Board’s recent report, a ’Stocktake on Nature-related Risks: Supervisory and regulatory approaches and perspectives on financial risk’, found that to-date, financial authorities around the world are at varying stages of evaluating the relevance of biodiversity loss and other nature-related risks as a financial risk. The assessment showcases that some countries have conducted analytical work and identified material financial risk at the national economic and financial system level, others are still scoping and monitoring the topic, while a few authorities are still prioritizing climate risks or struggle with data gaps before they can begin to assess the nature side of the equation.

Realizing the importance of biodiversity related risk assessment, the Central Bank of Hungary (shortly MNB), together with OECD and supported by the European Commission, developed a groundbreaking project with the purpose to lay the foundation for a unique assessment of nature-related risks. The final product of the project is a report named 'Technical implementation of the Supervisory Framework for Assessing Nature-related Financial Risks to the Hungarian financial sector' Additionally, the project also developed a methodological supervisory framework to help central banks and financial supervisors assess biodiversity-related financial risks, impacts and dependencies in the financial sector, including transmission channels for both physical and transition risks. The project also concluded on multiple recommendations for the Hungarian financial supervision.

The project fits the primary objective of MNB’s mandate, which is to achieve and maintain price stability, enhancing its resilience, ensuring its sustainable contribution to economic growth. Following the decision of the National Assembly on 28 May 2021, the MNB’s mandate was extended to support the Government’s policy on environmental sustainability, making it the first EU central bank to be granted a green mandate. MNB established its official green program in 2019, which aims to support the resilience of the Hungarian financial and economic system against risks stemming from environmental and climate risk.  

This project concluded in June 2024, and now a new phase commences as per how can key financial and political authorities translate the project findings into actionable strategies in alignment with Hungary's third National Biodiversity Strategy (which provides a comprehensive framework for the long-term preservation of the country's wildlife and natural resources, also defines the goals to be met by 2030).

Therefore, this COP16 official side event aims to:

• go beyond sharing the outcomes of this unique project,
• provide the perspective of a Central Europe based Central Bank,
• inspire any other financial institution or government authority, as well as market participant that face challenges regarding how to begin to identify, assess, and manage nature-related financial risks.

The side-event is part of the official program of the Hungarian delegation led by the Ministry of Agriculture, while the Ministry also fulfills the presidential mandate of the European Union’s council in the second half of 2024. This will generate high level of visibility for this side-event.

Catering will be provided to all attendees!

Agenda:

• 13.20 – 13.25 Welcoming Speech - Dr. Oszkár Ökrös, Deputy State Secretary for International Relations at the Ministry of Agriculture, Hungary
• 13.25 – 13.50 Assessing Biodiversity Related Financial Risk: Lessons from a Supervisory Framework – Balazs Lóránt, Analyst, Sustainable Finance Team, Central Bank of Hungary (MNB)
• 13.50 – 14.35 The Enabling Environment: Frameworks, Methodologies, Policies
  • Sjoerd van der Zwaag, Senior Policy Advisor, Sustainable Finance Office, De Nederlandsche Bank and Team Lead in Taskforce on Nature Related Financial Risks, NGFS
  • Kata Molnár, Senior Analyst, Sustainable Finance Team, Central Bank of Hungary (MNB)
  • Pietro Bertazzi, CDP Chief Policy & Project Officer

  • Moderator: Gayaneh Shahbazian, Biodiversity Engagement Manager, Morningstar Sustainalytics

• 14.35 – 14.40 Closing Remarks - Kumi Kitamori, Deputy Director, OECD Environment Directorate