Banks must move beyond climate-linked commitments and urgently set targets to curb their impact on nature, according to a United Nations-backed discussion paper that warns of escalating financial risks from biodiversity loss.

The report, published by the United Nations Environment Programme Finance Initiative and its World Conservation Monitoring Centre, lays out a proposed framework for banks to identify, measure and reduce negative impacts on ecosystems linked to their lending, investment and underwriting activities.

Beyond Climate: Expanding to Nature Risks

Banks have grown familiar with climate risk management, setting net-zero targets and measuring financed emissions. But comparable tools for nature impact are lacking, the report said.

Unlike greenhouse gases, which are measurable in carbon dioxide equivalents, biodiversity impacts vary widely across locations and ecosystems, making them harder to quantify.

“Nature-related risks are increasingly a key concern for banks, alongside significant opportunities,” the report noted. “This approach aims to support banks in moving from practice-based targets to measurable impact targets.”

The paper proposes a step-by-step framework, including screening portfolios for nature-related pressures such as deforestation, water depletion and pollution, identifying relevant indicators, setting “SMART” (specific, measurable, achievable, relevant and time-bound) targets, and aligning them with the Kunming-Montreal Global Biodiversity Framework.

Challenges of Data and Accountability

Despite growing awareness, the report highlights serious obstacles to implementation. Chief among them is the lack of reliable data on the location and scale of clients’ environmental impacts.

Many banks struggle to obtain information on supply chains, particularly in agriculture and mining, where ecosystem degradation is most acute.

Other hurdles include unclear baselines for nature targets, evolving methodologies, and the limited influence banks may exert over clients with entrenched business models.

“There is currently no agreed approach to identifying how much reduction of negative impacts is enough at the level of individual organizations,” the report said, warning that without clear benchmarks, target-setting risks becoming “a box-ticking exercise.”

The paper also highlights systemic risks, describing how biodiversity collapse could ripple through financial systems by disrupting supply chains, intensifying physical risks like floods and forest fires, and triggering regulatory shifts that expose banks to transition risks.

Pressure to Align With Global Biodiversity Goals

The discussion paper builds on guidance issued in 2023 and comes after governments agreed on the Kunming-Montreal pact, which set targets to halt and reverse biodiversity loss by 2030.

For banks, this means embedding nature considerations into strategy and risk management, similar to how climate finance evolved under net-zero frameworks.

UNEP FI said pilot projects and case studies will be critical to refining the approach and urged banks to provide feedback on its feasibility.

“Banks have the ability to influence clients and capital flows towards nature-positive outcomes,” said Sam Burke, UNEP FI’s programme lead and co-author of the paper. “But for that to happen, banks need clearer roadmaps, stronger data, and common standards.”

The paper highlights potential business opportunities, noting that nature-positive investments, such as financing reforestation, regenerative agriculture or water management projects, can strengthen resilience and generate sustainable returns.

Call for Regulatory Backing

While the guidance is voluntary, the report signals that regulatory support may soon follow. Policymakers in Europe and parts of Asia are already exploring disclosure rules aligned with the Taskforce on Nature-related Financial Disclosures. Industry groups warn that unless standards are harmonized, banks could face a patchwork of requirements.

“Voluntary action is important, but regulatory alignment will be essential to avoid fragmentation and greenwashing,” the report said.

The authors also called for collaboration between banks, investors, companies and civil society to accelerate progress. By engaging clients in high-risk sectors such as agriculture, forestry and extractives, banks can influence business practices and reduce exposure to biodiversity-linked risks.

Testing the Approach

The framework is targeted primarily at “mature banks” – those already integrating sustainability into governance systems and client engagement. However, the report notes that even less-advanced institutions can use the guidance as inspiration.

In the coming year, UNEP FI and UNEP-WCMC plan to gather case studies from banks piloting the approach. These practical examples will help fine-tune metrics and clarify how financial institutions can contribute to the biodiversity goals.

“The financial sector cannot remain on the sidelines as ecosystems collapse,” the paper concluded. “Establishing impact targets for nature is not just about managing risks – it is about seizing opportunities to build resilience, competitiveness, and long-term value.”