1 Welcome

Ladies and gentlemen,

It is a privilege to be here to conclude this workshop. First of all, I would like to thank the ECB and the NGFS for organising and hosting this event. 

Over the past two days, we have come together to discuss the economic and financial impacts of nature degradation. A huge thanks to everyone who has shared their insights, expertise and experiences. 

2 Nature degradation – a risk for the financial system

The title of the conference “Vanishing Nature, Rising Risk” is a strong reminder of the vital role that nature plays in our economies and the financial system. Nature provides resources and services that underpin so much of our economic activity. In essence, nature provides the foundations upon which our economies are built.

But as we have heard over the past two days, these foundations are showing significant cracks. We all witness nature degradation in our daily lives. 

We see fewer birds, hear less birdsong. And it is not just birds. Flowers and trees are disappearing, too. These personal observations – which I am sure many of you can relate to – are backed by figures. 

Since 1970 global wildlife populations have shrunk by 73 %.[1]Across Europe, more than 80 % of protected habitats are in a poor or bad state.[2]These staggering numbers show that nature is under immense pressure – in Europe and all over the world. 

And as we have heard throughout this conference, the degradation of nature is not just an environmental issue. It is also a significant risk for the economy and the financial system. When ecosystems are degraded, when rivers run dry, when forests are felled, when biodiversity is lost, the impacts ripple through our economies.

Consider pollinators like bees, for instance. They are essential for food production. 75 % of global food crops rely on them. Bees pollinate crops worth more than 235 billion US dollars per year. The decline in bee populations puts agricultural output at risk and threatens global food security. 

The pharmaceutical industry is another example. Over 50 % of essential medicines like antibiotics and painkillers depend on plants and other natural sources.[3]

This shows that there can be no healthy economy without a healthy planet. And more broadly, life as we know it depends on nature. 

One essence of life is water, clean water. Water is also critical for many economic activities, from agriculture to manufacturing and energy production.

Research by the ECB, the University of Oxford and the London School of Economics shows that an extreme drought could have a significant impact on the euro area’s economy.[4]

According to the European Environmental Agency, water scarcity already affects nearly one in three people in Europe.[5] So far, states like Cyprus and Malta have been particularly hit by water scarcity. But other regions in Europe are not immune either. 

Germany is one of the countries with the highest water loss worldwide. Between 2002 and 2021, we have lost an amount of water equivalent to the entire volume of Lake Constance, due to factors that include melting glaciers and declining groundwater levels.[6]

Against this backdrop, the Bundesbank has also looked into the potential implications of water-related risks for the financial system. In the Bundesbank Monthly Report in January, we will present findings that align with the ECB’s analysis. More than half – 57.5 % – of the loans that banks in Germany made to non-financial businesses in 2024 were highly dependent on at least one water-reliant ecosystem service. For financial institutions, this could translate into increased credit risks. 

These examples underline the risks that nature degradation poses to our economies and financial systems.

As we all know, nature loss is not an isolated challenge. It is closely interconnected with climate change. Extreme weather events like floods or wildfires not only damage ecosystems but can also be a driver of climate change. For example, the destruction of forests by wildfires not only releases CO₂ but also reduces the planet’s capacity to absorb carbon emissions – creating a vicious cycle. These risks are not confined to a single sector or region. They are systemic, with the potential to affect the entire economy and financial system. 

3 Supervisory approaches must evolve

What does that mean for central banks and supervisors?

It means that we have a responsibility to deepen our understanding of these risks. To meet this challenge, our supervisory approaches must evolve. Also financial institutions need to have the tools to identify and manage nature-related financial risks effectively. This means we must embed these risks into risk management practices, just as we have done with climate risks. 

The NGFS is playing a pivotal role in this undertaking. Our network provides valuable guidance and resources. Let me highlight two key initiatives that demonstrate the progress we are making.

First, central banks and supervisors in various regions are already applying the NGFS conceptual framework on nature-related risks.[7] This framework establishes a common understanding of these risks among central banks and supervisors. Simply put, we want to make sure that we are all talking about the same things. The conceptual framework explains how nature degradation can create physical and transition risks. And how these risks can affect the economy and the financial system. We also outline an approach for central banks and supervisors to identify and assess nature-related risks.

Second, the NGFS is working on a guide for the supervision of nature-related financial risks that we will publish in early 2026. This guide will provide clear recommendations designed to help supervisors and financial institutions address these risks. It recommends establishing clear supervisory expectations and foster close dialogue with financial institutions. It also offers practical advice on selecting the right metrics, collecting data, and monitoring dependencies and impacts. The guide underscores the importance of forward-looking tools like scenario analysis and stress testing. 

These tools allow us to identify vulnerabilities and take proactive measures to address nature-related financial risks before they materialise. By integrating these approaches into our supervisory practices, we can make the financial system more resilient in the face of growing nature-related risks.

4 Relevance of nature-related data and research

To effectively address nature-related risks, we need reliable data and robust research. Without them, we are working in the dark.

In recent years, we have made significant progress. Advances in technology, such as combining satellite imagery with artificial intelligence, have opened up new ways to monitor and understand changes in ecosystems. 

One (fascinating) example is the use of bioacoustics monitoring to track bird populations. By analysing bird songs and calls, we can gather valuable data on species diversity, population trends, and habitat conditions. 

This not only deepens our understanding of biodiversity but also provides early warning signs of ecosystem stress. Researchers are also developing innovative methods to value natural capital and integrate it into macroeconomic models. But there is still much work to be done. 

We need more granular, localised data to understand the full extent of nature-related risks. And the economic and financial implications. 

What is equally important is ensuring that this data can be accessed by policymakers, financial institutions, and researchers alike. By pooling our expertise, we can create a more comprehensive picture of nature-related risks.

5 Conclusion

Let me conclude by returning to the memory I shared earlier. 

The songs of birds in the woods are a reminder of the delicate balance of ecosystems. The challenges we face are immense. 

Nature degradation poses material risks to our economies and the financial system. Supervisory approaches must evolve to respond to these risks. 

The past two days have highlighted the expertise and the commitment of our community, which leaves me optimistic. This workshop has brought together a community of academics, experts and policymakers who are deeply committed to addressing these challenges. This workshop was an important step.

Sharing knowledge, best practices, and resources across borders and institutions is key. Let us keep up this dedication and momentum.

Thank you.

Footnotes:

1. World Wide Fund for Nature (2024): 2024 Living Planet Report, 10 October 2024.
2. European Environmental Agency (2025): Europe’s environment 2025, 29 September 2025.
3. World Health Organization (2025): Fact Sheet Biodiversity, 18 February 2025.
4. European Central Bank (2025): The European economy is not drought-proof, ECB Blog, 23 May 2025.
5. European Environmental Agency (2024): Europe's state of water 2024: the need for improved water resilience, 15 October 2024.
6.  Umweltbundesamt (2023): Monitoringbericht 2023 zur Deutschen Anpassungsstrategie an den Klimawandel, November 2023.
7. Network for Greening the Financial System (2024): Nature-related financial risks: a conceptual framework to guide action by central banks and supervisors, 2 July 2024.