Presentation by Julien Calas Agence Francaise de Développement OECD INSPIRE Workshop Bio Risks impacts and dependencies in the financial sector

1. FROM MACRO-FINANCIAL
AND SPATIALLY-EXPLICIT
ASSESSMENT TO SCENARIO
Emerging Approaches to Measure Biodiversity-related impacts
and dependencies and Translate Biodiversity- and Nature-related Risks into
Financial Risks – OECD / INSPIRE Workshop – April 4th 2023
Based on research led by Paul Hadji-Lazaro, Julie Maurin, Antoine Godin (AFD), Etienne Espagne (WB)
with Julien Calas (AFD)

2. Biodiversity
Productive
Structure
Financial
Institutions
Macro-
financial
Context
Second
round
effects
Country risk
Country risk Socioeconomic
impacts
Idiosyncratic
risk
Physical / Transition
shock
Indirect
effects
Transmission of Nature-related risks to Financial stability
- Idiosyncratic channel
- Macro-financial channel

3. Output from water-dependent sectors
Municipality-level surface water shortage index
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Spatially-explicit assessment of physical risks
Physical risks related to economic activities vulnerable to water-shortage
Based on WWF
Water Risk Filter
South Africa
Based on
ENCORE tool &
Quantec Easy Data
10% of SA total production is vulnerable to water-shortage
22% of SA exports are vulnerable to water-shortage
More than ZAR 1 200 billion of
assets held by the South African
banking system (18 % of total
credit) are issued by activities
that are highly dependent on
Surface or Ground water.
CAUTION : under review before publication

4. Location
In sensitive municipality
Not in sensitive municipality
Ecosystems threatened by mining activities
Output level of mining activities
47% of mining production locates in municipalities
highly covered by mining-threatened ecosystems
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Spatially explicit assessment of transition risks
Transition risks related to the protection of terrestrial ecosystems threatened by mining activities.
Based on
SANBI data
Based on
Quantec
Easy Data
80% of coal mining activities and 55% of metal mining activities
are located in sensitive municipalities.
SA banks hold 71% of their credits to the mining sector (ZAR +140
Billions), issued by two sectors (coal and metal) whose activity is
significantly located in municipalities where ecosystems are
threatened by mining activities
CAUTION : under review before publication

5. Two main types of scenarios to assess double materiality NRR
Source: Ferrier et al. (2016)
Transition risk
scenarios
Physical risk
scenarios
• Several business as
usual biodiversity
scenarios;
• Few literature on their
NRR effects;
• Lack ecological science
to integrate physical
tipping points and
regime shifts (complex
interconnections).
• The new Kunming
Montreal - Global
Biodiversity Framework
(Dec 22, COP 15)
provide a narrative
• Multiple possible
transition paths, but not
standardised as SSP
• Do not include natural
resources and land-use
as GDP growth factors
(feedback loop).
Maurin, J., Calas, J., Godin, A., & Espagne, E. (2022). Global biodiversity scenarios: what do
they tell us for biodiversity-related socioeconomic impacts. Paris, France: Éditions AFD.
https://www.afd.fr/sites/afd/files/2022-12-03-31-38/Global-biodiversity-scenarios.pdf

6. Shorter term physical risk scenario proxy:
In which countries are critical ecosystem functions moving away from the safe operating space ?
State Index
Progress Index
28 European countries
Usubiaga-Liaño, A., Ekins, P. (2022) Are we on the right path? Measuring progress towards
environmental sustainability in European countries. Sustain Sci.
https://doi.org/10.1007/s11625-022-01167-2

7. CAUTION : no final case results, only for methodological illustration
Shorter term transition risk scenario proxy:
The ESTEEM tool (Exposure to Structural Transition in an Ecological-Economic Model)*
Land Use intensity per production unit
Agriculture and farming in countries with same biomes
Density
Similar land use
intensity per
production unit
within the biome =
Lower transition risk
Very spread out
land use intensity
per production unit
within the biome =
Higher transition risk
Transition
++ Opportunity
Transition
Risk ++
* See : Magacho, G., Espagne, E., Godin, A., Mantes, A., & Yilmaz, D. (2023). Macroeconomic
exposure of developing economies to low-carbon transition. World Development, 167, 106231.
https://doi.org/10.1016/j.worlddev.2023.106231

8. THANK YOU
paulhajilazaro@gmail.com; maurinj.ext@afd.fr; godina@afd.fr; calasj@afd.fr
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