Report Warns of Nature-related Risks to Sovereigns

Partial nature collapse will have severe consequences for the debt sustainability of sovereign issuers, according to a new report, which says nature-related risks must be factored into assessment frameworks used by the IMF and World Bank. Under a partial nature collapse scenario, involving disruption to wild pollination, marine fisheries, and timber from native forests, the debt-to-GDP ratios of many developing countries could rise steeply, according to the report from Finance for Biodiversity (F4B) and the SOAS Centre for Sustainable Finance. Failure to factor nature risks into debt sustainability analyses could lead to inaccurate policy recommendations and increase the risk of avoidable debt crises for many countries, it added. Classification within the IMF’s Debt Sustainability Analysis framework is a key determinant of market access for sovereign issuers and is a factor in IMF-sponsored economic programmes. “This study demonstrates the dire consequences that partial nature collapse can have on countries’ public finances and the imminent need to integrate the risks of nature destruction into the IMF’s macroeconomic and financial assessments,” said Simon Zadek, Chair of F4B.



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