Publication: Nature-Related Financial Risks in Brazil
Date
2021-08
ISSN
Published
2021-08
Author(s)
Calice, Pietro
Diaz Kalan, Federico
Miguel, Faruk
Abstract
Biodiversity loss and associated
economic costs are increasingly recognized as a source of
financial risks. This paper explores how and to what extent
Brazilian banks are exposed to the loss of biodiversity
through their lending to non-financial corporates. The
results suggest that such exposures are material. Forty-six
percent of Brazilian banks’ non-financial corporate loan
portfolio is concentrated in sectors highly or very highly
dependent on one or more ecosystem services. Output losses
associated with the collapse in ecosystem services could
translate into a cumulative long-term increase in corporate
nonperforming loans of 9 percentage points. Moreover, 15
percent of Brazilian banks’ corporate loan portfolio is to
firms potentially operating in protected areas, which could
increase to 25 percent should conservation gaps close, and
38 percent should all priority areas become protected.
Finally, 7 percent of corporate loans are to firms for which
environmental controversies have been recorded. While
preliminary, the results have important policy implications
for both Brazilian banks and Banco Central do Brasil.
Citation
“Calice, Pietro; Diaz Kalan, Federico; Miguel, Faruk. 2021. Nature-Related Financial Risks in Brazil. Policy Research Working Paper;No. 9759. © World Bank, Washington, DC. http://openknowledge.worldbank.org/handle/10986/36201 License: CC BY 3.0 IGO.”
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