Panel discussion 'Every scenario requires collective action'

July 30, 2025

^{This discussion was originally written in Dutch. This is an English translation.}

Biodiversity loss is difficult to measure, but its impact on the economy and on investments is greatly underestimated. During a panel discussion at the Financial Investigator seminar on “Energy Transition, Natural Capital & Biodiversity”, four experts called for urgency, better models and an active stance on biodiversity risks.

By Baart Koster, Photography Cor Salverius Photography

How do institutional investors deal with biodiversity risks and to what extent are these already well understood? Chair Nikki Trip kicked off the debate with this question. According to Daan de Zwart, it starts with awareness: 'If you want to tackle risks, you first need to understand them. We're doing pretty well with climate change; we have CO₂ as a unit of measurement. For biodiversity, we have only just begun.“ De Zwart emphasises that climate and biodiversity cannot be viewed separately. 'You have to look at the risks in conjunction with each other, otherwise you run the risk that a measure in one area will cause damage in another. Think of climate policy that harms biodiversity.” Marjolein Meulensteen also recognises this development phase. ‘We have been working on climate for ten years and have aligned our portfolios accordingly. We only started working on biodiversity two years ago. We now have a solid basic analysis of where the risks and opportunities lie in the portfolio and can continue to integrate them step by step.’

Underestimated risks

A majority of participants in the room felt that biodiversity risks are underestimated, a view that the panellists wholeheartedly endorsed. Meulensteen: ‘It is difficult to measure, so people are cautious. But the risk is real.’ Cherry Muijsson went a step further: ‘There is still so much we don't know. Look at the enormous damage caused by the forest fires in California: insurers are reporting around 50 billion dollars in direct damage, and another 250 billion in broader economic damage. That's without even considering the impact of lost ecosystem services, such as air purification, water quality and the climate-regulating functions of forests. Those effects are not priced in, but they are very real."

According to Muijsson, estimates of biodiversity damage vary widely. “The World Bank now estimates the annual impact at between 90 and 225 billion dollars from 2030 onwards under a 'business as usual” scenario. That is probably still on the low side, because it only covers what we can measure now. Some aspects, such as water efficiency, are already priced in. But broader ecosystem services are still too intangible. That will not remain the case.‘

Economists versus climate scientists

Bert Kramer sees a similar underestimation in the academic world. ’There is some disagreement between climate scientists and economists. Climate scientists say that with global warming of between three and five degrees, social collapse can be expected. That is -100% GDP, while economists are still reasoning in terms of a 10% GDP loss by the end of the century, assuming 2.5 to 3% growth per year. That makes the effect seem negligible. But economists are now shifting towards the climate perspective. Recent publications are becoming clearly more pessimistic.

According to Kramer, climate scientists are currently better positioned to interpret the seriousness of the situation than economists. Trip then asked, with a wink, who in the room felt like an economist and who felt like a climate scientist. “Listen especially to the latter,” joked Trip. “But more importantly, make sure that these worlds meet in models that do justice to the risks.”

This was followed by the question of how normative investors can or should be. De Zwart: 'If you look at the amounts we are talking about, it is not only an ecological risk, but also a major financial risk. We have a fiduciary responsibility to take this seriously. Look at climate: more and more funds have committed to the Paris goals and are putting them into practice, for example by excluding shale gas or coal. As biodiversity risks become more visible, I expect more normativity to emerge in this area as well."

According to Muijsson, the initiative does not have to come from clients alone. ‘We see it as our responsibility to understand these risks and actively involve our clients in this process. Since 2021, we have been mapping biodiversity risks for each portfolio, using tools such as the Encore model. We share these insights with our clients.’ At the same time, Muijsson sees regional differences. ‘In Europe, certainly in the Netherlands, the Nordics, Switzerland and the UK, there is greater willingness to address these risks than elsewhere. Some pension funds are already investing specifically in restoration projects or funds aimed at increasing biodiversity. That is a positive development.’

Start moving!

This was followed by a deeper exploration of measurability and models. According to Kramer, the focus is still very much on the impact at company and sector level, with data sources such as Encore. ‘But what is more interesting is what biodiversity loss means for the global economy and financial markets. We have a lot of separate pieces of information, but the overall effect is almost impossible to quantify.’ The Taskforce on Nature-related Financial Disclosures (TNFD) offers some starting points, but much remains unclear. Physical risks such as soil depletion, loss of pollination, or disruption of the water cycle are difficult to quantify. Even pandemics, which are also part of the biodiversity story, are difficult to fit into the picture.

“Nevertheless, we must try to estimate an order of magnitude. Better to be roughly right than precisely wrong,” says Kramer. De Zwart also sees progress, but with reservations. 'We have increasingly better data, but often still at sector level and not location-specific. Encore was the only provider for years, but there are now many new initiatives.

Some data providers are already showing the effects on business performance, including location information. That is promising.“ Meulensteen emphasises that imperfect data should not be an excuse to sit still. 'You have to move before you are ready. There is enough data for an initial risk assessment. You can use that to take action, for example through engagement.”

Indicative data also helps

Kramer described how various scenarios are now available in the field of climate, such as those of the Network for Greening the Financial System (NGFS). The situation is less advanced for biodiversity. ‘Encore has long been one of the few sources. That is why we started a public-private partnership last year, together with Wageningen University & Research, ING, APG, Allianz and Commerzbank, among others. The aim is to develop macroeconomic projections for the effects of biodiversity loss. Think of pollination, soil quality and the interaction with extreme weather.’ Kramer expects the first version at the end of this year, but emphasises that it will certainly take another two to three years before these models can be widely applied. ‘Nevertheless, you can already learn a lot from indicative data.

We use estimates of GDP and inflation impact, among other things, which we can translate into consequences for different asset classes. This creates a useful framework. For Meulensteen, the use of climate models still offers the most guidance for the time being. 'We use them for strategic asset allocation.

We haven't made that translation for biodiversity yet, but there is a lot of overlap between the two types of risk.' De Zwart also recognises the challenges. 'We don't yet work with biodiversity scenarios in strategic asset allocation, but in practice, investors already analyse operational risks such as water scarcity when making investments, without explicitly labelling them as biodiversity risks. So the thinking is already there, it's just not always explicitly stated.‘

Caution with biodiversity credits

Biodiversity credits were also a topic of discussion. Muijsson said that her organisation is involved in working groups on nature-positive investments through the TNFD. ’Biodiversity credits can help develop nature markets, provided they are well defined. We have learned a lot from the limitations of carbon credits. The International Advisory Board Panel on Biodiversity Credits published clear guidelines during COP16 in Cali, Colombia. Their main message: don't see biodiversity credits as simple compensation.

Muijsson points to the British example, where project developers have recently been required to achieve a minimum 10% net improvement in biodiversity. “If they fail to do so, they have to purchase credits. That market is already worth between £130 million and £270 million a year. It is largely regulatory-driven, but it does create opportunities.” At the same time, vigilance is needed. “Biodiversity is not a uniform entity. You cannot simply compensate for losses in one place with gains elsewhere. Verifiable results are essential, especially if you want to attract institutional capital. Nevertheless, I see promising developments, such as companies using nature restoration projects for high-quality compensation projects.”

Biodiversity: a systemic risk

In the final part of the debate, the focus was on the approach: do investors tackle climate and biodiversity challenges from a risk perspective, an impact-driven vision, or both? A majority in the audience opted for impact. However, the panellists did not want to be forced into a choice. Meulensteen: ‘We do both. We limit risks through portfolio management and engagement. At the same time, we are expanding our impact investments, even though this is less easy for biodiversity. We actively seek innovations that can strengthen biodiversity.’

Muijsson: ‘Risk mitigation and impact go hand in hand. Biodiversity is not only a risk for individual companies, but also a systemic risk. That is why you also need to look at solutions systemically.

We use four lenses: efficiency, circularity, conservation and restoration, and the use of natural systems. The latter includes synthetic biology and technologies that reduce pressure on ecosystems. Some solutions fall within impact investing, others within regular strategies. De Zwart advocates a holistic approach. 'Biodiversity and climate are increasingly being combined in policy.

We look at whether we can combine them into a broader vision of nature. This also includes social and governance aspects. In terms of impact, we do not have any impact targets for biodiversity. For climate, this is the case in our infrastructure portfolio. It is important to take the preferences of participants into account. Impact only works if you stay connected to that.

Focus on companies

The discussion ended with the question of how the chosen approach relates to investments in public or private markets. De Zwart: ‘Risks are everywhere – in liquid and illiquid markets. You have to address them everywhere. Impact is a different story. The question is whether public markets really add anything. If you buy a share on the secondary market, little changes. With an IPO or direct project investment, it's different.“ Kramer notes a difference in attitude between regions. 'With our Canadian clients, we see a clear shift towards private markets. There, the awareness and desire to make an impact is greater than in continental Europe. They more often opt for direct involvement.”

The audience warned against drawing conclusions too quickly based on incomplete data. “Encore labels sectors as risky, but not every agricultural company is automatically a culprit.” Meulensteen emphasised that data reports are only the beginning. “They provide direction, but we always conduct additional analysis at the company level.”

De Zwart added: “We see data as a signal. It triggers further investigation, not automatic exclusion.” Kramer concluded with a powerful plea. 'It's not about good or bad sectors, but about companies within sectors. And we must continue to realise that the consequences of negative scenarios can be extreme.

Systemic collapse is not an unthinkable outcome. It is therefore important that all sectors contribute to limiting risks. Even – and perhaps especially – if 1.5 degrees is no longer achievable, every step counts."