Biodiversity is under threat, and the situation is urgent. Human activities are destroying the living world and the ecosystems on which we directly depend—often irreversibly. And yet, in the face of the ongoing mass extinction, the financial sector is struggling to take action. While it has powerful tools to accelerate the transition away from fossil fuels, it continues to support their extraction and even their expansion. Yet, these activities are recognized as driving environmental degradation twice over—through the exploitation of ecosystems and the exacerbation of climate change. Reclaim Finance calls on the entire financial sector—starting with private financial institutions and financial regulators—to rethink their approach and immediately adopt measures to protect critical biodiversity areas from all fossil fuel exploitation.
It is estimated that vertebrate populations have declined by about 70% in less than 50 years (1), and that nearly 50,000 species are now threatened with extinction (2). At the same time, vegetation cover—and forest cover in particular—is rapidly shrinking due to human activities, making ecosystems increasingly vulnerable (3).
While the pressures are manifold, the fossil fuel-based production system is one of the main drivers of this destruction, resulting in deforestation, persistent pollution, habitat fragmentation, and the degradation of local ecosystems close to fossil fuel infrastructure. The extraction of coal, oil, and gas is weakening already fragile environments to the point of threatening their collapse.
This is not just about protecting species. When ecosystems disappear, vital services for humans, including access to water, protection against natural disasters, and food security, also collapse. These impacts translate into significant risks to economic and financial stability, a concern that is increasingly on the minds of supervisory authorities and regulators.
Fossil fuel projects transform natural allies in the fight against climate change into sources of emissions by degrading essential carbon sinks, and at the same time, they exacerbate climate impacts, which in turn weaken biodiversity.
Rethinking the approach
Some financial institutions have committed to help protect biodiversity. However, the measures they have implemented are far from adequate. Two trends are emerging:
- A comprehensive approach, particularly through the Task Force on Nature-related Financial Disclosures (TNFD), has the merit of addressing biodiversity issues but struggles to translate into concrete measures that transform financial practices. Often focused on transparency, it risks replicating the limitations of its predecessor (TCFD), and thus failing to enable progress that could reduce pressures on ecosystems.
- Targeted commitments aimed at restricting financing or strengthening environmental requirements for projects located in protected areas or high-risk sectors. While more concrete, these measures cover only a portion of financial services and a fraction of the areas that are truly critical for biodiversity.
It is therefore time to rethink the approach. Rather than waiting for perfect data on all the risks facing biodiversity, pragmatism must prevail. We must prioritize action in the sectors that contribute most to biodiversity loss and for which all the data needed to take action is available. The fossil fuel sector is one of them.
Protecting critical areas for biodiversity
In response to calls for climate action, many financial institutions have adopted policies designed to reduce their support for and exposure to the fossil fuel sector, notably by excluding new fossil fuel projects from their financial services. These measures help create some of the conditions needed for fossil fuel phaseout, which is essential for sustainably reducing pressure on biodiversity. But they are not enough.
The urgent need to protect the living world means that more must be done. Any support for fossil fuels in critical biodiversity areas must be ruled out (4). These critical areas include the Amazon, the Arctic, and the Coral Triangle in Southeast Asia, considered the world’s most biodiverse marine region. This area, which supports the livelihoods of some 120 million people, is threatened by fossil fuel extraction—particularly oil and gas—with more than 450 offshore exploration blocks and 31 onshore or floating liquefied natural gas (LNG) terminals likely to be developed there.
While limitations remain in the exhaustive identification of all critical biodiversity areas, several classifications developed by internationally recognized institutions—based on rigorous scientific criteria and supported by accessible, regularly updated geographic data—can be used (5).
Shared but differentiated responsibilities
For financial institutions, the expectations are clear. They need to adopt further measures to combat the expansion of fossil fuels, including measures to exclude any direct or indirect support for oil, gas, or coal projects located in critical biodiversity areas.
These measures must be accompanied by structural changes. In particular, financial supervisory authorities and central banks must integrate biodiversity protection into their monetary policy tools (collateral frameworks, monetary portfolios) and into bank supervision (notably through prudential transition plans). They must take into account the key role of fossil fuels in the accumulation of nature- and climate-related risks, at both the macro- and micro-prudential levels.
Everyone can draw on Reclaim Finance’s work to identify the tools already available and select the classifications best suited to protecting critical biodiversity areas.
Continuing to support fossil fuel projects in the Coral Triangle or in any other critical biodiversity area is not only inconsistent with the financial sector’s stated commitments, but also puts the most precious and vulnerable ecosystems—and, through them, all life–in grave danger.
