Financial regulation and supervision in a complex world: how can we green the financial system for nature?

Over the past decade, financial regulation and supervision have been increasingly seen as potential solutions to climate change and biodiversity loss. Yet, they are at best a necessary but not sufficient condition for action. This paper explores how science and modelling have been used within financial regulation and supervision to date – to motivate and inform action – and analyses the limitations of current approaches and the potential negative repercussions for finance and society. With the launch of the Task-Force on Nature-related disclosures in September 2023, there is increasing pressure that these new financial frameworks incorporate nature and biodiversity. Yet this brings even greater risk assessment challenges. We present results from our recent work with the Network for Greening the Financial System (NGFS) and the UK financial sector that tries to capture some of the lessons from complex systems analysis to inform integrated nature-climate scenario analyses for financial institutions. We draw lessons on the needs from both the scientific and finance communities to generate more decision-relevant evidence and to use this appropriately within decisions.

About the speaker

Dr Nicola Ranger is Director of the Resilient Planet Finance Lab at the University of Oxford, Executive Director of the Oxford Martin Systemic Resilience Programme and leads the Resilience and Development Group of the Environmental Change Institute. She is also a Senior Research Fellow at the Institute for New Economic Thinking of the Oxford Martin School. She brings 20 years’ expertise in risk, analytics, economics, finance and fiscal policy as a practitioner and researcher across industry, government, IFIs and academia. She works with governments, Central Banks, regulators, financial institutions and international organisations to help align policy and finance with resilience and sustainability goals. She is a Visiting Academic at the Bank of England, a member of the European Commission’s High Level Expect Group on Sustainable Finance in Low and Middle Income Economies and a member of the UK’s Green Technical Advisory Group. Nicola is also co-Chair of the Resilient Planet Data Hub, an international public-private partnership with the UN and Insurance Development Forum providing open data and analytics on climate and nature. Nicola joined Oxford from the World Bank’s Finance, Competitiveness and Innovation Global Practice, where she worked with financial institutions, Ministries of Finance, Central Banks and regional institutions to strengthen financial resilience and implement systems and processes to strengthen national and global resilience to shocks and crises. Prior to this, she held senior roles at the UK Department for International Development, the London School of Economics and Political Science, HM Treasury, Risk Management Solutions and Defra. Nicola completed her postdoctoral research in climate economics and policy at the London School of Economics and Political Science and holds a doctorate in Atmospheric Physics from Imperial College London. Nicola has written more than 30 book chapters and peer-reviewed articles and contributed to major reports including the UK National Climate Change Risk Assessment, the Stern Review on the Economics of Climate Change, the World Development Report and the Intergovernmental Panel on Climate Change reports.