Biodiversity loss threatens the financial stability of States

The destruction of nature and the disappearance of forests reduce countries’ ability to repay their debts. These phenomena weaken the natural foundations of the economy, limiting production and increasing the burden on governments. Currently, financial rating agencies ignore these risks, which could lead to a misvaluation of $83 trillion in global assets.

A recent study has incorporated these risks into the assessment of sovereign debt, that issued by States. It examines three essential ecosystem services: tropical timber exploitation, wild pollination, and marine fisheries. If these services collapse partially, they could cost $162 billion per year in additional interest on public debt. For India, this would represent $49 billion, or 2.4% of the median disposable income of its citizens. China, on the other hand, would see its costs increase by $70 billion per year.

Some countries would be even more affected. Angola, Bangladesh, the Democratic Republic of the Congo, and Madagascar could suffer losses in gross domestic product exceeding 15% by 2030. These losses would affect not only their economy but also their ability to borrow at affordable rates. Financial markets therefore systematically underestimate nature-related risks, with serious consequences for public finances and economic stability.

Half of the world’s wealth depends directly on nature. Yet, actions to protect biodiversity are lagging behind those implemented for the climate. Pandemics, such as COVID-19, become more likely with deforestation and the disappearance of species. A decline in ecosystem services could lead to an annual drop of $2 trillion in global gross domestic product by 2030.

Rating agencies, which assess States’ ability to repay their debts, do not account for these future risks. However, their omission could have disastrous consequences, as seen during the 2008 subprime crisis. The scenarios studied show that even a partial degradation of ecosystems could cause financial rating downgrades for many countries. For example, China and Malaysia would see their ratings drop by more than five notches, making their debt much more expensive.

States have few options to address these additional costs. They can reduce public spending, borrow more, default, or raise taxes. None of these solutions are ideal. Reducing spending means less investment in education, health, or infrastructure. Borrowing more worsens the problem in the long term. Defaulting has lasting consequences on market confidence. Finally, raising taxes weighs on citizens, who are often already heavily taxed.

Financial markets and governments must therefore recognize the urgency. Integrating biodiversity-related risks into credit assessments would help avoid costly surprises. Countries rich in biodiversity, often among the most indebted, are particularly vulnerable. If nothing is done, the loss of nature will worsen the debt crisis, already described as a catastrophe for development by the UN.

The additional costs linked to the degradation of nature could reach $162 billion per year for just the 23 countries studied. This represents nearly 80% of the global target of $200 billion per year set to finance biodiversity protection. Investing in nature today would avoid much heavier expenses tomorrow, while protecting the economy and the well-being of populations.

Data and Sources

Official Study Source

DOI: https://doi.org/10.1038/s41559-026-03081-7

Title: Biodiversity loss will decrease the future creditworthiness of nations

Journal: Nature Ecology & Evolution

Publisher: Springer Science and Business Media LLC

Authors: Matthew Agarwala; Matt Burke; Patrycja Klusak; Moritz Kraemer; Ulrich Volz; Benjamin K. Sovacool