As life supporting systems in nature deteriorate, so too does our capacity to adapt and build resilience against adverse events. As we think about the financial sector’s response, this understanding on the interactions between 1/3  BIS central bankers' speeches  biodiversity and climate resilience is important from at least two perspectives. First, it crucially promotes the effectiveness of current efforts to tackle the climate crisis. Second, it enables the financial sector to leverage on climate initiatives to accelerate the equally pressing response needed to address broader nature-related risks. This includes initiatives to build capacity and address data gaps. Consistent with these considerations, the Climate Change and Principlesbased Taxonomy adopted for the financial sector in Malaysia incorporates the principle of “do no significant harm to the environment,” which requires an economic activity to protect healthy ecosystems and biodiversity. This is particularly important for Malaysia, one of the world’s megadiverse countries. Our livelihoods and economic activities are supported by natural ecosystems. The tourism sector for instance benefits from the existence and maintenance of lush rainforests and marine life. The manufacturing, agriculture and construction sectors depend on land, soil, plants, animals, water and minerals as inputs and enablers of production. Our economy is fundamentally embedded in this web of natural systems that provide, support, maintain and regulate our activities. Thus, the collapse of these systems, could pose a serious threat to society and the economy. The relationship between nature and the economy is, however, complex.

There remain significant challenges in tracing how nature loss transmits to the economy and financial sector. Knowledge, data, methods, and models in this area are still largely evolving, even compared to that of climate risks. This report is therefore exploratory, and is meant to contribute towards building a deeper understanding of risks and opportunities in this complex and intricate area. We remain some way from being in a position to develop more explicit supervisory and regulatory expectations – but we believe this work makes an important contribution to our thinking and approach to managing climate and nature-related risks in a coherent manner. Importantly, the financial sector needs to come to grips with the reality that like climate, nature-related risks are already presenting a significant threat to our economies and society that can no longer be ignored. The findings of this report lend impetus to the need to strengthen capacity in this area. The scientific community continues to issue the ‘code red for humanity,’ and with recent events, including the pandemic, floods and bushfires, the message could not be clearer. Ecosystem and planetary health matters to economic and financial stability. While the primary responsibility for addressing these priorities rests with governments, the financial industry and authorities have a critical interest in deepening our understanding and appreciation of the interactions between climate and nature-related risks – because how these risks evolve both affect and are affected by the actions of financial institutions.