Human activities are accelerating biodiversity loss at an unprecedented rate: according to IPBES, one million species are threatened with extinction and vast portions of ecosystems have been altered. As ecosystems degrade, the essential services they produce – food production, water purification, climate regulation, etc. – decline. As with climate change, this affects macro-economic stability by generating systemic socio-economic and financial risks, either physical or transitional.

Although complex, assessing these risks is crucial for sustainable socio-economic stability. It has progressed in recent years: AFD, for example, has developed several methodologies to measure economies' exposure to socio-economic and financial risks linked to biodiversity loss (see "To learn more"). On the other hand, unlike nature-related risks, nature-related opportunities are much less documented, which calls for further research.

Noting significant interest from the international community in its work, AFD has decided to supplement its publications by developing an open-access web portal.

This portal – which will assess at the country level the consequences of nature degradation on taxation, the economy and social protection – could be particularly useful to:

• Central banks, to identify economic sectors most exposed to disruptions due to biodiversity loss, and to anticipate necessary prudential policies related to transition risks;
• Ministries of Finance, to locate economic sectors where biodiversity loss could affect GDP, employment or taxation, as well as economic sectors more resilient to nature-related risks, and to identify economic and budgetary impacts of ecological transition policies;
• Public agencies in charge of biodiversity, to identify ecosystem services critical to maintaining socioeconomic and ecological resilience, and to target conservation policies using socioeconomic arguments;
• The private sector, to anticipate supply chain disruptions due to ecosystem degradation, to assess the impact of new environmental standards and to innovate to comply with them;
• Commercial banks/private equity firms, to map investments most exposed to nature-related risks and reallocate portfolios toward resilient assets, while identifying investment opportunities in innovative companies aligned with sustainability goals.

The project will unfold in three stages:

1. Development of a prototype on risks related to nature degradation

Building on AFD’s historical experience in socio-economic risk assessment and its numerous international cooperation on this subject, an initial prototype portal analyzing physical and transition risks linked to nature loss will be proposed to and challenged by partners, to consolidate and improve it through their feedback.The partners include three countries and three types of economic actors: DBSA, ie the development bank for Southern Africa; the Central Bank of Tanzania; the Department of Macroeconomic Policy within the Armenian Ministry of Finance; and the Financial Analysis and Forecasting Division (DEPF) of the Ministry of Finance of Morocco.

2. Addition of a module on opportunities related to nature preservation

A new module will be specifically developed and added to allow partners to analyze opportunities related to nature preservation, around two main areas of reflection:

• What are the economic activities that contribute strongly to a country's major macro-economic aggregates and that depend on ecosystem services in good condition, a condition that may be useful to preserve?
• What are the economic activities that also play an important socio-economic role in a country and that exert low pressures on nature degradation, activities that may be interesting to favor for a resilient transition?

3. Launch of an open and free version of the web portal

A free, open-access version of the portal will be made available by AFD, where it will be accessible to any user wishing to assess nature-related risks and opportunities in a given country, among the list of 150 countries covered. Users will be able to filter results on specific variables, adjust criticality thresholds, download calculation results, and generate graphs.

These data can inform actions aimed at better integrating biodiversity into public policies and reducing subsidies harmful to biodiversity (Targets 14 and 18 of the Kunming-Montreal Global Biodiversity Framework). It can also indirectly help reduce pressures on biodiversity and create sustainable opportunities for sustainable and desirable growth (Targets 7, 8, 10 and 11 of the Framework).

• Constance Gires, Nature expert and Coordinator of the project
• Antoine Godin, Head of the Macroeconomic Modeling Unit at AFD
• Julien Calas, Research fellow at AFD
• Paul Hadji-Lazaro, Research fellow at AFD

As a public development bank, AFD must gauge the issues at stake and monitor the risks associated with its financing. To do so, it relies on a team of around ten economists dedicated to analyzing the macroeconomic and financial situation of its various countries of operation. This monitoring feeds into country assessments that inform the Group's operational and strategic decisions in each of its regions of operation. This activity is part of one of AFD's priority research areas, dedicated to macroeconomic diagnostics and forecasting.

Country assessments make it possible to analyze the development processes under way in the countries where AFD operates, to characterize their growth trajectories, and to identify the economic, social, political, and financial vulnerabilities associated with these trajectories. This enables AFD Group to properly gauge the issues at stake and monitor the risks associated with each of its investments.

The scope covered focuses on developing countries, particularly in Africa, for which macroeconomic analyses are scarce or infrequent. The analyses produced are therefore often highly complementary to existing coverage of global economic developments, which tends to focus more on advanced economies and major emerging markets.

The work of AFD's country-risk economists draws on close, long-term monitoring and an in-depth understanding of local contexts. Short-term developments, often highlighted in the news, are systematically examined in light of the structural trends of each economy and its regional context, in order to bring out the macroeconomic issues specific to each country while assessing risks against comparable trajectories over time and across countries.

Country-risk economists place the study of socio-political vulnerabilities, growth models, public debt sustainability, external balances, and financial system soundness at the heart of their diagnostics, and pay particular attention to countries' exposure to climate and natural hazard risks.

The MacroDev collection

Some of the work carried out by country-risk economists, whether country assessments or cross-cutting analyses, leads to publications in the MacroDev collection of the Éditions Agence française de développement. In particular, the special “Semestrial Panorama” issues shed light on the key cyclical and structural issues facing emerging and developing countries.

See all MacroDev publications

The DecoDev webinars

The publication of each MacroDev “Semestrial Panorama” is accompanied by a DecoDev webinar: a session decoding the major macroeconomic trends, followed by three country focus segments.

Discover the DecoDev webinars