The report “Tipping Points: Understanding Risks to the Economy and Financial System” emphasises prioritising critical ecosystems and understanding their economic and financial stability risks. It highlights the increasing pressure on nature from human activities and climate change, leading to the risk of terrestrial ecosystem tipping points (ETPs). The loss of these critical ecosystems could severely impact the economy, including reduced food and energy security, asset damage, and health risks.
The report also emphasises the financial implications of ecosystem tipping points, stating that economic losses from ETPs can be transmitted to financial institutions and have global repercussions. It points out that current economic modelling frameworks may be underestimating the severity of physical climate- and nature-related financial risks and calls for a precautionary approach to prevent thresholds from being crossed.
The report stresses the need for coordinated efforts from governments, central banks, financial supervisors, and policymakers to prioritise and address ecosystem tipping points, to ensure price and financial stability.