The ecology of money: How systemic interactions can grow sustainable finance

A new perspective on sustainable finance argues that as long as nature is ignored, finance will erode nature and increase systemic risks. However if ecological realities are used to steer the flows of money, finance can still become a powerful lever for supporting humanity’s ecological life-support systems.

In a recent iScience review, Beatrice Crona and an interdisciplinary team of colleagues from the Mistra FinBio project at Stockholm Resilience Centre explain why current sustainable finance efforts fall short.

A key problem is non-systemic actions that rely on an overly narrow worldview. Financial actors rely on limited metrics, opaque ESG claims, and often ignore how financial decisions increase nature related systemic risks. Crona and colleagues warn that today’s financial system is a key driver of many of the social, economic and environmental risks we’re observing already today, and will see more of in the future. Crona notes:

“Finance is currently undermining the ecosystems we all depend on, and it faces the blowback when those systems reorganize — through urban fires, disease outbreaks, transportation disruption, crop failures, or cascading supply chain shocks. Yet current risk models still assume a stable planet, and information-gathering exercises, such as sustainability disclosure standards, are developing but remain entrenched in financial materiality views and will not deliver the information needed to reliably assess environmental impacts or risks. The illusion that we are dealing with the problem leaves finance dangerously exposed.”

Embrace systems thinking

The authors argue that to address these risks, finance must embrace systems thinking — as a practical tool to align capital flows with ecological reality.

The review calls for three urgent shifts:

• Bring science into finance — integrate climate and biodiversity knowledge into risk and valuation using scientific models, data, and systems analysis.
• Make corporate sustainability reporting count — replace vague ESG claims and financial materiality assessments with transparent, science-based disclosures that are actually relevant for assessment of risks and opportunities.
• See the bigger picture — expand impact assessments beyond project footprints to capture supply-chain risks and systemic ecological risk.

What would systems thinking look like in practice? It is about identifying virtuous cycles, where financial actors reinforce the sustainability of their respective investments for the benefit of all. Imagine insurers, investors, and regulators pushing each other forward in such a virtuous loop: sustainable investments strengthen ecosystems, healthier ecosystems lower financial risks, reduced risks encourage further innovation and investment, and supportive policies amplify these dynamics.

Instead of risks reinforcing one another, finance could create self-reinforcing cycles in which nature-positive investment and financial returns strengthen each other. The paper identifies five such virtuous loops- and the dynamics that currently prevent them from materializing at scale.

Relevant for many actors

What does systems thinking mean for different actors?
For finance professionals, systems thinking reframes sustainability. It is no longer a cost to manage, but a strategic asset — reducing risk, identifying opportunities, and enabling nature-positive strategies. The challenge is to overcome barriers to action while forging collaborations that can scale sustainable finance.

For policymakers, regulation must move beyond box-ticking and integrate ecological complexity into new tools and regulations that reward nature-positive action and sanction practices that drive nature loss.

For the public, the message is clear: demand a financial system that invests in our most precious common asset — the living planet that underpins both people and the economy.

As Garry Peterson concludes: “Finance can learn to include natural capital in its investments to ensure that people and nature build a future in which we all thrive, but for this to happen the data gathering and risk analyses that underpin decision-making have to broaden to include what is material for the planet that we depend on .”