Biodiversity is no longer a peripheral sustainability issue, but an emerging driver of credit risk. For investors in government bonds, particularly in emerging markets (EMs), the prudent course is to begin incorporating biodiversity-related indicators into credit assessments and portfolio construction to manage forward-looking risks.

The Global Biodiversity Framework (GBF) set global standards, yet implementation has been patchy. Certain economies are particularly exposed to the risk of collapsing ecosystems, which could result in significantly declining gross domestic product and rising debt. Based on an optimisation that increases exposure to protected areas, it is possible to align an EM government bond portfolio to the GBF target through adjustment of country weights. This requires reallocation away from the largest issuers toward smaller markets with stronger conservation metrics.

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