On 10 and 11 August, CETEx was pleased to co-organise the Nature and the Macroeconomy Conference with the Central Bank of Chile, Sustainable Macro and SUREAL. The conference brought together central bankers, government officials and academic researchers over two days to examine how nature degradation and climate change are reshaping inflation dynamics, financial stability, fiscal policy and growth across the Chilean economy and beyond. The full agenda, including available presentations can be found here.
Opening the conference, Elias Albagli, Director of the Monetary Policy Division at the Central Bank of Chile set the tone: the cost of environmental inaction is high and consistently underestimated, with the NGFS’s central scenario putting climate-only GDP losses at 15-20% by 2050. This underestimated figure still excludes nature degradation and tipping points. As several participants noted over the following two days, the economy may in fact be far more dependent on nature than current frameworks assume. It provides far more than just depletable resources; it is a living biosphere that underpins economic activity itself.
Insights from the research
Keynote speech: measuring nature in the macroeconomy
Policy panel
Looking ahead
Insights from the research
Monetary policy, prices and consumption
The first research session examined how climate and nature shocks are transmitted through prices and household spending. The first presentation highlighted how orthodox inflation management geared towards demand shocks and looking through transitory supply shocks is increasingly ill-suited to ecologically-driven inflation. This type of inflation stems from profit-price spirals and the financialisation of commodities and land rather than wage-price dynamics, which can turn permanent as nature’s productive capacity is degraded. In the second presentation, food-price inflation more broadly was shown to be a function of global production networks and trade exposure rather than domestic weather alone, and where inflationary pressure does emerge, it rarely justifies a monetary policy response on its own. And finally, consumption data from Costa Rica showed that extreme rainfall events measurably reduce spending, particularly on mobility and health-adjacent categories, while droughts appear to shift spending patterns rather than compress them. The discussion reinforced a message that ran throughout the conference: to effectively manage inflationary shocks, central banks must work in concert with fiscal and industrial policy partners.
Critical minerals and fiscal resilience
A session on critical minerals turned to copper and lithium, both central to the energy transition and to Chile’s economic outlook. The first presentation focussed on copper, arguing that it is the “oil of the 21st century” – a systemic input shaping global production structures and macroeconomic stability. Looking at natural disasters such as earthquakes, the research showed that not every copper supply disruption becomes a macroeconomic shock. Rather, the source of the price movement matters, and macroeconomic resilience depends as much on adaptive supply-side mechanisms as on primary production capacity. The second presentation focussed on the lithium triangle through comparative work across Chile, Bolivia and Argentina. The research showed that identical global prices can generate wildly different fiscal outcomes, shaped by royalty design, state administrative capacity, and increasingly by water stress, which is now a hard constraint on future production ceilings.
Natural disasters, firms and financial intermediation
The third session traced how physical shocks propagate through the financial system. Evidence from Peru showed that weather anomalies tighten credit and deposit activity persistently at the bank-branch level, even where the broader macroeconomic shock proves short-lived. Firm-level research on the 2024 Valparaíso wildfires, drawing on tax, employment and debt records matched against ecological dependency data, showed that ecosystem-dependent firms suffer the sharpest and most durable sales losses. A related study of Chilean floods and wildfires found no single mechanism (capital destruction, tighter financing, or labour market frictions) fully explains slow post-disaster recoveries; different frictions dominate at different stages.
Deforestation, ecosystems and biodiversity
The final research session focussed on deforestation, ecosystems and biodiversity, looking at experiences in forest-rich nations of Bolivia, Brazil and Indonesia. Modelling calibrated to Bolivia showed that deforestation is not simply an externality to be priced: in commodity-exporting economies it erodes the productive capacity of the export sector that keeps the balance of payments solvent, via a real feedback loop between forest cover, precipitation and land productivity. Productivity-enhancing agricultural policy pursued without binding land-use limits was shown to accelerate deforestation, whereas pairing productivity gains with a binding land-use constraint delivered both higher GDP and preserved forest. A paper on Brazil traced how foreign capital entering the soy sector drives deforestation and exits again as repatriated profits – a channel that conventional balance-of-payments accounting does not capture. Work on Indonesia’s spatial planning system suggested that biodiversity-inclusive zoning can support disaster resilience without undermining local growth – once again showcasing the need for collaboration amongst policymakers in times of ecological decline.
Keynote speech: measuring nature in the macroeconomy
In a keynote address, Associate Professor at the University of Minnesota, Justin Johnson, explored the trade-offs in translating nature into economic metrics, framing a spectrum from big, policy-grabbing figures like the WEF’s $55 trillion estimate to smaller, more precise ones such as natural capital accounts. He used this to probe the limits of GDP, pointing to alternatives like the UN’s System of Environmental-Economic Accounting (SEEA) and NatCapTEEM’s Gross Ecosystem Product (GEP) which measures of total value produced by ecosystems that, unlike GDP, has no inherent prices, since regulating services such as climate regulation remain far harder to value than provisioning services like timber. Notably, countries rich in GEP are often poor in GDP, underscoring how much value current accounting misses – and strengthens points already made in earlier research presentations about the unfair transfer of resources from forest rich nations to resource dependent ones. But Johnson cautioned that GEP, like GDP, measures income and says nothing about future wellbeing. True sustainability means non-declining intertemporal social wellbeing, and if policymakers are to optimise for anything, it should be inclusive wealth rather than income in any given year.
Policy panel
The conference policy panel brought together senior figures from the Chilean financial sector and academia to discuss what these findings mean in practice. Panellists agreed that climate and nature risks are no longer long-horizon concerns: they are immediate, and already visible in firms’ dependence on water, in international investors’ growing interest in ESG exposures, and in the mounting cost of disasters to supply chains. Discussion turned to instrument design such as carbon markets, EV standards, environmental permitting and forthcoming disclosure requirements (IFRS S1 and S2), with broad agreement that regulatory certainty and flexibility matter more than rigidity in driving firm-level change. Panellists also flagged the need for central banks to think about the climate-nature nexus as a single, connected challenge rather than treating climate and nature loss sequentially, and called for closer engagement with the private sector and across scientific disciplines to close persistent data and information gaps.
Looking ahead
Several of the questions raised over the two days feed directly into CETEx’s ongoing research and policy agenda, including:
- How should non-linearities and tipping points be incorporated into macroeconomic and financial stability modelling?
- What fiscal and institutional design choices best capture the value of critical mineral extraction while managing nature-related constraints?
- How can central banks and supervisors integrate the climate-nature nexus into disclosure, collateral and prudential frameworks?
- What structural and international reforms are needed where deforestation is tied to capital flows and sovereign solvency?
It has been genuinely exciting to see how much empirical and analytical traction this agenda has gained – from firm-level ecological vulnerability indices to structural models with forest-productivity feedbacks built in.
We are grateful to our intellectual partners at Sustainable Macro, to our hosts at the Central Bank of Chile – especially Luis Gonzales, Andres Martinez, Daniela Gaete and Kevin Cowan – for their generous partnership, and to every researcher and policymaker who contributed their energy and intellect across two rich days of exchange. Bringing this community together to stress-test new and emerging research in real time is one of the things we value most about this work, and we look forward to carrying these threads forward together.