Biodiversity: the risks of living outside nature’s boundaries
From bacteria to blue whales and from fungi to flowers, the loss of Earth’s biodiversity and the subsequent damage to our ecosystem is one of the top ten dangers facing society today. The World Economic Forum’s 2020 Global Risks Report reveals that associated risks could jeopardise the health of societies, prevent the deceleration of climate change and trigger colossal financial repercussions on economies across the globe.
The accelerated vulnerability of our biodiversity comes at a time when the world is still reeling from the myriad implications of the coronavirus crisis. The deleterious effect the virus has had on food chains and the disruption to economies provides a foreboding example of what could happen in the event of biodiversity loss.
The financial cost of ignoring the destruction of biodiversity is vast. The International Union for Conservation of Nature quantifies the value of goods and services provided by natural ecosystems as $33 trillion per year; equivalent to more than a third of global GDP in 2019.
A loss of biodiversity will have a substantial impact on industries reliant on natural resources, such as the major energy players, and the pharmaceutical and manufacturing sectors that use plant-based materials. The impact of this will pose significant risks to global markets and financial institutions.
The estimated $5.8 trillion to $8.8 trillion cost of the coronavirus pandemic on the global economy has disrupted policy agendas, but should not deprioritise the environment to a secondary position. If anything, the pandemic has demonstrated the risks associated with a reckless attitude to nature. By destroying ecosystems and driving animals out of their natural habitats along with temperature hikes associated with climate change, humans and wildlife are forced into closer proximity, increasing the risk posed by the transmission of animal-borne diseases. For these interrelated risks, inaction is simply not an option. A green recovery from the coronavirus pandemic will not only help preserve biodiversity, it could lower the risk of another outbreak, and, according to the International Renewable Agency, potentially boost global GDP by $98 trillion between now and 2050 through a burgeoning renewable energy industry.
The loss of our planet’s biodiversity has been inextricably linked to industrial farming methods, which although economically lucrative, have had a widespread negative effect on sustainability. This method of agricultural industry has been reliant on large-scale, excessive or indiscriminate, use of agrochemicals: be it the pesticides that can be toxic to wildlife or the long-term usage of synthetic fertilisers that can cause soil acidification and emit greenhouse gases such as carbon dioxide and nitrous oxide. When those fertilisers infiltrate lakes, rivers and oceans, their concentrated source of nutrients trigger an excessive but short-lived growth of algae. Upon decomposition the algae emit carbon dioxide (CO2), thus depriving aquatic life of oxygen and adding to the CO2 count.
With governmental policy and a growing regulatory framework in place to support green finance, the incentives for businesses to not only take biodiversity issues into account but to also capitalise on them are increasingly evident. Directives such as the EU Action Plan on Sustainable Finance are driving a transformation in business models, and, following the emergence of coronavirus, the European Commission recently revealed that new reporting requirements on companies to protect their businesses from the emerging link between biodiversity reduction and pandemics may be introduced. Capital markets are starting to include natural capital factors in their investment strategies.
What was once a Wild West of underreporting with poor disclosure from companies, is now an improving landscape that will help develop a greater understanding of the impact some industries have on biodiversity and the impact reduced biodiversity would have on them.
17 Feb 2022