More than half of the world’s total GDP is at least moderately dependent on nature. Yet arguably, there is no economy (or life) without nature. A quarter of animal and planet species are now threatened, and 14 out of 18 key ecosystem services – including fertile soils to grow food, flood and disease control and regulation of air and water pollution – are in decline.
Writing in The Conversation, three researchers at the ECI explain the importance of these ecosystems and why nature loss should be treated with the same urgency as climate change. Dr Jimena Alvarez, Research Associate, Dr Nicola Ranger, Director Global Finance and Economy group and Emma O'Donnell, DPhil student, say attitudes are changing, but more needs to be done.
These ecosystem services are essential and have no easy substitutes. Despite this, almost US$7 trillion (£5.4 trillion) per year is spent by governments and the private sector on subsidies and economic activities that have a negative impact on nature – including intensive agriculture and fossil-fuel subsidies. This compares to only US$200 billion that is spent on nature-based solutions (just a third of what is estimated to be needed).
Although the biodiversity crisis has often been overshadowed by climate change on the global stage, the tide is turning. In 2022, the Kunming-Montreal global biodiversity framework was adopted with its overarching goal to halt and reverse biodiversity loss by 2030.
At the end of October 2024, the signatories of the framework will again come together at the UN’s COP16 Biodiversity Conference in Cali, Colombia, to negotiate the implementation of their targets. To make progress towards these goals, COP16 aims to align finance with the framework; effectively ensuring finance is part of the solution rather than the problem.
To do this, the flow of finance will need to be redirected. A central lever in this is the pricing of risk. Financial institutions face significant risk, both from the degradation of ecosystem services (physical risks) and the social responses to degradation, including regulation and changing consumer demand (transition risks). Yet these risks are not fully priced into financial decisions.
On top of this, corporations do not disclose their nature-related risks, dependencies and impacts, making it difficult for financial institutions to understand the implications of their investments. Together, this means that finance continues to flow unhindered into riskier activities.
Central banks are now starting to highlight risks from nature to financial institutions and to explore the areas where these risks manifest in the financial system.
Read the article in full in The Conversation: How finance can be part of the solution to the world’s biodiversity crisis