There is nothing new in saying that human, economic, and business health depends on nature. Or that we urgently need to reduce human threats to our natural life support system, which provides food, materials, water, energy, climate regulation, and so much more. Scientists and environmentalists have been telling us this for decades, but we did not act hard or fast enough.
Sometimes we need to take a hit before we protect what we value: the heart attack that makes us change our diet, or the cancer scare that makes us stop smoking. Covid-19 is our health scare, on a planetary scale. We need to respond appropriately and immediately, by shifting from destructive economic activities to investing in nature.
The pandemic has drawn a direct line between the health of nature and the health of people and our economies. Many studies have linked the erosion of wild spaces and the unsustainable exploitation of species to diseases such as Covid-19, known as zoonoses, because they jump between people and animals. While zoonoses have been experienced throughout human history, there have never been so many opportunities for pathogens to pass from wild and domestic animals to people. We have all seen and felt the consequences. More than 4.5 million people dead. Livelihoods in ruins. Businesses closing, never to reopen. The biggest global recession since the Great Depression of the 1930s.
The three planetary crises
What should worry us even more is that Covid-19 is not a standalone threat. It is part of what we at the United Nations Environment Programme (UNEP) call the three planetary crises:
Climate change is bringing forest fires, extreme heatwaves, devastating droughts, and terrifying floods across the globe. Without action, we risk missing the Paris Agreement’s ambition of holding global warming to well under 2 °C and limiting further devastation. Humanity has altered three-quarters of the planet’s surface and placed the existence of one million species in doubt. We have polluted the air, land, and water – harming human health, food security, and economies.
All this is driven by humanity’s relentless, unsustainable consumption of natural resources. Estimates of our total impact on nature suggest that maintaining the world’s present living standards with current economic systems would require 1.6 Earths, and that is during a time of economic slowdown.
The economic impacts
What does this mean for economies and businesses, beyond the immediate impact of the pandemic? More than half of global GDP depends on nature to some extent. Our activities are eroding this economic base. The Intergovernmental Platform on Biodiversity and Ecosystem Services in 2018 found that land degradation and biodiversity loss were costing the world 10 per cent of GDP each year in lost ecosystem services, such as preventing harmful nutrient run-off into streams or decreasing the effects of floods.
We can also estimate the value of natural capital – the planet’s stock of renewable and non-renewable natural resources – alongside values of produced and human capital, such as roads and skills. Together, these three forms of capital measure a country’s true wealth. Data from UNEP show that – per person – our global stock of natural capital has declined nearly 40 per cent since the early 1990s, while produced capital has doubled and human capital has increased by 13 per cent. We need to decouple growth from the erosion of nature.
The World Economic Forum’s 2020 Global Risks Report, meanwhile, ranked biodiversity loss and ecosystem collapse as one of the top five threats humanity will face in the next ten years. The financial implications for businesses and investors include reduced commodity yields, disrupted supply chains, and the loss of potential sources of new products such as medicines. Companies that produce clothing and accessories use natural fibres for production, the supply chain of which can be disrupted by more frequent flooding and storms. The brewing industry is also highly dependent on a natural supply chain, again at risk of disruption from nature loss, climate, or pollution.
Financial reboot
It is clear that we need systemic change to build low-carbon, nature-positive economies. One of the insights from the Dasgupta Review on the economics of biodiversity is that finance plays a role in determining both the stock of natural capital and the extent of human demands on the biosphere.
Part of the change must come through pandemic recovery stimulus packages that align our economies with the Sustainable Development Goals (SDGs), the Paris Agreement on Climate Change and international processes that target healthy biodiversity. Over the next 6–18 months, governments are expected to inject approximately USD 20 trillion into pandemic recovery, on top of money already spent protecting people and jobs. We need to invest much of this in nature-based solutions, sustainable agriculture, renewables, conservation, and green and blue infrastructure.
Such large-scale investments can bring massive returns. Between now and 2030, the restoration of 350 million hectares of degraded terrestrial and aquatic ecosystems could generate USD 9 trillion in ecosystem services and remove up to 26 gigatonnes of greenhouse gases from the atmosphere. The economic benefits are ten times more than the cost of investment, whereas inaction is at least three times more costly than ecosystem restoration.
Overall, the business opportunities from transforming the food, land, and ocean use system could generate USD 3.6 trillion of additional revenues or cost savings by 2030, while creating 191 million new jobs. To take advantage of these cost:benefit ratios, the United Nations Decade on Ecosystem Restoration will, from 2021, marshal the global community to restore degraded land.
Choices for investors
Governments, however, cannot do it all alone. We need the entire financial system to reform, and that includes all investors and providers of finance – from those putting in a few hundred dollars to those putting in billions. Financial institutions can contribute in many different ways.
UNEP’s Finance Initiative recently released a report calling on the finance industry to set biodiversity targets across their activities to enable them to implement net biodiversity gain, or at least no net loss. Investors can look for biodiversitypositive investment opportunities and progress against targets – be they in agriculture, timber production, tourism, or infrastructure.
The financial sector can consider the impact its holdings have on the marine environment.
Investors can ask themselves if their investments are helping to rebuild ocean prosperity, restore biodiversity, and regenerate ocean health. One initiative of note is the Global Fund for Coral Reefs. Coral reefs provide around USD 2.7 trillion per year in ecosystem service value. The fund, a ten-year USD 500 million blended finance vehicle, aims to head off a situation in which 75 per cent of the world’s reefs will be under high threat by 2050.
Consumers and corporates can also choose where to bank, and ensure that their banking partner is committed to responsible banking practices. The UNEP Finance Initiative hosts the Principles for Responsible Banking, which provide banks with the framework for sustainable decision-making.
‘The Economist’ recently highlighted that 87 per cent of young investors believe corporate success should be measured by more than financial performance. Many young investors want more than just returns. They want a viable planet that can sustain them and generations to come. The paper puts the investment community on notice to take these young investors seriously.
More than philanthropy
Investments in nature are, at their heart, investments in our own prosperity. Diverse ecosystems are more stable, productive, and resilient to change. Just as diversity within a financial portfolio reduces risk to returns, greater biodiversity reduces risks within a portfolio of natural assets. Multiple studies have shown that ESG (environmental, social, and governance) factors can be real drivers of value. Meanwhile, increasing international frameworks and regulations will lead to stranded assets, and polluting industries will become increasingly untenable – a fact that will be reflected in their share price, resilience, and longevity.
When we invest in nature, we make a significant contribution to halting the three planetary crises. We accelerate the transition to clean energy sources and sustainable methods of production. We safeguard the future for generations to come, and our businesses, economies, and societies thrive.
Yes, times are currently hard, but now, more than ever, is the moment to invest in a future that will allow people, businesses, and the planet to prosper. The question is not, “How can we afford to invest in nature?” It is, “How can we afford not to?”