5 facts about biodiversity finance and investing
Biodiversity provides and supports everything in the natural world we need to survive. It's time it gets high on investors' agendas, as biodiversity's impact on business and investing is greater than you'd think. Check out our latest report Unearthing investor action on biodiversity to explore biodiversity finance.
1. Biodiversity loss affects the global economy and financial markets
Despite the importance of biodiversity for a functioning planet and the economy, we are losing animal and plant species at an alarming rate. The acceleration of biodiversity loss is stalling the progress of many of the UN's Sustainable Development Goals (SDGs).
It also poses huge risks to financial markets. The World Economic Forum estimates that more than half of the world's GDP, around USD 44 trn, is moderately or highly dependent on nature and its services. The Global Futures Initiative has developed a model to calculate the impact of nature's decline on the world's economy, trade, and industry. In a business-as-usual scenario, between 2011 and 2050, the biodiversity loss can cost us almost USD 10 trillion, or USD 479 billion annually.
2. Biodiversity finance lags behind other nature-related investments, despite being key to our health and wealth
While investor interest in ESG investments has accelerated in recent years, funding for biodiversity has not kept pace. Global biodiversity finance makes up just 0.1% of global GDP. To date, traditional conservation and biodiversity funding has depended on either governments or philanthropic donors, creating a disconnect between the funding mechanisms and what conservationists need to curb biodiversity losses. An estimated investment of up to USD 967 billion is required each year if the decline in biodiversity is to be reversed by 2030. Private capital is necessary to address the issue. Investment tools, clear guidelines, data, and metrics similar to the ones available for the green or blue economy are much needed.
3. Investors need to evaluate their portfolio exposure to biodiversity and biodiversity loss
A major failure of ecosystem services and the resulting loss of production possibilities can lead to a decline in the value of the investment portfolio. While all human activity is to some extent affected by nature and nature-related events, some sectors are considered at higher risk from biodiversity loss. These include food and beverages, the health sector, and consumer goods.
4. Investors need to identify biodiversity-linked risks
One of the key business risks identified with biodiversity loss is the reduced productivity of natural systems. A reduction of ecosystem services is estimated to have a huge impact on financial markets and could wipe out trillions of dollars of global GDP.
Biodiversity loss can lead to destabilizing supply chains and reducing quotas for extraction from natural resources. And with regulators and governments putting biodiversity higher on their agendas, the regulatory risk and the risk of biodiversity-related litigations are starting to emerge.
5. Investor awareness of biodiversity and biodiversity investment is growing
The challenge of protecting wildlife and nature has fallen behind many other sustainability issues for investors and governments alike. Part of the explanation likely lies in the complexity of biodiversity and its loss. But investors are increasingly starting to wake up to the challenge. As many as 55% of respondents who took part in the Credit Suisse and Responsible Investor survey believe the issue needs to be addressed in the next 24 months. Just under 30% responded that biodiversity loss needs to be addressed in the next five years, while only 1% said it is not urgent at all.
Investors are concerned about biodiversity loss
of respondents are very concerned about biodiversity loss
are addressing biodiversity in their portfolio
believe biodiversity loss needs to be addressed within 24 months
Sectors investors identified as at risk from biodiversity loss
Food and beverage
What stops investors from considering biodiversity investments
Data availability and metrics
No way to value natural capital adequately
Lack of internal expertise