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October 2023 / INVESTMENT INSIGHTS

Counting the Cost of Biodiversity Loss

Addressing the challenge of integrating biodiversity into investment analysis

Key Insights

  • Preserving biodiversity is essential to the long‑term social and economic development of humanity.
  • Data on biodiversity impact remain scarce with the universe of issuers sharing measurable data points on biodiversity outcomes limited.
  • In the absence of data that measure the biodiversity impact of investments, proprietary research and analysis is essential.

The natural world is undergoing unprecedented, exponential deterioration,1 with human activity being the principal driver.2 Consequently, the rates of species loss are unparalleled in human history. Research shows that one million species are now threatened with extinction within the next few decades,3 setting Earth on an alarming trajectory for what biologists warn could be the sixth mass extinction.4

The Importance of Preserving Biodiversity

We believe that preserving biodiversity is essential to the long‑term social and economic development of humanity, and also that biodiversity loss and climate change are fundamentally interlinked twin crises.

Natural carbon sinks (both on land and underwater) play a key role as they absorb significant amounts of human‑generated greenhouse gas (GHG) emissions. In turn, climate change, whether through changing rainfall patterns, extreme weather events, or ocean acidification, is having a materially negative impact on biodiversity. Furthermore, biodiversity is so vital to maintaining a sustainable future for humanity that its loss undermines 80% of the United Nations Sustainable Development Goals (SDG) targets relating to poverty (SDG 1), hunger (SDG 2), health (SDG 3), water (SDG 6), cities (SDG 11), climate (SDG 13), oceans (SDG 14), and land (SDG 15), whereas biodiversity preservation and restoration support the delivery of targets for the SDGs related to education (SDG 4), gender equality (SDG 5), reducing inequality (SDG 10), and peace and justice (SDG 16).

To contextualize the cost of biodiversity decline in economic terms, the World Economic Forum (WEF) states that over 50% of global gross domestic product is highly or moderately dependent on natural ecosystems.5 This is unsurprising since biodiversity is an implicit enabler asset that underpins many human activities.6 For example, pollination by bees and other pollinators is vital to global food security—75% of the world’s food crops rely on it.7 According to the WEF, investing in opportunities that directly address the threats to biodiversity has the potential to generate up to USD 10.1 trillion in annual business value and 395 million jobs by 2030.8

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IMPORTANT INFORMATION

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

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October 2023 / INVESTMENT INSIGHTS

Keeping Pace With the Energy Transition

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Keeping Pace With the Energy Transition

Energy transition has broad economic, political, and investment implications

By Maria Elena Drew

Maria Elena Drew Director of Research, Responsible Investing, T. Rowe Price Associates, Inc.