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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October 2023 / VIDEO
Tongai Kunorubwe is the head of environmental, social, and governance (ESG) in the Fixed Income Division.
