Climate Change and biodiversity are intertwined

Preserving biodiversity is critical for human survival. And we know that limiting carbon emissions is one of the top threats to biodiversity, the destruction of which, through deforestation and industrial agricultural practices, in turn creates the feedback loop for exacerbating climate change. Changing how we use our land, produce and consume food, alongside efforts to protect nature can help and the world is beginning to take action. 

What is biodiversity?

Biodiversity refers to Earth’s interconnected web of life, and it can be understood on many levels. From individual plants and animal species to vast systems like rainforests and coral reefs, it’s becoming evident that our planet’s preservation is critical to human survival and economic development. An estimated $44 trillion of economic value generation—more than half the world’s total GDP—is moderately or highly dependent on nature and its services.¹

One way to think about biodiversity is via the planetary boundaries framework. This structure identifies nine guardrails that, when breached, could lead to irreversible damage to the world’s natural capital. 

As shown in figure 1 below, human activity has led to the transgression of six of these boundaries to date.² Only 16% of earth’s land remains undisturbed by humans, and off-land, plastic pollution threatens 66% of marine environments.³

The world’s natural capital is at risk and global biodiversity is deteriorating at speed. With significant costs to global economies and spillover consequences for climate change, over 90% of biodiversity loss is attributable to five causal factors—ranked here by order of the largest relative global impacts so far:

1. Changes in land use
2. Overexploitation of land and sea resource
3. Pollution
4. Climate change
5. Invasive species threatening local ecosystems⁵
   

How is the world responding to this increased biodiversity loss?

How well countries protect and restore biodiversity is likely to be a significant driver in whether the world is able to reach net zero emissions by 2050. Thankfully, national leaders have recognised the urgency and have started to act accordingly.  A few examples of recent initiatives and frameworks from countries around the globe:

• Global Biodiversity Framework: In December 2022, Montreal hosted 188 countries for the 15^th bi-annual Conference of the Parties on Biological Diversity (COP15). This past year’s conference set 23 landmark targets, all of which are incorporated into a Global Biodiversity Framework (GBF). Targets range from enhanced marine restoration to the annual mobilisation of $200B for capital biodiversity strategies. Every nation in attendance stamped this action plan with their approval.⁶
• Task Force on Nature-Related Financial Disclosures: There is a growing focus on reporting metrics. The Task Force on Nature-Related Financial Disclosures (TFND) has developed a model which quantifies long-term financial risks associated with how particular corporate operations impact natural capital.⁷ The utilisation of this data is critical in the management and protection of biodiversity. Increased transparency will ultimately lead to more informed investment decisions.
• The Dasgupta Review:  In 2019, the UK government commissioned a global review on the economics of biodiversity, resulting in a now-renowned 610-page report referred to as ‘The Dasgupta Review’. The report amplified the necessity of attributing economic value to the positive impacts of biodiversity and revealed that by 2030, $140B of annual investment will be required to adequately protect 30% of the world’s land and oceans. It also claimed that human living standards now require 160% of the resources that currently exist on Earth.

What are impactful solutions to avoid biodiversity loss and reduce carbon emissions?

When it comes to investment, it is estimated that $1 trillion will be required to manage the health of Earth’s ecosystems by 2030.⁸ Within the scope of this capital demand, two particular pillars serve as essential facets of biodiversity protection.

1. Pivotal improvements in food and land use systems

15% of global emissions (~9 gigatons per year) trace back to the food system through activities like industrial farming, livestock (particularly beef cattle), rice production, fertilizers and food waste.⁹ For food and land use protocols, an annual investment of $300-350 billion will be required to achieve sustainable systems.¹⁰

Food system emission reductions will be driven through the improvement of soil health and promotion of alternative proteins.

Soil health: The USDA estimates that the average carbon content of soil in the U.S. is currently 1.4%.  Through regenerative farming practices—e.g. crop covering and minimised tilling—opportunities exist to increase the average carbon content to 3.0%. This shift could reduce emissions by 2 gigatons per year, potentially accounting for a 20% improvement in the emissions profile of the food system.¹¹

Alternative proteins: The meat and dairy industry accounts for a staggering 14.5% of total greenhouse gas (GHG) emissions globally according to the UN’s Food and Agricultural Organization (FAO).  This issue is particularly pronounced in the US, where the average person in the U.S. eats more than a pound of beef per week, along with four pounds of cheese and other dairy products¹². One keyway to achieve a material reduction in these emissions, and reduce our overall consumption of meat and dairy, is to improve and scale plant-based alternatives. Cutting annual consumption of beef and dairy by 50% would lead to a 3 gigaton reduction in carbon emissions per year, potentially accounting for a 30% improvement in the emissions profile of the food system.¹³

2. Protecting nature

Reducing deforestation: 3.75 million hectares of primary forest are lost annually due to human action.14  Planting or restoring more trees than are logged or burned could result in a 6 gigaton reduction in emissions annually.¹⁵

Ocean health: Oceans present a 1 gigaton emission reduction opportunity. As of 2022, it was estimated that only 8% of the earth’s coastal oceans were protected.¹⁶ The deep ocean is layered with marine sediments and is the single largest stockpile of stored carbon. The commercial fishing practice of bottom-trawling—dragging heavy nets along the ocean floor—releases carbon dioxide into the sea water and then into the atmosphere. Ending trawling and increasing protected coastal oceans could unlock this reduction.¹⁷

What does the drive to net zero mean for efforts around biodiversity?

A confluence of factors–including the drive to net zero, population growth, and a rising middle class - have led to a need for increasingly efficient use of agricultural and natural resources. As protecting biodiversity has climbed the policy-making agenda, we see pressure from investors and regulators to measure biodiversity loss,improve corporate disclosure, and invest in nature-based solutions. 

According to a UN report, an annual investment of $154B has been pledged towards nature-based solutions—far below the targeted $384B required by 2025 to halt biodiversity loss. Of these investments, private capital represents only 17% of the total, a small slice.¹⁸

Investors have more opportunities than ever to address biodiversity loss in their portfolios—as both a risk and an opportunity. Across asset classes, investors have the ability to incorporate a company’s nature-related financial risk into their investment decisions. The financial materiality and economic benefit attributed to biodiversity (and the Earth’s natural capital) is one that will serve as a critical investment theme in the coming years, especially as it pertains to mitigating the effects of climate change.

¹ https://www.weforum.org/projects/sector-transitions-to-nature-positive#:~:text=Nature%20is%20the%20foundation%20of,faster%20than%20it%20can%20regenerate.

² https://www.stockholmresilience.org/research/planetary-boundaries.html

³ https://documents.nuveen.com/Documents/Global/Default.aspx?uniqueid=0a78890c-319e-4e4b-b5db-942e95d9e6e2

⁴ https://www.stockholmresilience.org/research/planetary-boundaries.html Azote for Stockholm Resilience Centre, Stockholm University. Based on Richardson et al. 2023

⁵ https://www.un.org/sustainabledevelopment/blog/2019/05/nature-decline-unprecedented-report/

⁶ https://www.cbd.int/article/cop15-cbd-press-release-final-19dec2022

⁷ https://tnfd.global/

⁸ https://about.bnef.com/blog/1-trillion-to-protect-biodiversity-is-cheaper-than-the-cost-of-inaction/#:~:text=This%20will%20need%20to%20jump,the%20end%20of%20the%20decade.

⁹ https://speedandscale.com/

¹⁰ https://www.foodandlandusecoalition.org/wp-content/uploads/2019/09/FOLU-GrowingBetter-GlobalReport.pdf

¹¹ https://speedandscale.com/ https://speedandscale.com/okrs/3-0-fix-food/3-1-farm-soils/

¹² OECD https://speedandscale.com/okrs/3-0-fix-food/3-3-consumption/

¹³ https://speedandscale.com/ https://speedandscale.com/okrs/3-0-fix-food/3-3-consumption/

¹⁴ https://www.globalforestwatch.org/blog/data-and-research/global-tree-cover-loss-data-2021/

¹⁵ https://speedandscale.com/

¹⁶ https://www.rmg.co.uk/stories/our-ocean-our-planet/what-is-30x30-marine-protected-areas-ocean-2030

¹⁷ https://speedandscale.com/

¹⁸ https://www.unep.org/news-and-stories/press-release/doubling-finance-flows-nature-based-solutions-2025-deal-global

¹⁹ https://about.bnef.com/blog/1-trillion-to-protect-biodiversity-is-cheaper-than-the-cost-of-inaction/#:~:text=This%20will%20need%20to%20jump,the%20end%20of%20the%20decade.