Bloom or bust? Why we can no longer ignore biodiversity

Author: President of UBS Asset Management and Group Executive Board lead for Sustainability and Impact. Suni Harford was also Co-chair of the World Economic Forum Global Future Council on Investing from 2000 to 2022.

The global community has overcome seemingly intractable sustainability problems before—just look at the agreement to repair the ozone layer in the late 1980s, praised as a “positive and powerful outcome of multilateralism”.

Today, multiple crises jostle for multilateralism’s attention. Rebuilding trust—the theme of Davos 2024—is often the first step to overcoming these issues. Can the world unite to overcome biodiversity loss?

Recent analyses highlight the scale of the problem: on average, wildlife populations have declined almost 70% since 1970. Worldwide, the impact is so large that wild mammals declined as a share of the global mammal biomass from 17% in 1900, to just 4% in 2015. Humans and livestock account for the remaining 96%.

The world’s impact on nature is clearly large, but so is the world’s dependence upon it. Roughly 60% of global GDP is at least moderately dependent on nature’s diverse services, from clean water supplies to pollination services (Figure 1).

Building trust

In recognition of this risk, in 2022 the world reached consensus on a “Paris Agreement for nature”—the Global Biodiversity Framework. Its two principal objectives are to reverse global biodiversity loss by 2030 and to achieve a nature-positive state by 2050.

Reaching a consensus is only useful, however, if it is followed by action, and a plan of action is still missing. Trust in the Global Biodiversity Framework is still being built. Countries are currently translating its targets into national strategies, and plan to review their progress at the 2024 COP biodiversity conference.

It will be a race against time to reverse biodiversity loss in just six years. You cannot blame the skeptics; the global community last agreed on a set of biodiversity goals called the ‘Aichi Targets’ in 2010. They failed to hit those targets, largely because no clear implementation plan was agreed.

Every destination needs a path

There are many steps needed to reverse biodiversity loss. The first is to create effective measurement. You cannot manage what you cannot measure. Successful interventions to halt biodiversity loss hinge on knowing what drives the loss, where, and at what speed, so that the best interventions can be identified.

Even today the world lacks the measurement infrastructure to track local ecosystem conditions at a global level. This oversight could morph into the Achille’s heel of global biodiversity goals, given vast amounts of accurate, timely, and granular data on nature’s highly local and complex features are required.

Fortunately, revolutionary leaps in the form of new measurement technologies are not necessary. Our recent UBS White Paper “Bloom or Bust” sets out why today’s “nature tech” toolbox already offers the necessary technologies to track the state of biodiversity. The task at hand is to deploy these technologies, faster and at greater scale, to reverse biodiversity loss.

Hurdles in the way

The rapid deployment of measurement technologies will not happen organically.

Historically, private capital allocation, corporate actions, and consumer behaviors have ignored nature’s value in their everyday activities. There are three reasons for this. First, the amount of subsidies that harm nature are five times larger than those that support it. Second, until methodologies are created to properly value nature, it will remain outside of business and financial decision-making. Third, as long as an implementation plan for global biodiversity goals remains undefined, the direction of travel will remain unclear.

This holds back the investments that will support the long-term transition to a nature-positive world by 2050, let alone what is required to meet the 2030 goal. A few years ago, the gap was estimated to be five-to-seven-times more than what is currently spent. It is likely wider now. The task of reversing biodiversity decline is becoming harder as time passes.

As the bill grows, the question of who must pay it becomes even trickier. It is unlikely that private capital can plug the gap alone, given that nature-related assets struggle to meet the stable returns and efficiency required by large-scale, private capital providers.

Aim for bloom, avoid bust

Reversing biodiversity loss in just six years demands immediate, large-scale action from various stakeholders. Our recent report calls for the global community to act in three areas.

First, a key part of the solution could be transition finance. This includes any financing activity necessary to support an orderly transition to agreed sustainability objectives. Typically known for climate, transition finance can also be applied to nature. There are a series of instruments that tie financing terms to criteria that promote sustainable outcomes, such as lower interest rates upon meeting environmental targets. While transition finance is not a panacea, it offers the best tool for financial markets to promote better biodiversity outcomes in the real economy.

Second, government involvement is required to support innovative and concessional funding. Equally, steps should be taken to end subsidies that harm biodiversity. Doing so would align economic incentives with the global effort to repair biodiversity and send a clear signal to markets.

Third, partnerships will be key. Biodiversity touches every sector, so by necessity any strategy to manage it will rely on a diversity of stakeholders. At UBS, we see our role as bringing together partners to develop and scale solutions, helping to maximize their impact. We welcome others joining us on the journey.

Figure 1: At least 25% of the economic value in the supply chain of nine industries is highly dependent on nature

Percentage of supply chain gross value-added exhibiting low, medium, or high dependence on nature. Further information on methodology can be found in the UBS white paper appendix, which follows recent analyses from PwC (2023) and the European Central Bank (2023).

Read the full article here:

.