Reversing Loss of Biodiversity is Critical to Saving Everything, Including Our Economy
“The loss of biodiversity is a silent killer.”
– Pasca Palmer, Executive Secretary of the UN Convention on Biological Diversity – the world body responsible for maintaining natural life support systems on which humanity depends.
Most people are familiar with the Paris Agreement of 2015 to combat climate change, but many are unfamiliar with the Strategic Plan for Biodiversity 2011-2020. Similar to the Paris Agreement, the Strategic Plan for Biodiversity is a United Nations global agreement reached by 196 signatories, instead, with the purpose of halting the depletion of biodiversity and restoring what was lost. The Strategic Plan for Biodiversity is critical to the efficacy of the Paris Agreement, and the lack of attention to it is unsettling considering how inextricably connected restoration of biodiversity is with combating climate change. Thankfully, at least within the financial sector, 26 financial organizations have recently signed the Finance for Biodiversity Pledge to reverse nature loss this decade.
Importance of Biodiversity to Climate Change
“Biodiversity” encompasses all forms of life on Earth, including the smallest microorganisms to the largest mammals and plants. Earth’s ecosystems are populated by a vast array of organisms and maintain a delicate balance of birth and decomposition, where resources are fully recycled to avoid any permanent degeneration. This balance has been achieved through millions of years of evolution.
By no coincidence, in less than 200 years we have upset this balance. We have excavated, burned, harvested, and ultimately depleted many ecosystems through industrialization. We consumed without the thought of sustainability, mainly due to our ignorant belief that ecosystems would replenish on their own. Now we face a dire situation where the atmosphere of our planet is thick with greenhouse gases that trap heat and radiation from the sun, and as a consequence, intensified natural disasters and rising sea levels continue to devastate ecosystems that are critical to reducing the amount of greenhouse gases in our atmosphere. We have created a feedback loop that will not fix itself, and current efforts to minimize biodiversity loss are insufficient to break out of this vicious cycle. As individuals and as a society, we must take net positive actions to promote biodiversity, rebuild ecosystems, and find nature-based solutions that will enable us to maintain economic growth and continue to advance our standard of living. If we do not change our behavior to adopt more sustainable approaches to managing ecosystems, we will be unable to halve our greenhouse gas emissions by 2050 and face climate change apocalypse.[i]
Importance of Biodiversity to Human Health and Identity
Minimizing depletion of wildlife habitats and promoting net positive biodiversity actions will have immediate health benefits to us. The current COVID-19 pandemic’s origin vector has been linked to human-wildlife interaction. So has HIV/AIDS, SARS, avian flu, and the swine flu – all similarly categorized as zoonotic diseases. As we recklessly rush to deplete habitats for industrial development, we increase the risk of exposure to zoonotic diseases. We also risk eliminating undiscovered natural pharmaceutical compounds from rainforests and ecosystems previously untouched by civilization. From a healthcare policy perspective, regulating corporations to conduct a biodiversity assessment before developing an area would seem rational; however, only in limited cases are such assessments mandatory. Furthermore, the exacerbated climate change from loss of biodiversity has begun to melt the permafrost, increasing the risk of releasing ancient microbes that modern humans do not have antibodies to or treatments for. Considering over 200,000 Americans died from COVID-19 in less than a year, from a strain of virus derived from a virus we had already researched, a brand-new microbe will likely be devastating.
Mental health benefits have also been linked to biodiversity. Forest bathing, a practice that originated in Japan in the 1990s, connects a person with nature to improve both mental and physical health. By relaxing in a biodiversity rich area, the practice decreases stress, anxiety, and heart rate, boosting the immune system and mood. Even in western medicine, hiking and camping is a pastime that now has been evidenced to provide similar health benefits.
Fortunately, governments are increasingly taking steps to reverse deforestation. European nations have implemented programs to expand state-owned forests to offset total emissions from major cities. Forests account for 30% of global carbon sequestration annually, and these countries are therefore embracing these restorative and regenerative initiatives, in combination with the promotion of renewable energy sources, to mitigate climate change.
Cultures and national identity are also connected to biodiversity. Worship of nature is a prevalent theme in major religions, traditional knowledge, and customs. Around the world there are sacred forests, caves, and mountains that provide the backdrop for many myths and origin stories. Nature has also been used as a symbol for national pride. In the United States, major conservation federal statues were enacted to save both the bald eagle and American bison from extinction because they are considered national symbols.
A healthy planet with a thriving biodiversity benefits us in many ways — our health, traditions, and identity. It’s time we recognize its importance and commit to reversing the loss of biodiversity.
Importance of Biodiversity to Key Resources and Economics
Loss of biodiversity has been linked to degeneration of water, arable land, forests, and undiscovered natural ingredients from plants and animals. Governments and corporations are beginning to realize that the decline of biodiversity is detrimental for business, and they have been implementing some measures to reverse biodiversity loss. For example, a key water quality issue involves contamination by pollutants of emerging concern. A source of these pollutants is agricultural run-off, which is a mixture of pesticides and animal waste from those treated with antibiotics. It is expensive for water treatment companies to clean these pollutants because the pollutants are too small to be caught by the companies’ water treatment filters.
However, wetlands can eliminate these contaminants for free. Realizing this, some water treatment companies have begun integrating artificially built wetlands with their water treatment plants. If we continue to destroy our wetlands, an integral part of biodiversity, our water will continue to be contaminated, and we will incur unnecessary costs by having to resort to more advanced technologies to deal with a preventable problem.
Another key issue is the loss of biodiversity from erosion of soil as a result of deforestation, unsustainable agriculture and irresponsible mining. Healthy soil has the ability to sequester carbon from the atmosphere, where the stored carbon is utilized by biodiversity within the soil. In addition to acting as natural carbon sinks, forests prevent soil erosion, play a critical role in the water cycle, and house essential natural resources. Companies operating in various industries, ranging from civil construction, lumber production, fuel extraction, mining, textiles and agriculture, recognize that they significantly contribute to deforestation and have taken measures to promote reforestation, and in certain instances, afforestation. Other forward-thinking companies have recognized the financial impact of eroded soil and have made commitments to implement regenerative agriculture. For example, General Mills has committed to advancing regenerative agriculture on 1 million acres of farmland by 2030. Regenerative agriculture can mitigate corporate risk by creating business operations that are more resilient to droughts, floods, and pests while also restoring soil health and productivity. Similarly, responsible mining companies, like Freeport-McMoRan Inc., engage in mine reclamation activities to mitigate the environmental impacts of mining and restore land to its natural state. These efforts include capping the area with soil and reseeding with native flora, which encourages the return of wildlife and promotes biodiversity.
Financial institutions have taken note of these trends, which has resulted in a growing adoption of biodiversity-friendly investment policies and practices such as green lending and the development of guidelines that promote investment in sustainability-forward corporations and government projects (for example, the Equator Principles). According to the World Economic Forum, it is estimated that about half of the world’s GDP, or approximately $44 trillion, is dependent on ecosystem services and robust biodiversity. This dependence has prompted financial institutions to embrace the multifold value of investing in sustainable companies that work to mitigate impacts on biodiversity and the environment. For example, HSBC Global Asset Management, a leading financial services company, has partnered with climate change advisory firm, Pollination Group, to create an asset management venture focused on “natural capital”, which seeks to put a value on resources such as water, soil and air to help to protect the environment. HSBC has committed to seeding $1 billion the first year and $2 billion the following year. The venture will focus on biodiversity protection and promotion, for example, through carbon credits from reforestation and the development of mangrove forests to protect shores from rising sea levels.
Importance of Consumer Choices for Biodiversity
Our daily choices impact biodiversity. Whether we decide to eat a vegetarian meal, or eat less red meat, or to recycle more diligently, we each have a footprint on the environment and biodiversity. As everyday consumers, we each have the ability to make conscious decisions to redirect our spending to support more sustainable businesses. We can decide to attend a farmer’s market to support local farmers that use less land and do not encroach on wildlife habitats, or we can purchase from corporations with no sustainability policies or practices that continue to focus on short-term profits, at the cost of the environment and biodiversity. Or, somewhere in the middle of the two, we can buy from a corporation that responsibly sources its products and emphasizes sustainable supply chains. We can also more broadly endorse companies that promote biodiversity by investing in them. Some financial institutions and investment advisors, like Karner Blue Capital, have introduced nature-based funds for consumers to invest with impact.
Karner Blue Capital’s Commitment to Net Positive Biodiversity
Karner Blue Capital (KBC), together with 25 other financial institutions from around the globe, signed on to the Finance for Biodiversity Pledge on September 25, 2020. In the Pledge, the signatories call upon world leaders to reverse nature loss this decade and commit to collaborating, engaging, assessing their own biodiversity impact, setting targets, and reporting on biodiversity matters by 2024 at the latest.
The 26 progressive institutions that launched the Pledge are: ACTIAM N.V., Achmea Investment Management, AEGON Nederland N.V., Allianz France, ASN Bank, ASR Nederland, Bankinter, AXA Group, Caisse des Dépôts, Domini Impact Investments LLC, Etica Sgr — Responsible Investments, HSBC Global Asset Management, Karner Blue Capital, Mirova, Piraeus Bank, New Forests Pty Ltd, NN Investment Partners, NWB Bank, Coöperatieve Rabobank U.A., Robeco, Triodos Bank, Triple Jump, UFF African Agri Investments, Vancity Investment Management and Volksbank.
[i] United Nations, Global Issues: Climate Change, https://www.un.org/en/sections/issues-depth/climate-change/; What the World Will Look Like in 2050 If We Don’t Cut Carbon Emissions in Half, Christina Figueres and Tom Rivett-Carnac, TIME, https://time.com/5824295/climate-change-future-possibilities/ (see for a harrowing narration on the future if we do not cut our emissions in half by 2050).
DISCLOSURE: As of the date of this blog, Karner Blue Capital (“KBC”) held positions in Fortescue Metals Group, Ltd. on behalf of its clients. Securities issued by the companies identified or described in this blog do not represent all of the securities purchased, sold or recommended by KBC for its advisory clients, and readers should not assume that investments in the securities issued by the identified companies were or will be profitable. KBC and some of its partners may hold positions in certain securities issued by the companies identified in this blog in corporate and/or personal accounts. As fiduciaries, KBC prioritizes its clients’ interests above these corporate and personal accounts to avoid any conflict of interest in trading these commonly held securities.