A Pro-Nature Economy Will Create Jobs And Prosperity
Financial decision-making has largely ignored our dependency — and impact — on nature. As a result, we’re now on course to destroy the very ecological wealth that has underwritten millennia of human progress and prosperity. But 2021 could be the year we choose a better path.
Be Clear About What We Stand to Lose
First, let’s be clear about what we stand to lose. The benefits that nature provides — crop pollination, water and air purification, pest and disease control, climate regulation, storm surge protection and so much more — are essential to everyday life. These ecosystem products and services are also the life blood of our economy: Roughly $44 trillion of the world’s economic output, or a little more than half of global GDP, is either moderately or highly reliant on the bounty that nature provides.
We seem to have forgotten the simple rule not to eat your seed corn. Unsustainable economic activities, from deforestation to agricultural expansion and intensification, land use change and overfishing, are exploiting our natural assets faster than the planet can restore them. We are consuming the very asset base from which we are building our future.
Wildlife populations monitored for WWF’s biennial Living Planet Report have declined on average by 68% since 1970.
Meanwhile, collapsing ecosystems have put a million animal and plant species on track for extinction, and extreme weather events from fires to floods exacerbated by climate change are roiling the face of our planet as never before, costing us billions.
Major Source of Systemic Risk
These negative impacts are clearly a source of systemic risk and instability for markets and the financial system. Anyone who still doubts that need only step outside and take a stroll past the countless businesses shuttered in response to COVID-19 — a virus that jumped from animals to humans in a cycle made more likely by humanity’s continued incursion into nature. Indeed, the pandemic illustrates why any viable, large-scale solution to environmental degradation will require more than simply a shift to more sustainable business practices.
It doesn’t have to be this way.
At the cost of $2.7 trillion per year, we could transition the world’s economies through a combination of ecosystem restoration, regenerative agriculture and circular business models. If $2.7 trillion sounds like a lot of money, that’s because it is. But flash-forward just one decade: By then, our nature-positive global economy will have created 395 million new jobs and will be generating over $10 trillion in annual business value. Soon, we’ll have made our money back and then some, all while ensuring a healthy, clean and secure future for people and nature.
Now compare that to the cost of doing nothing.
We know that nature-related financial risks have a material influence on society and economies, but we can’t manage what we can’t measure.
If nature’s decline continues unchecked, annual economic losses could soon surpass $479 billion. By mid-century, the total cost could reach $10 trillion. In other words, we can work toward a future where we rake in an additional $10 trillion each year, or we can live in a future where we set that $10 trillion on fire. The choice seems clear.
What’s Holding Us Back?
We know that nature-related financial risks have a material influence on society and economies, but we can’t manage what we can’t measure. How, exactly, can a company identify and quantify both its dependencies and impacts on nature? How can a financial institution capture that information to make judgements about the risks it takes or impacts it enables? And what do those risks and impacts mean for regulators once aggregated across the system?
Those are tough questions, but we have already faced a similar conundrum in assessing the risks and opportunities that arise from climate change.
The Task Force on Climate-Related Financial Disclosures (TCFD) was created to improve and expand the reporting of climate-related financial information, providing investors with the data and information needed to understand the risks they might be taking on, and for regulators to better understand and respond to the financial system risks of climate change.
A Task Force on Nature-Related Financial Disclosures
The market needs a similar mechanism for nature.
Building on the model of the TCFD, together with the UN Environment Programme Finance Initiative, UN Development Programme, and Global Canopy, WWF co-founded an informal working group of more than 70 banks, insurers, asset managers, companies, governments and regulators. This year, the group plans to formally launch a Task Force on Nature-Related Financial Disclosures (TNFD) designed to fill the data gaps that currently prevent financial institutions from better integrating nature — business dependencies, impacts and risks — into their decision-making.
In doing so, the TNFD will help shift finance away from unsustainable economic activities to activities that better align with the Paris Agreement, the Convention on Biological Diversity and the UN Sustainable Development Goals.
Finance is a powerful lever for change. Pull it in one direction and you shift humanity toward infinite consumption on a finite planet — rather like taking a long walk off a short pier. But, pull the lever in the other direction, and you can shift the entire global economy from nature-negative to nature-positive, with clear benefits for nature and people, our communities and our economies.
Only the collective clout of government, industry and civil society can budge that lever. That’s why we urge leaders gathering this year for discussions in the G-7 and G-20, at the United Nations General Assembly, and at several critical summits on the environment and climate, to seize this historic opportunity to change the way we interact with the natural world around us and deliver the promise of the Sustainable Development Goals: prosperity for all on a healthy planet. This could be our generation’s greatest legacy.