Understanding the impacts of biodiversity loss

Addressing Biodiversity Loss: Steps for Firms to Take

By Nicola Kenyon, Head of Insurance Investment & ALM; Kate Fry, Head of Insurance Innovation; Ryan Boldick, Consultant and Steffan Xenios, Associate Consultant from Hymans Robertson

In this report, we will define biodiversity, explain why firms should care about it, and suggest several steps that firms can take today to address the threat of loss posed by biodiversity.

What is Biodiversity?

Biodiversity refers to the variety and variability of all living organisms within and across ecosystems. It encompasses the genetic makeup of species and the variation in life found in different geographical areas. Human activities, such as industrialization and overexploitation, have a significant impact on biodiversity.

A well-known example of biodiversity loss is the decline in bee populations. Factors such as intensive farming, pollution, and deforestation have led to a reduction in suitable habitats for bees, which has implications for the agricultural sector due to the reliance on bee pollination for crop production.

Why Should Firms Care About Biodiversity?

Biodiversity has gained increasing attention in recent COP events, with discussions and commitments made to protect land and water by 2030. Firms need to understand the risks and costs associated with biodiversity loss to effectively manage them in the future.

Some biodiversity risks may arise from firms’ efforts to address their impact on climate change. Actions that are seen as “climate positive” may inadvertently harm biodiversity, such as building renewable energy infrastructure in natural habitats. Firms must take a holistic approach to sustainability, considering both climate and biodiversity considerations.

Biodiversity decline not only impacts the natural world but also has economic implications. Industries such as agriculture, forestry, pharmaceuticals, energy, transportation, and infrastructure heavily depend on ecosystems and natural resources. The cost of reversing biodiversity loss is estimated to be around $950 billion annually until 2030, which can negatively affect firms’ investment portfolios.

For example, declining bee populations can have severe consequences for the agriculture industry. Bees contribute billions of euros each year to the EU’s agriculture industry through pollination and reproduction. With a significant portion of crops dependent on bee pollination, a loss of bees could disrupt food production and have long-term costs for firms.

Furthermore, there are potential financial disclosure requirements related to biodiversity risks. The Taskforce of Nature-related Financial Disclosures (TNFD) and the Partnership of Biodiversity Accounting Financials (PBAF) provide guidance for financial institutions on assessing biodiversity impacts. While TNFD is not mandatory in the short term, firms should consider adopting the framework to address the complexities of nature-related risks.

The Challenges Firms Face and the Actions

Biodiversity is one of many sustainability risks that firms encounter. The lack of data, metrics, and regulatory incentives may have hindered its prioritization in the past. However, the severity of its impact and upcoming reporting requirements necessitate firms to address biodiversity risk.

Here are a few steps that firms can take:

1. Education: Educate the Board and employees on nature-related risks and opportunities to reduce impact and contribute to nature restoration.
2. Engagement and Collaboration: Engage and collaborate with biodiversity initiatives and frameworks like TNFD to better understand risks and shape the industry.
3. Stakeholder Communication: Communicate with stakeholders early on to identify exposure and implement methods to monitor and manage the threat.
4. Internal Policies: Publish a biodiversity policy that includes principles to inform decision-making and stay ahead of the curve.
5. Investment Scorecard: Research and develop a scorecard to assess biodiversity exposures of new and existing investments.

SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 13: Climate Action
• SDG 15: Life on Land

2. What specific targets under those SDGs can be identified based on the article’s content?

• SDG 13.2: Integrate climate change measures into national policies, strategies, and planning.
• SDG 15.5: Take urgent and significant action to reduce the degradation of natural habitats, halt the loss of biodiversity, and protect and prevent the extinction of threatened species.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicator for SDG 13.2: Number of policies, strategies, and plans that integrate climate change measures.
• Indicator for SDG 15.5: Extent of coverage and effectiveness of protected areas in relation to marine areas and terrestrial areas.

SDGs, Targets, and Indicators

Explanation:

1. The issues highlighted in the article are connected to SDG 13 (Climate Action) and SDG 15 (Life on Land). The article discusses the impact of human-induced changes on biodiversity, which is a critical aspect of life on land and relates to climate action.

2. Based on the article’s content, the specific targets that can be identified are SDG 13.2 (Integrate climate change measures into national policies, strategies, and planning) and SDG 15.5 (Take urgent and significant action to reduce the degradation of natural habitats, halt the loss of biodiversity, and protect and prevent the extinction of threatened species).

3. The article does not explicitly mention indicators, but based on the identified targets, indicators can be used to measure progress. For SDG 13.2, the indicator could be the number of policies, strategies, and plans that integrate climate change measures. For SDG 15.5, the indicator could be the extent of coverage and effectiveness of protected areas in relation to marine areas and terrestrial areas.

Behold! This splendid article springs forth from the wellspring of knowledge, shaped by a wondrous proprietary AI technology that delved into a vast ocean of data, illuminating the path towards the Sustainable Development Goals. Remember that all rights are reserved by SDG Investors LLC, empowering us to champion progress together.

Source: actuarialpost.co.uk

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