A new research from Oxford University, which emerged alongside recommendations from central banks in respect of assessing nature-related risk, has shown that shocks to the global economy related to biodiversity loss and ecosystem damage could cost upwards of $5 trillion.
The researchers found that human-driven pollution, deforestation, land-use change and over-extraction, are fundamentally eroding the natural capital upon which our societies and economies are built – including our water, clean air, fertile soils and pollinators – and act as ‘risk amplifiers’ on the impacts of climate change.
The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) – the network of over 120 Central Banks and supervisors globally – made its recommendations in respect of assessing nature-related economic and financial risks.
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As part of this work, Oxford’s Environmental Change Institute studied the development of scenarios for climate-nature shocks and gathered the evidence on the macro-criticality of nature for the global financial system. The analysis focused on three risks: water, pollution and pollination.
The ECI study concludes that the erosion of natural capital linked with biodiversity loss and environmental degradation generates significant and long-term risks to society, the economy and finance, from increased risk of pandemics, floods and droughts.
Dr Nicola Ranger, who led the study and is Director of the ECI’s Resilient Planet Finance Lab, said, ‘Protecting and restoring nature is essential for the functioning of our economies and a vital component of adaptation to climate change.’
Reacting to the negotiations at COP28, she said, ‘Nature is not the elephant in the room, it’s the huge green scorpion running towards us. The sting in its tail will significantly amplify the impacts of climate change in ways that are difficult to predict. It is not just about birds and butterflies, we are fundamentally eroding the natural capital upon which our societies and economies are built.’
Story was adapted from University of Oxford.
