Published: 2 July 2024 at 12:00
‘Species and habitat loss should be given the same importance as climate change’
Professor Aled Jones of Anglia Ruskin University (ARU) is calling for nature to be placed at the heart of finance, to ensure that the protection of species and habitats is factored into all future decision-making.
Professor Jones, the Chair of the Institute and Faculty of Actuaries’ (IFoA) Biodiversity Working Party, has set out his case in The Actuary, the official publication of the IFoA, where he explains why biodiversity loss should be given the same level of importance as climate change, where a financial cost is attached to carbon emissions.
According to the Office for National Statistics, the total asset value of the UK’s ecosystems stood at an estimated £1.5 trillion in 2021, with the biggest contribution coming from the value of the health benefits the ecosystems offer.
However, according to the State of Nature Partnership’s 2023 report, the UK is now one of the most nature-depleted countries on Earth, with nearly one in six species facing extinction. The primary causes of this decline are farming and climate change.
In his article, Professor Jones, Director of the Global Sustainability Institute (GSI) at ARU, along with his IFoA’s Biodiversity Working Party colleague Jack Kunkle, explain that while nature and climate are interlinked, they are still treated separately. For example, the UN has separate COPs for nature and climate: Montreal recently hosted the biodiversity COP15, while Dubai held the climate change COP28.
Professor Jones says this needs to change, but admits placing a specific financial value on nature is fraught with difficulties. He said:
“Climate change is a global issue, and the simple metric of tonnes of CO2 equivalent emitted is a good measure of its negative impact. This gives us a carbon price, which businesses can understand and act on.
“With traded global markets for carbon dioxide reaching almost £800 billion per year, adding biodiversity to this would seem a natural next step. However, capturing the impact of biodiversity loss is more difficult because it is often local, non-linear – ecosystems are prone to tipping points, where species go extinct or services are lost forever – and uncertain.
“A tree in Cambridgeshire or Essex will have a very different value from a tree in Paris or the Amazon rainforest, in terms of the ecosystem services it provides. Going further, a particular tree can have significant additional value for the people who regularly interact with it – maybe you had your first kiss under this tree?
“Even with all the technology available to monitor biodiversity metrics and data, quantifying nature and creating a biodiversity credit market alongside a carbon credit market could be problematic. You can’t allow a particular rare species to be killed off but then ‘offset it’ by developing a wetland, even if they have the same biodiversity credit value.
“The difficulty is that unlike carbon emissions, nature and biodiversity cannot be crudely financialised in this way. Instead, finance will have to be ‘nature-fied’. This means understanding both the impact of nature on finance as well as the impact of finance on nature.
“We need to develop more qualitative measures to manage these impacts such as risk-based scenarios as well as taking an approach where certain investments are excluded because of the impact they have. We are not just dealing with a technological problem, but a philosophical one, too – how and why do we value nature?
“The complexity of biodiversity impacts and attributing specific values should not be seen as an excuse for inaction, however. Action on net zero can drive biodiversity action, but great care – and thought – is needed in how it is implemented in the real world.”