How severe is biodiversity loss?

Biodiversity loss is critical, driven by land and sea use changes, organism exploitation, climate change, pollution, and invasive species. The global population of species such as mammals and fish has declined by 69% since 1970, with one million species at risk of extinction. Sectors relying on pollination, water, and soil are affected, with 75% of global food crops depending on pollinators. Biodiversity loss is an urgent risk for businesses and investors.

Economic implications of biodiversity loss

The World Economic Forum (WEF) estimates that over half of global GDP, around USD 44 trillion, depends on nature. Loss of biodiversity threatens sectors like agriculture, forestry, and fisheries. For example, invasive species reduce global staple crop production by 16%. Firms dependent on biodiversity face substantial operational and financial risks, as biodiversity depletion weakens ecosystem resilience.

Why does this matter for investors?

Biodiversity loss represents both risk and opportunity. The impact is twofold: businesses may affect biodiversity and rely on it. For instance, agricultural firms may need pollination but contribute to deforestation. The effects of biodiversity loss extend across industries, creating systemic risks. Ignoring biodiversity issues elevates risks in supply chains and asset value for investors, particularly in natural resource-dependent sectors.

A growing regulatory focus

With biodiversity loss worsening, regulations are evolving to address nature-related financial risks. The Kunming-Montreal Global Biodiversity Framework requires countries to protect 30% of the planet’s land and water by 2030. The EU mandates biodiversity standards under the EU Taxonomy, urging investors to assess dependencies and risks.

A new milestone in global disclosure: The TNFD framework

The Taskforce on Nature-related Financial Disclosures (TNFD) has created a framework to standardise biodiversity risk disclosures, following a LEAP approach—Locate, Evaluate, Assess, and Prepare. The TNFD aligns with climate disclosure standards and is expected to become widely adopted.

Integrating biodiversity into investments

Quantifying biodiversity impacts is complex due to data scarcity and geospatial needs. However, investors can start by assessing dependencies, identifying high-risk companies, and screening biodiversity-harming activities. Biodiversity footprinting, using metrics like the Potentially Disappeared Fraction of Species (PDF), can guide responsible investments.

MSCI Nature and Biodiversity Metrics Framework

The MSCI framework helps investors identify biodiversity risks and opportunities, providing metrics for assessing impacts and potential growth from biodiversity-positive products. In industries like utilities and agriculture, biodiversity footprinting reveals companies’ impacts on species extinction, guiding biodiversity-conscious strategies.

Conclusion
Biodiversity underpins half of global GDP, but human activities are depleting it. Investors face regulatory pressures to consider biodiversity, as climate and nature crises interlink. Effective frameworks and data now make it feasible for investors to measure biodiversity risks, aligning portfolios with nature-positive economic resilience.