What will the UK Government's 'nature positive' response to Dasgupta mean for finance?
The UK government recently committed to a 'nature positive' response to Prof. Sir Partha Dasgupta's review of the Economics of Biodiversity. At Ethical Finance 2021 last week, Prof. Dasgupta called for a 'World Bank of Biodiversity', arguing that despite the complexity of nature and biodiversity, there are ways of reducing the issues to fairly simple economic principles. The biosphere should be treated as a global public good, argued Prof. Dasgupta at the annual Ethical Finance Summit, explaining that treating it as such would justify paying penalties for its desctruction.
In the UK Government's response to Prof. Dasgupta's review, it committed toi a number of actions ahead of the crucial COP26 climate summit in November. These include:
- Committing up to £3 million additional support to the development of the Taskforce on Nature-related Financial Disclosures framework – a market-led initiative which will support business in assessing emerging nature-related risks and opportunities
- Working with the Office for National Statistics to improve the way nature is incorporated into our national accounts
- Further improving Government guidance for embedding environmental considerations into policy-making processes
- Incorporating biodiversity into the UK Government Green Financing Framework
- Joining the OECD Paris Collaborative on green budgeting, an initiative to encourage governments to incorporate climate and environmental considerations into their financial and fiscal decisions
These are all no doubt positive developments - necessary steps on the way to creating global frameworks that protect biodiversity and the biosphere. However, given the scale of the challenges we face, are they enough? The Living Planet Report 2020 reports stark statistics regarding biodiversity, including:
- An average 68% decrease in population sizes of mammals, birds, amphibians, reptiles and fish between 1970 and 2016
- A 94% decline for the tropical subregions of the Americas over the same period
- 75% of the Earth’s ice-free land surface has already been significantly altered, most of the oceans are polluted
- More than 85% of the area of wetlands has been lost
- Until 1970, humanity’s Ecological Footprint was smaller than the Earth’s rate of regeneration. To feed and fuel our 21st century lifestyles, we are overusing the Earth’s biocapacity by at least 56%
- Per person, our global stock of natural capital has declined by nearly 40% since the early 1990s, while produced capital has doubled and human capital has increased by 13%
Put simply, nature is in crisis, and as this crisis depens, it will affect our economies more and more. As the Dasgupta review pointed out nature suffers from a 'Tragedy of the Commons' effect - while the benefits for its destruction are privatised, the costs are public - a classic 'Principal-Agent problem', in the economists' parlance. To address this, we desparately need global cooperation between governments, finance, business and civil society on protecting biodiversity, and we need it now. THe steps the UK Government has committed to are a crucial step on the road to protecting nature with a 'World Bank for Biodiversity', but without committments to go further - to not just report and disclose impacts, but actively work to prevent them - there is a risk that this could be too little, too late.
The finance sector needs an urgent, credible plan to make TNFD reporting mandatory, as reporting in line with TCFD is likely to become soon. While TCFD's progress from idea to (in some territories) law has been admirably fast relative to the usual pace of public policy, it has still been too slow relative to the climate crisis. To respond to the crisis of nature and biodiversity that we are seeing, TNFD must be even faster.
At COP26, we will be exploring these issues as part of our Finance for Nature programme in our Path to COP26 campaign, with a dedicated focus on nature discussions in the unique setting of Loch Lomond. Click to learn more.
