BLOG: Putting ecosystem restoration on a pedestal

Ecosystem loss is depriving the world of carbon sinks such as forests and peatlands at a time we can least afford it: Global greenhouse gas emissions have risen for three consecutive years. The emergence of COVID-19 has reminded us just how disastrous the consequences of ecosystem loss can be: The destruction of animals’ natural habitats creates ideal conditions for pathogens such as coronaviruses to spread.[1] So, it is timely that this year’s World Environment Day coincided with the launch of the UN Decade on Ecosystem Restoration, a global mission running through 2030 to protect and revive billions of hectares of valuable and much needed natural capital, from forests and farmland to the oceans.

Why does it really matter?

There are good reasons for ecosystem restoration. Aside from the intrinsic value of biodiverse, functioning ecosystems, they underpin a lot of our activities, as we have noted in this recent blog article. Our long-term prosperity relies on rebalancing our use of ecosystem services such as pollination, flood protection and CO2 sequestration, and nature’s capacity to supply them. Half the world’s GDP depends – at least moderately – on a form of ecosystem service.[2] The degradation of these services creates significant risk for business: from lower returns and the risk of defaults to rising insurance liabilities. Put simply, ecosystem collapse will result in economic collapse.

Mitigating damage and creating opportunities

According to the Geneva Environment Network, between now and 2030, the restoration of 3.5 million square kilometres of degraded terrestrial and marine ecosystems – an area about the size of India and France combined – could generate USD 9 trillion in ecosystem services. Restoration could also remove 13 to 26 gigatons of greenhouse gases from the atmosphere. The economic benefits of such interventions would exceed the cost of investment more than nine times. By contrast, doing nothing would be at least three times more costly than ecosystem restoration. As we point out in our recently published paper, Sustainable by Nature: Our Biodiversity Roadmap: According to the World Economic Forum in its Global Risks Report 2020, the top five global risks in terms of likelihood are all environmental, including major biodiversity loss.

The financial sector – Doing our part

The financial sector can play a fundamental role to guide the trillions of dollars needed to preserve and restore ecosystems. Doing so can unlock multiple co-benefits. It’s important to note that biodiversity preservation can go hand in hand with effective climate change mitigation and adaptation efforts.

Financial services companies can also help by incorporating biodiversity into wider financial strategies and by setting biodiversity disclosure, reporting and loss targets – particularly for priority industries that either depend on functioning biodiversity or whose activities significantly affect it. They range from agriculture & food to clothing and from distribution to mining & exploration.

Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice.

The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.

Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).

Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

[1] See Destroyed Habitat Creates the Perfect Conditions for Coronavirus to Emerge
[2] See Half of World’s GDP Moderately or Highly Dependent on Nature, Says New Report

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2. investment advice.

Opinions included in this material constitute the judgment of the investment company at the time specified and may be subject to change without notice. The investment company is not obliged to update or alter the information or opinions contained within this material. Investors should consult their own legal and tax advisors in respect of legal, accounting, domicile and tax advice prior to investing in the financial instrument(s) in order to make an independent determination of the suitability and consequences of an investment therein, if permitted. Please note that different types of investments, if contained within this material, involve varying degrees of risk and there can be no assurance that any specific investment may either be suitable, appropriate or profitable for an investor’s investment portfolio.

Given the economic and market risks, there can be no assurance that the financial instrument(s) will achieve its/their investment objectives. Returns may be affected by, amongst other things, investment strategies or objectives of the financial instrument(s) and material market and economic conditions, including interest rates, market terms and general market conditions. The different strategies applied to the financial instruments may have a significant effect on the results portrayed in this material.

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As at June 2021.

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