Advice & Best Practice

Why biodiversity and global prosperity go hand in hand

By Christoph Nabholz, chief research officer at the Swiss Re Institute

Last year, renowned naturalist David Attenborough broke a world record. He became the fastest person ever to reach a million followers on Instagram, doing so in just over four hours.

But why did the legendary presenter show a sudden interest in social media? He wanted to use the platform to spread the word that our natural world is in trouble. The United Nations has named 2021-2030 the decade for ecosystem restoration.

And the scale of the problem is terrifying. A million plant and animal species are now facing extinction. More than 40% of amphibian species, almost a third of reef-forming corals and more than a third of all marine mammals are threatened.

In fact, data from our own 2020 Biodiversity and Ecosystems Index showed the extent to which ecosystems are in peril. Nearly a quarter of all countries on the planet have fragile and damaged ecosystems in a significant proportion of their land. And it’s having a direct impact on their bottom line: many of these countries depend on the systems, processes and fruits of their lands to sustain their economies.

More diversified economies, which are less dependent on fishing, farming and forestry, for example, still face threats from water shortages and interruptions to food supply. One estimate places the value of biodiversity at USD 33 trillion a year – close to the combined GDP of the US and China.

The health of the natural world is not just about having nice places to walk and fresh air to breathe – it’s rooted in our financial system and is at the heart of societal wellbeing.

The cost of a damaged environment

As our urban areas expand, we’re carving huge swathes out of natural ecosystems. By 2050, it’s estimated over two thirds of the world’s population will live in cities and towns.

Alongside this, greenhouse gases, plastic waste and other sources of pollution continue to mount up.

Our studies have found that only 34 countries (or 14% of all countries) have ecosystems with a high capacity to provide services on at least a third of their territories.

These ecosystem “services” represent the benefits that we obtain from nature. Malta, Israel, Cyprus, Bahrain and Kazakhstan have some of the lowest capacity to provide ecosystem services.

But Kenya, Vietnam, Pakistan, Indonesia and Nigeria are most dependent on the health of their ecosystems. With their economies largely powered by industries such as farming, fishing and forestry, these countries are financially vulnerable to ecosystem shocks.

Data is part of the solution

Given the inextricable links between ecosystem services and global financial and societal health, tackling each factor in isolation will not help us find a solution. This is where data and technology comes in. By collecting and analysing information about our environment and the impact of our infrastructure, we can make financial decisions grounded in nature. We can use this information to ensure our industry and urban expansion is not just sympathetic to the environment, but actively supports its recovery. And ultimately this will guide us to a more resilient future.

Technology already exists to turn geographical risk data into actionable information for the insurance industry. Swiss Re’s CatNet tool, for example, assesses risk by combining hazard, loss and exposure with selected background maps and satellite imagery, meaning that data about issues such as climate change, natural catastrophe and population density can be used in pricing and to create new solutions.

Using this data to inform underwriting and asset management will help redirect attention to more sustainable and financially viable projects, creating more resilience. And nature-based insurance solutions open up a new line of business for insurers.

Key to driving progress will be insurers and the broader financial services sector fostering a dialogue around biodiversity and ecosystem services and their connection with the economy.

We want to see biodiversity and ecosystem services incorporated into businesses’ decision-making. As an industry, we have the power to influence a resilient future for affected regions and communities and our global economy.

As we look to a post-pandemic recovery, the long-term health of our societies and financial systems ultimately depends on Mother Nature’s wellbeing.


By Christoph Nabholz, chief research officer at the Swiss Re Institute

 

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