Resources The Birds and the Bees in the Boardroom

The Birds and the Bees in the Boardroom

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Bruce Howard

25 April 2024

Dr. Bruce Howard, Director, Ecosystems Knowledge Network & Dr. Mike Perring, Plant Scientist and Ecologist, UK Centre for Ecology & Hydrology

It’s a conversation we can’t delay any more. We need to talk about the birds and the bees.

This is not a discussion of the merits of more rooftop gardens or green walls to adorn the glass and concrete of the UK’s business districts. It is a conversation with more far-reaching implications.

The topic is how nature-related risks are pertinent to the decisions taken in boardrooms of businesses and financial institutions throughout these islands. The new analysis that the Green Finance Institute (GFI) and its research partners have published today shows the extent to which UK plc is in jeopardy because of these risks.

The GFI report is about ‘nature’; a code word for all the natural features and processes in our surroundings. It is not just about things that can be counted, such as birds and bees. It is about fundamentals like the condition of oceans, soils, rivers and the air we breathe. The analysis shows that nature is not peripheral. It is no longer the fluffy sibling of climate concern.

How we got to this GDP warning

Over recent decades there has been a steady stream of reports that connect the condition of our natural environment with economic performance. Their findings have been underpinned by robust scientific evidence provided by independent research organisations with a track record of collecting and interpreting environmental data, such as the UK Centre for Ecology & Hydrology. These independent insights have been used in strategic decision-making too. For example, the Scottish Government uses a Natural Capital Asset Index as part of Scotland’s National Performance Framework.

Many parts of the corporate world are already alert to the importance of nature and that natural phenomenon we call biodiversity. After all, the extent of variation across species and ecosystems underpins the global economy. Over the last two years, the Taskforce on Nature-Related Financial Disclosures has played a vital role in this alertness. Hundreds of organisations in business and finance now assess, report and act on their nature-related dependencies and risks. Thanks to the new analysis led by the GFI, the ramifications of the state of nature for the whole UK economy are laid out in stark quantitative terms. And those terms do not make happy reading. Gross domestic product (GDP) could take a hit in the next decade, possibly by more than occurred through Covid-19.

The risks are tangible

It doesn’t take a genius to see how compounded climate- and nature-related risks can impact on the finances of every business and household throughout the jurisdictions of the UK.

Flooding, wildfires and urban heat are an increasingly routine part of the cycle of the seasons. Right now, many farmers are feeling the pain of lost income after one of the wettest winters on record. Deterioration of habitats means they are less able to act as a sponge to reduce the extent of flooding. Sure enough, the impacts of flooding will trickle through to the price of a pint of milk or beer.

Indeed, the agricultural sector faces among the highest risks from climate change and nature degradation, including flooding and droughts, reduced soil quality, which could all impact food production. Meanwhile, the utilities sector is potentially vulnerable for it is dependent on surface water for cooling power stations, and any constraint in supplies could impede production and raise energy prices. The manufacturing sector faces risks from reduced availability of water and loss of labour force productivity due to impaired senses and deteriorating wellbeing arising from biodiversity decline. Air, water and soil pollution all have the potential to influence the health and productivity of the workforce across all sectors.

Why this new analysis matters

The significance of this new analysis led by the GFI is that it puts numbers on the impact the state of nature has on one of the most widely used measures of economic output: GDP. It uses a macro-economic model used by a wide range of central banks. Following a set of scenarios and analysis of risks such as fire and disease we see that GDP should take a hit in the next decade because of the state of nature – both at home and abroad. On top of this, it shows how climate change will unleash its unfortunate habit of exploiting ongoing degradation in biodiversity and condition of habitats. To use a human analogy; if you aren’t fighting fit, it’s hard to take the knocks in life.

Understanding risk leads to economic opportunity

On the one hand, the findings of the analysis by GFI and its partners highlight things to avoid. Public policy, regulatory and government decisions will want to steer clear of exacerbating the whole-economy nature-related risks that have now been quantified.

There is another side to this, however. As the GFI report acknowledges, when risks are known and can be managed, opportunities arise. While fixing nature isn’t easy, environmental improvement in the UK is achievable, and can yield huge social benefit as well as climate resilience. This open door to opportunity is not about letting nature take over in some sense of wanton ‘rewilding’ abandon. Over the last decade, the Ecosystems Knowledge Network has spoken to hundreds of the UK’s most creative programmes and projects that are restoring nature in ways that are good for the economy and good for people. They include Community Woodlands that boost the well-being of workforces and local communities. And Landscape Enterprise Networks, which enable private and public sector organisations to work together to improve the health, productivity and resilience of areas of land and water that they rely on.

The initiatives create good jobs in technology, research and professional services. And for those who want a career change, there are plenty of ‘on the ground’ jobs in places where the economy is less vibrant.

Far from being an awkward conversation, this is about finding opportunity and competitive advantage for UK plc.

That conversation about the birds and the bees need not be so awkward after all.

Read Assessing the Materiality of Nature-Related Financial Risks for the UK, published by the Green Finance Institute