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Why is biodiversity important for ESG?

The planet’s biodiversity is under threat; human activities are destroying biodiversity at an unprecedented rate. As per a report published by WWF, in the last 50 years, we have lost 68% of global species.

Converting land for agriculture has caused 70 percent of global biodiversity loss and half of all loss in tree cover. Since 2000, 1.9 million square km of wild and undeveloped land has been lost through conversion. The damage to ecosystems including forests and coral reefs forecast to have a devastating effect on the global economy. The severity of the situation is such that even UNDP has recognized the situation and 2 of the 17 SDGs (SDG goals 14 and 15) are dedicated to saving biodiversity.

Recently formed Task Force on Nature-related Financial Disclosures (TNFD), has also understood the risk of biodiversity loss and as a result, it aims to create a standardized way of measuring threats to wildlife and ecosystems. Today Biodiversity is becoming the new focal point for ‘E’ in ESG. Just as companies are getting used to the idea of having to report their climate change risks, investors are demanding they now cover a whole new spectrum of issues related to corporate environmental performance. Today, Funds and international creditors have an opportunity to drive conservation improvements by tying finance to ESG milestones. An investor has begun to realize that.

 

What makes biodiversity an important part of ESG?

Firstly understand that ‘E’ in ESG stands for the environment and not just for climate change. It also involves biodiversity, water air, etc. No doubt climate change is an important aspect (arguably the most important aspect) today, but we have to remember it is ‘E’ and not just ‘C’. Earth’s ecosystem is like this vast machinery made up of millions of tiny gears, and each of those gears matters. By removing one cog, we can potentially shut the entire machinery down. Various studies have found that if we remove bees from our ecosystem, the entire food chain would collapse, removal of predators from the ecosystem, would result in overgrazing of pasture, which would again collapse the global food supply. And even if we do go back just for that ‘C’, biodiversity still makes a huge impact.

It is a well-known fact that the Amazon rainforest is one of the most important carbon-sink. But as a result of human activity of destroying bio-diversity for our own financial gains, we have finally managed to clear enough of the Amazon rainforest, that for the first time it has become carbon-positive (i.e. it is releasing more carbon than it absorbs). By destroying certain aspects of biodiversity, we are actually increasing the total GHG in the atmosphere. Greenery not only reduces carbon, but it also cleans our air, produces oxygen, produces food, they cool the environment. Insects play their own role in sustaining that ecosystem; animal biodiversity keeps a check on all components of that system. Each and every cog has its own role to play.

And if sustainability of the environment is not enough well then there is also money. Another reason for this increased talk about biodiversity is the potential economic risks associated with biodiversity loss. As per WWF, “damage to ecosystems including forests, grasslands, and coral reefs and the associated loss of biodiversity could drain nearly $10tn from the global economy by 2050”.

 

What are the challenges?

Biodiversity risk is a factor of both, the presence of valued ecosystems and species, as well as a country’s intent and capacity to protect them. But measuring these risks requires universal benchmarks, we can put a cost to biodiversity loss, but how much that’s the question? TCDF has made this problem somewhat less complex, but countries still need to come up with a universal system just like they did with carbon and GHGs, we need to put a dollar value on biodiversity.

Another problem with Biodiversity is general negligence, most of us know that we are losing flora and fauna but we are not aware of exactly how much they affect us. Many companies and investors still mislabel biodiversity efforts under Social factors instead of Environment factors. Only by making people aware, we can expect them to understand the severity of biodiversity loss and act on it.

So by now, we have understood why biodiversity is important but the sad part is despite that, many investors are still ignoring the big elephant i.e. biodiversity loss. It is estimated that in 2019, the world’s big financial institution has given loans and finances amounting to $2.6 trillion to the projects that are linked to the destruction of Bio-diversity. I am not saying that we are not doing anything; we have many organizations that are doing their part for preserving biodiversity, recently Porto du Acu, a Brazilian port earn a sustainability award for their effort to save sea turtles, but the thing is we are not doing enough. Countries need to come up with much stricter rules regarding biodiversity preservation. It is important that we set similar targets for preserving biodiversity as we have done for carbon reductions, and draft stricter policies.

Biodiversity is important and we must preserve it. We need to preserve it because it is humane, it is our moral duty, it instills that sense of happiness in us, and it’s economical in long run. And if all these reasons aren’t enough then remember this we need our ecosystem to survive, we have only one planet. If all other reason doesn’t seem good enough then how about this, do it to say alive. Because in the end, the thing is, if we destroy our biodiversity, human society won’t survive.

 

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