Climate Risks Demand A Global Economy That’s Nature-Positive

Context: Rewiring an economic system and rewarding sustainable long-term performance that goes beyond financial returns is necessary for driving efforts towards an equitable, nature-positive, net-zero future.

Rising climate challenges

• Planet’s ecosystems nearing critical tipping points: Extinction rates 100-1,000 times higher than they were a century ago.
• World Economic Forum’s 2021 Global Risks Report: Four of top five risks to our economies are environmental—including climate change and biodiversity loss.
• Huge costs associated with human-driven nature loss: Links to spread of diseases like covid-19, and $300 billion annual cost due to natural disasters.
  • Economic cost of land degradation: Amounts to more than 10% of annual gross world product.
  • Cost of human-caused declines in ocean health: Projected to cost the global economy $428 billion per year by 2050.

Challenges in building an equitable, nature-positive, net-zero future

• Constrained thinking embedded in GDP and short-term profits: True risks arising from climate change and nature loss are often not accounted for or understood, including by investors.
• Poor investor confidence: Due to lack of environmental and social dimensions in credit rating of companies.

Way forward: Recognition of ESG dimensions in “contemporary conceptions of economic possibilities.”

• Definition of business success must change: Environmental Social Governance (ESG) indicators must become a credible proxy alongside financial performance to measure a company’s value.
  • Broaden stakeholder base: Corporate performance indicators must embed true value of natural, social and human capital to reveal a full state of health of planet, people and profits.
  • Develop a globally accepted system for corporate disclosure system: Constituting both financial and sustainability information.
• Abhor activities having a negative impact on climate and biodiversity: Investors should ask companies to issue reports aligned with Task Force on Nature-Related Financial Disclosures.
  • Shifting towards nature-positive economy could generate $10 trillion of business opportunities and create nearly 400 million jobs.
• Governments policies that reflect vision of sustainable economy: Such measures could unlock new business opportunities and create level playing field and stable operating environment.
  • E.g. Recently, the UN adopted a landmark framework to integrate natural capital into economic reporting.