Greenomics – Ep. 12 | Beyond climate: Exploring nature-related risks for businesses

Sarah Nelson:
Hello and welcome to Greenomics, a podcast from Oxford Economics, where we delve into the complex relationships between climate, nature and our global economy. I’m Sarah Nelson in the Economics and sustainability team here at Oxford Economics and today will be exploring the links between climate change and nature loss. This confluence of issues is sometimes referred to as the climate nature nexus, which has a real buzz word ring to it, but nonetheless describes the very real and very important relationship between how the climate is changing and the other shifts we’re observing in our natural world. From biodiversity loss to soil degradation to invasive species. Joining me in the studio to discuss these issues are Jake Kuyer and Carina Manitius, my colleagues in economics and sustainability team, Jake and Carina have been leading Oxford Economics charged to understand the economics of nature change and how it interacts with the climate impacts that we’re all generally more familiar with.

Jake, Carina, thank you for joining me.

Jake Kuyer
Thank you, Sarah. Good to be back.

Carina Manitius
Nice to see you, Sarah

Sarah Nelson:
So before we dive into the conversation, we have a primer on nature risks from Caroline Vexler, Nature finance principal at the European Bank for Reconstruction and Development. Carina, I understand you spoke to Caroline this week, so let’s cut to that conversation now and debrief in the studio afterwards.

Carina Manitius
Hi, Caroline. Thank you so much for joining me today.

Caroline Vexler
Thanks so much for having me.

Carina Manitius
So I wanted to start kind of by going back to the basics. So what exactly do we mean about when we talk about nature? Does nature include climate change? What else does it include?

Caroline Vexler
Yeah, absolutely. So just to just a caveat, so I’m going to be answering this question as an economist and not as an ecologist. So you might get slightly different answers depending on who you ask this question to. And also, just in the context of the global debate and policy momentum around curbing nature loss. So nature encompasses when we talk about nature in that context, we it encompasses quite a lot. It encompasses land, forests, soils, freshwater resources, marine resources, and it includes both the living and non-living components of those ecosystems. So we’re talking about quite a wide diversity of habitats and ecosystems. And I also wanted to point out a distinction between nature and biodiversity because the terms are often used quite interchangeably, but they’re actually very different. So biodiversity is the diversity of life within ecosystems which can be measured at different scales, that can be measured in terms of genetic diversity or species diversity or at other scales.

And biodiversity is really important for the functioning of nature and of ecosystems. It makes ecosystems healthier and more resilient, which is particularly important in the context of climate change and threats that ecosystems might face. But those are two very different concepts, and they’re both very important, but they’re terms that shouldn’t be used interchangeably. And so, you know, I’ve mentioned quite a lot of different, I guess, terminology here, and I think that’s part of what makes the nature conversation so overwhelming is that it encompasses so many different things and it can also seem really intangible.

Often times when people think of nature, they think of like pristine Amazon forests or exotic, you know, tiger species. And while those are really important, they’re important culturally, they’re important as indicators of the functioning of different ecosystems, nature is much more fundamental to the economy. So the way in which as an economist, we conceptualize the contribution that nature provides to people and the economy is a term we call ecosystem services, and ecosystem services are typically divided into three categories provisioning, regulating and cultural services. Provisionally, provisioning services are the more tangible products and services that ecosystems provide.

So agricultural products, fisheries products, water, forest products, etc. all of those all of those products are very important for food systems and for people and wider supply chains and production systems. Regulating services represents the services that ecosystems deliver in terms of providing stable and functioning kind of broader systems so that can be things like, you know, well-functioning forest ecosystems are critical for climate mitigation and adaptation. Mangroves, for example, can provide resilience to storm surges and also different parts of soil systems and root systems can provide water filtration. So that’s just a sample. But ecosystems are really important to just the broad functioning of life on earth. And then cultural ecosystem services are also really important. And so that can be things like it’s important for people to have access to green spaces or to be able to visit forests for their for their mental health or for their physical health.

And those are also really important services that nature provides to people. And I think using that conceptualization of ecosystem services can help make it a little bit clearer of why, you know, we don’t just want to protect, restore and conserve nature because it’s wonderful. It’s also really, really fundamental to how our economy functions. I’ve seen some studies that have estimated the value of ecosystem services to the economy. And it’s you know, I’ve seen huge numbers as big as like 125 to 140 trillion per year. I don’t know that that is necessarily representative, but it just gives you a sense of the contribution that the nature of healthy and well-functioning nature provides to the economy and people.

Carina Manitius
Yeah, that’s really a good overview of how much nature encompasses. And I think when we’re talking about climate and nature, like one way that kind of demonstrates that is the fact that climate is just one of the nine environmental boundaries that scientists have said have set for Earth. So it it’s just climate is just one part of the broader sort of nature crisis, I guess, thinking about how we translate that into for our listeners, like why, why should we care about nature loss? I imagine a lot of our listeners are quite familiar with the risks we face from climate change, but what are the risks that nature loss creates to businesses, to people?

Caroline Vexler
Yeah, absolutely. And just to add, I guess, a funny note on the kind of climate nature and actions point are managing director at every RD. He says that we have a nature crisis and climate is just one of the nature crises. So I think climate tends to eclipse nature in terms of like the global agenda. But nature really encompasses all of climate and more so. So why should we care? I mean, I mentioned before that, you know, 125 to 140 trillion figure in terms of ecosystem services. There’s also been studies that look at how much GDP broadly is reliant on nature. PWC did a study a couple of years ago and they estimated that half of all GDP is moderately or higher, highly reliant on well-functioning nature. And I’m going to steal from Simon Zadek rather than using that kind of half of GDP. 100% of the economy is 100% dependent on nature. We know this is pretty fundamental, right? Without clean water, without clean air, without forest products, without food, like the economy would cease to function. So that’s really fundamentally why we should care about nature loss. But more so than that, nature is declining at a really alarming rate. So just to give a couple of statistics that are quite scary but really reflect the losses that we’re seeing in nature, we’ve seen significant tree cover losses over the past couple of decades, up to 12% of tree cover loss since 2000, about a third of topsoil has been degraded and WWF has put out some figures in recent years on decline in the average size of wildlife populations of up to 68% since 1970.

So huge losses of nature and that really threatens the ability of those ecosystems to continue providing services to the economy. And much like climate is increasingly recognized as a financial risk, it’s also being nature is also being recognized as a financial risk. And that’s been recognized through efforts like the Task Force on Nature related financial disclosures. For those of your listeners that are familiar with the Task Force on climate related financial disclosures, it’s follows a similar process and structure, and it’s increasingly being taken by it by corporates and being demanded by investors because nature losses also a critical threat to businesses in their ability to continue functioning. And we have started to conceptualize nature losses of a material financial risk to businesses from two perspectives. I’ve mostly talked about it from the perspective of dependencies. So the ways in which production systems depend on well-functioning ecosystems, and that’s clearly a financial risks that businesses need to understand how much they depend on those ecosystem services. But at the same time, impacts on nature from a business perspective are also a material financial risk. Just to give an example, if a business is doesn’t really understand their supply chain or doesn’t really care about their supply chain, and they’re highly involved in supply chains that have a huge amount of deforestation that’s a big business risk from a reputational perspective, from a regulatory perspective. So if they’re, you know, there’s a lot more pressure on certain countries to crack down on deforestation, if the supply chains are affected by new deforestation legislation, that’s a huge potential risk for companies that don’t have good supply chain traceability or don’t have good visibility over whether or not their suppliers are producing in ways that are likely to face new policy and new legislation.

So the TNFD and others are creating the infrastructure for companies to better understand how their businesses intersect with natural resources and nature. From from both of those perspectives.

Carina Manitius
Yeah, that’s really interesting and I think kind of brings us to some ongoing developments around nature policy. So there is some exciting news for nature policy this month. As the EU passed the world’s first nature restoration law, and that law is aiming to restore at least 20% of the EU’s land and seas by 2030. What does that mean for your work and for the future of nature policy?

Caroline Vexler
Yeah, absolutely. It was incredibly exciting. And I’ve been in actually meetings this morning with some of my colleagues and in some of our EU countries of operations to talk about this because it’s a very ambitious policy. Maybe just to take a step back before talking about the EU nature restoration law and give some context for those that haven’t been involved in the ongoing global conversations on the Convention on Biological Diversity. So like the climate COP, there is actually a biodiversity COP as well. And the biodiversity COP in Montreal two years ago was the biggest biodiversity COP there’s ever been. There’s been there was much more financial sector and private sector involvement in that COP than ever before. And what came out of that COP was the global biodiversity framework, which is a broad set of ambitious global targets on nature restoration and transformation of business practices and a variety of things.

And I really encourage everyone to have a look at it that are trying to put the world on a path towards nature, preservation and nature recovery. And that includes things that that people may have heard of, like the 30 by 30 targets on, you know, 30 preserving 30% of terrestrial ecosystems. And so the EU nature restoration law is really a follow on to that. And it’s exciting development, which is an EU law and not an EU directive, which is super important in terms of how it’s implemented. And I guess the importance of it in terms of it being mandatory for EU countries to take forward, the EU nature restoration law essentially sets out a series of targets that relate to different habitats and ecosystems and production practices that all EU member states are required to comply with. And not only that, it’s not just have a kind of broad set of targets, but it also requires EU member States to set out very specific restoration plans for how they’re going to achieve those targets. So just to give a couple of examples of what’s included, it includes targets on restoring habitats like peak peatlands that aren’t in sufficient condition. It also sets targets for how much green space there needs to be in cities of a certain size. It sets targets on developing strategies for improving pollinators status and things like that. There’s a huge list and every EU country is going to have to go through an intensive baseline exercise to figure out what habitats and what ecosystems fall under this fall, under these targets.

You know, do they have sufficient greenspace in their cities? Are they going to need to invest highly in green infrastructure? And then over the next 24 months, set out a very specific plan of what specific actions they’re going to take to achieve those targets and how they’re going to finance those. So from our perspective, as a as an MDB that’s working in currently 12 EU countries, we’re really excited to see what opportunities this opens up for nature finance as it as it shifts the focus on invest, investments and actions towards achieving these restoration targets.

Carina Manitius
Yeah, it’s a really exciting development and I guess that kind of brings me to my final question, which is can you tell me a bit more about the work that EBRD is doing on nature in your work specifically?

Caroline Vexler
Yeah, absolutely. So for anyone that’s not familiar with the European Bank for Reconstruction and Development, we’re a multilateral development name bank, and despite having Europe in our name, we’re actually not just in Europe. So we cover, I think about 40 countries now that are in Central and Eastern Europe, the Baltics, as well as in Central Asia, a little bit of southern and Eastern Europe, that kind of Mediterranean region, North Africa, and starting next year will be in six countries in sub-Saharan Africa, as well as Iraq. So quite a broad diversity of economies, of ecosystems, of habitats and of climate change impacts as well. And EBRD is mandate is supporting market based transitions and supporting private sector development. And so as a result of that, the majority of our work is with the private sector, although we do do some sovereign lending and some municipal lending, particularly through our Green Cities program. In terms of our approach to nature, we released our first ever approach to Nature report last year, which was launched at Climate COP, which reiterates our, I guess, commitment to addressing the nature crisis, recognizing that and the nature of crisis is in part driven by market failures. And as a markets oriented bank, we see a role for us in addressing that crisis. And that all said, there are obviously challenges broadly in nature finance because there isn’t, in most cases, a direct revenue stream from investing in nature and even more challenges when working predominantly with the private sector. But we are committed to finding ways to address it through our environmental and social policy and continued application of our strong environmental and safeguarding standards and also through our investments in policy dialog.

And within that approach to nature, we highlight three areas where we are doubling down our efforts and we see a particularly role for us as a bank given our historic experience and our mandate. And those three areas are in blue and green infrastructure. So I mentioned our Green Cities program. We have a network of, I think about 60 cities that we work with. And last year we financed our first Nature based Solutions project in one of the cities, which is very exciting. We’re hoping we can use that as a template for more investments in blue and green infrastructure. The second area is pollution prevention and circular economy. This is an area that we have a vast amount of experience in wastewater treatment investments and circular economy investments, and we continue we will continue to promote investments that reduce pressures on ecosystems in our countries of operation. And the third area is primary production and nature governance. We tend to work with our agribusiness and manufacturing clients that are kind of middle of the value chain. So we don’t often work directly with primary producers, but we see important opportunities for us to influence primary production systems by working with clients that have supply chains that affect land use. And so we’ll continue to work with those clients to identify opportunities to do so.

Carina Manitius
Great. That sounds super interesting. Thank you. Thank you so much again for joining me today. Yeah, it was a really, really insightful discussion.

Caroline Vexler
Thanks for having me. Always happy to chat about nature.

Sarah Nelson:
Carina that sounded like a really useful summary of how nature risks are so important for the economy and how they could develop over time. What was your main takeaway from that conversation?

Carina Manitius
Yeah, super interesting conversation. I feel like Caroline did a really good job of sort of conveying how big of an umbrella nature really is, how many things fit under it, Different types of nature, loss, dependencies impacts the way it impacts people and communities as well as businesses and supply chains, which is something that I think, as Caroline said, makes people a little bit intimidated when they’re first engaging with nature because of how much is involved with it, but also just demonstrates how important it is and fundamental to so much of our economy and society.

Sarah Nelson:
Thanks. I think one of the things that you touched on with Caroline, which, you know, I’m certainly guilty of in my career, is that, you know, when people think of nature, or think of environmental crises. They often just think of climate. And we’ve all worked in sustainability for our whole careers. And it seems to me, although admittedly, I think this is just because I and very focused on climate, that nature losses emerging onto headlines only recently.
Jake, given how urgent nature loss is, why has climate received so much more attention in the last few decades?

Jake Kuyer:
Yeah, it’s a good question. I think there’s a number of reasons. One is perhaps that nature’s kind of just always there, always in the background. And because of that, maybe people don’t recognize changes which are happening more gradually. Whereas with climate it’s become quite apparent with things like disasters and that are on the news frequently and it’s a little bit more visible and carbon in carbon issues, while they’re very, very complicated, are actually still more straightforward than really kind of understanding nature and how nature interacts with the climate, but also with economies and how we how the economy is built on the environment and what degradation means. So I think it’s just a very complicated issue, but it is becoming more mainstream as a as an area of focus and a recognition that it does constitute material risks to the economy and to businesses as well as people’s day to day lives.

Carina Manitius
Yeah, I think it’s also important when we’re talking about attention moving from climate to nature or nature coming into the conversation more to also clarify attention from who, because I think populations in the Global South have been raising the alarm bells around nature loss for decades, and it’s really the power centers in the global north policymakers, business leaders who have not been paying as much attention. And I think we can’t deny that a big part of that is that nature loss has been over the last few decades quite concentrated in the global South. As globalized supply chains have meant that nature was associated with consumption. The global North has been offshored to the global South. And so while it’s not been on our footsteps in the global North, it’s only now that we’re starting to understand how these sort of complicated interrelationships with our supply chains and ecosystem dependencies mean that nature loss in the Global South does actually create risk for the global North. And now we’re starting to pay a lot more attention.

Sarah Nelson:
One thing that’s quite interesting, I think about nature loss is tipping points. And as you said, Jake, climate change is kind of more visible with disasters and stuff. But my understanding is that there’s quite a big potential for tipping points in the nature loss sort of projections. How do you think that that will play into kind of the attention that’s given that and the policy response?

Jake Kuyer:
Yeah, I mean, it’s a good question. And it’s also where a lot of the complexity comes from because things are kind of fine until they aren’t. And I think one thing to recognize is that a lot of the impact of climate change will have is actually the mechanism is going to be from ecosystem loss and nature loss and environmental degradation. And that’s when you start to see things like failure of agricultural crops on a widespread basis or the impacts of droughts and floods and things like that. So while climate change kind of maybe creates a push that actually what happens is that alongside the pressures that different economic activities are placing on the environment, it pushes it increasingly closer to a threshold. And once those thresholds are crossed, you start to see some fairly catastrophic impacts potentially that are quite hard to reverse. So they’re very much related issues and yeah, adds to the whole complexity.

Sarah Nelson:
So what developments in the last few years or a decade or so have kind of come up to help us better understand some of that complexity and some of that kind of supply chain dependencies that Carina mentioned?

Jake Kuyer:
Yeah, I mean, there is there’s various elements, as Carina said, I’m talking about as if these things are all new. But of course, they’ve been around for decades and potentially centuries in terms of awareness for different groups, but becoming more mainstream or working its way into that kind of the day to day lives of people, I think from a kind of contextual perspective. And as an economist, I would say this, but it’s an increasing recognition of the relationship between the economy and the environment and how much economic activity is actually ultimately dependent on the environment and the functioning of ecosystems and the provision of ecosystem services. So once you start to measure these, make these links conceptually, you can start to measure them. And that’s the other part of the puzzle is that technologies allowed for a lot better managed measurement and monitoring of the state of nature of degradation and how that can filter into the economy and create material risk for businesses and for people’s wellbeing. So yeah, there’s a few different elements coming together. But yeah, I think we’ll see. I think we’ll continue to see this momentum grow over the years.

Carina Manitius
Yeah, I could just to add to that point on technology, I think that’s where there’s been so much development over the last 5 to 10 years, especially around the real influx of Earth observation data and remote sensing data where you’re able to get data from satellites and other remote sensing devices, but mostly satellites which have global coverage and have really expanded our ability not only to measure and locate where nature impact is occurring, but also to track what is driving nature change and to and to trace those links between, again, the actual nature loss and then the ultimate sectors that are driving it. And there’s lots of different ways and lots of different types of data that they have that’s been able to be collected, whether it’s data on ecosystem condition and extent, which ecologists are then able to use to track nature loss globally. But also importantly, there’s been a lot of new data coming out on locating where economic assets are within the economy, which is key to understanding what ecosystems are being impacted. And now with the advancements in AI that’s being pushed even further, where you have tools like Climate Trace, which are linking Earth observation data with A.I. to estimate greenhouse gas emissions from different facilities based on their smoke plumes. And that’s all done using satellite data and A.I., which is quite an interesting development, I think shows that over the next few years this can just be push even further and expand our ability to not only understand these things, but then also there’s obviously sort of enforcement and accountability mechanisms that those open up as well.

Sarah Nelson:
And with the AI solutions, like you mentioned, climate trace, which is one I’ve looked into, super interesting how reliable are they? Because I mean.

Carina Manitius
AI’s

Sarah Nelson:
A bit of guesswork, I think some in some aspects. So how reliable are they? And also does that matter? Like, is it okay if there’s some uncertainty given that previously we didn’t have any data on this kind of stuff.

Carina Manitius
Yeah, I think that’s an important point to remember. I mean, even just with Earth observation data in general ,when AI’s not really in the picture. You’re still talking about proxies, you’re still talking about data collected remotely from satellites, which is attempting to proxy a measure on the ground. I still think it’s worthwhile because it enables us to capture global metrics, which otherwise you have to go in person and collect. And just when you think about a global scale. So even with that uncertainty, which I do think is somewhat measurable, you can crowdsource these things. I think it’s still worthwhile using this data because otherwise we don’t really have data sources with global coverage in the same way.

Sarah Nelson:
Cool. So I understand that you’ve been using some of these data sources, Carina, to kind of.

Carina Manitius
Explore.

Sarah Nelson:
The application of the data and the application of our economics tools to a particular industry. Can you walk us through the case study that you’ve been working on?

Carina Manitius
Yeah. So using sort of all of these developments, we’ve been building out our own modelling capabilities and so we sort of applied this to a case study of the French restaurant sector, which I think demonstrates this quite well. And so the French restaurant sector has a $1.4 billion supply chain, which spans 14 countries. So it’s quite concentrated in France, but it does have a global impact. And unsurprisingly, food products and agriculture make up a significant share of that supply chain. And the agricultural sector is highly dependent on a range of ecosystem services. So it really represents that link between nature and economy really well. And this creates risks to the French restaurant sector because if the ecosystem services in the areas where it’s sourcing food from are no longer able to provide those services, then that creates risks to the supply chain through disruptions or shortages and so on. And so what we were able to find is that two thirds of agriculture in French restaurant sector supply chain is sourced from France, and the rest is spread across a number of different countries. And using our model and some of this earth observation data, we’re able to estimate the specific ecosystems within each country that these products are likely being sourced from. And we found that 27% of agricultural products that French restaurants are purchasing are likely sourced from regions where nature is considered to be imperiled. So in other words, where nature risk is really high. And so what we found is that sort of the globalized nature of supply chains has exposed the French restaurant sector to nature risk in countries like the US and Morocco in ways that might not be immediately obvious if you’re not using this sort of observation data and complex supply chain modelling.

Sarah Nelson:
So I think we’ve sort of touched we actually talked a little bit on this in previous episodes of Greenomics and kind of has come up in this conversation. But there’s that sort of double materiality aspect of all of this analysis where you’ve got both impacts and dependencies. Jake, can you just briefly recap what that is and how this plays into the kind of example that that Carina explores?

Jake Kuyer:
Yes, double materiality broadly means looking at both impacts and dependencies or impacts and risks and opportunities can be thrown in there as well. So economic activity will have a negative or potentially positive impact on our nature. So whether it’s extractive uses or sometimes more restorative uses, if we’re looking at positive impacts and that’s those impacts, if they are, we’ll talk about the negative side. So if they degrade ecosystems and environments and that can have knock on effects for both local communities living live in the area or for things like climate change, but also negative economic impacts, and then that kind of gets into the dependency side. So there’s also much economic activity that’s also dependent on environment. So we kind of mentioned that a little bit earlier in the conversation and where there’s a dependency on the environment or on ecosystems and those ecosystems are degraded, that has an effect on that economic activity. So put there’s a risk associated there where that links made. And when you take these things together, that’s sort of a double materiality or sometimes called dynamic materiality, understanding that there’s both an impact and a risk side or a dependency side that needs to be managed. And yeah, it’s important and meaningful and also valuable to businesses or governments.

Sarah Nelson:
And so for the French restaurant example, Carina, if we take this example that there’s some portion of the supply chain that’s in a area that’s imperiled, then that has dependency risk for the company as well, but also is the kind of marginal impact and that’s sort of an economics term. But the additional impact of French restaurants procurement from that sector, is that going to be larger in an area that’s imperiled?

Carina Manitius
Yeah, that’s right. So you can think about through this double materiality lens, the French restaurant sector both depends on ecosystem services to provide agriculture, but it’s also associated with the land use agriculture agricultural sector is using in the ecosystem. And when the ecosystem is in a state of peril, like you say, the marginal impact, the extent to which that additional land use is associated with potentially pushing that ecosystem closer to a tipping point, closer to a collapse is greater than in an ecosystem where there’s a bit more flex for additional land use change without these risks at tipping points.

Sarah Nelson:
So it’s really basically it’s really important to know where and how much of your supply chain is dependent on very at risk. Exactly ecosystem. So we always on Greenomics try and kind of ground the discussion and why it matters to business. So I mean, this is a pretty broad question for you Jake, but why should businesses care about the Climate nation axis?

Jake Kuyer:
Sure. I mean, I think we’ve touched on a few things that much economic activity is ultimately dependent on the environment. There’s estimates out there about 50%, I believe, from the World Economic Forum. And it may not be immediately obvious that sometimes this is from extended supply chains. 510 tiers up your up your supply chain. But there’s some dependance on an agricultural commodity or some sort of extractive resource or other services that the environment provides, such as such as protection, flood mitigation, you know, the prevention of forest fires and other things that can disrupt supply chains, transportation routes and ultimately production output and revenues for businesses. So there is fairly explicit links you can make there. And we’re seeing this being taken increasingly seriously as the supply chain risks kind of move to the forefront of business leaders minds via things like the COVID lockdowns, the various wars and geopolitical issues that are happening today and increasingly with climate change and nature related disruption. So I think there’s a fairly clear link there, and nature also helps to mitigate the impacts of climate change. So where you have a robust and diverse ecosphere Systems, they’re much better able to adapt to changing climates. And that’s quite important. Where you don’t have that, where that resilience isn’t there, you’re much more subject to droughts and again, fires and floods and all these types of things which can be disruptive. So it provides a bit of a mitigation to climate change impacts and other impacts as well. And yeah, I mean, I could talk about that more and more, but I’ll stop there.

Carina Manitius
I think I think it’s also worth highlighting or going back to what we talked about earlier with tipping points, I think there’s also this sort of risk of crossing these tipping points, which creates the systemic risk, which is large and at this point unknown and potentially even unknowable. So there’s this very real downside risk that I think businesses also need to be aware of, especially, you know, if there’s anything we can take from climate change, it’s that climate scientists have routinely underestimated the scale and pace of climate change and so I think it’s worth keeping that in mind for nature loss as well. So this is a bit of a.

Sarah Nelson:
Deviation, perhaps, but you mentioned the kind of climate modelling aspect. Nature modelling is a lot more complex with tipping points and lots and lots of different sort of small scale things going on. And where is also the economics that in terms of building up nature modelling scenarios, where is the industry and more generally.

Carina Manitius
Yeah, that’s I think this is really the cutting edge. So, you know, organizations out there like Network for Green Financial Services and others have been starting to talk about the idea of macro scenarios of nature loss, like they develop macro scenarios of climate change, but these don’t yet really exist. And so that’s something I suspect Alex has been working on developing, but it really is the cutting edge. So like you mentioned, major loss is far more dependent on what’s happening locally around the world. That creates a lot more complexities that you need to capture in any type of model. So this is the cutting edge and I think an area where you’re going to see a lot of development over the next few years.

Sarah Nelson:
I suppose is a bit related to our heavily downside climate scenario, which we talked about in one of the episodes, because I think that captures some of the tipping point effects, but not explicitly through the nature loss kind of avenue. So Carina, on that, you mentioned the NGFS and I know it’s on the minds of a lot of that sort of financial services sector players and stuff. What is the role of regulation and policy in kind of meeting the nature challenge?

Carina Manitius
Yeah, so I think we’ve seen a lot of developments again in the last few years on the regulatory front. So we’ve seen market led initiatives such as the Task Force for Nature related financial disclosures, pushing forward in developing these frameworks of what sort of metrics businesses should be disclosing around nature of us, nature, risk and impact. But then on the regulatory, probably see a lot of developments in the EU, around the ESRS, European CBD reporting standards, which are including in both climate as well as broader nature issues. And we’ve also seen further developments looking at things like the science based targets for nature. And so there are things that are developing around the world, but these things are relatively, relatively new.

Jake Kuyer:
Yeah, I think it’s been interesting. It is all relatively new. And the CSRD in Europe is a legislated piece of legislation that companies do need to follow. So that does have some kind of compliance relevance. But there’s a lot of voluntary adoption of other things that that Carina’s mentioned. And you also have other standards setting. Another interesting one is the United Nations system of Environmental Economic Accounting, which sets out a standard by which governments like countries, can track the state of environmental, the value, economic value it provides. And that starts to well by standardizing how that data is produced by statistical agencies, provides a kind of common transferable data sets that can help to feed into this type of analysis. But you’re seeing things from that international level to domestic level governments. You’re seeing it from NGOs, but also both market led and business led. And really finance sector led to, you see quite a lot of action where actors within the finance sector are starting to recognize this as something that’s actually matters for capital markets, capital at risk from nature issues. So I think we’re seeing a lot of interest in action from a lot of different sides and increasing momentum, which is good to see.

Sarah Nelson:
So I have one more question and it’s hopefully going to round out the conversation on a slightly more optimistic note. Are there any opportunities created by nature change and the global response to it?

Jake Kuyer:
Sure. Yeah. I mean, there’s always opportunities. Anytime there’s challenges and disruptions and risks and there’s also potentially an upside and there’s lots of new demand for new technologies as we’ve kind of talked about how to measure things, how to monitor things. There’s demand for expertise, ecological expertise, also economic expertise, scientific, but also around like social and engagements, issues. How do you get people talking and communicating about these things and there’s kind of really direct ways. And we saw an interesting thing happen post lockdowns where there seemed to be a greater appreciation or people valued the green spaces more. And so being able to kind of allow people to access that value in different ways and obviously that touches into things like tourism as well and eco tourism. But even just kind of standard tourism, how it actually operates and manages and draws value from the environment is an interesting area and creative financing solutions. There’s a big demand for how do you actually fund a lot of this stuff. There’s not necessarily a direct economic profit to doing so, although there is an indirect economic profit doing so. So that makes financing these things a bit tricky and there’s lots of room there and then increasingly new markets opening up as well. So I think there’s plenty of opportunities.

Carina Manitius
I think one thing I would add there is that there’s also a lot of co-benefits to addressing nature loss, things like efficiency gains and reduced waste that can also help businesses bottom lines there. It’s not just a pursuing or addressing natural loss just for natural lost. There’s also other benefits that can come with that.

Sarah Nelson:
Okay. Well, thank you so much for a really interesting discussion, you two. I am going to wrap up with a Greenomics gamble the tradition. So, Carina this will be your first greenomics gamble. So it’s two truths and one lie, and you have to pick the lie. So the first statement is that biodiversity hotspots represent just 2.5% of Earth’s land surface, but support more than half of the world’s plants, species and endemics, meaning that they don’t exist anywhere else. The second statement is that coral reefs support an estimated 25% of all marine species, despite covering less than 1% of the ocean floor. And the last statement is that 5% of global greenhouse gas emissions are generated by land clearing, crop production and fertilization. So what do we think.

Carina Manitius
It’s got to be to the agricultural.

Jake Kuyer:
To say the last one as well? They’re all they all sound true, but it’s the exact percentages. I’m not too clear, but I’ll go with the last one.

Sarah Nelson:
Yeah, you guys are right. They made it too easy for you. Too easy. Well, with that, all that’s left to do is say thank you to Caroline Vexler for her insights over the phone and to Jake and Carina for joining me in the studio today.

Jake Kuyer:
Thank you, Sarah.

Sarah Nelson:
And thanks for the listeners for tuning into this episode. This is actually last monthly episode for now. Greenomics will be back to explore other sustainability issues after the summer. Please subscribe on Spotify, SoundCloud or on our website. And feel free to write to us at [email protected]. That’s it for today on Greenomics from Oxford Economics, where we know that money might make the world go round, but sustainability makes it a much nicer place to live. See you next time.