Biodiversity's vital role in sustainable growth and economic resilience

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Key takeaways


  • The intricate web of life on Earth, known as biodiversity, is not merely a repository of ecological wealth but also a cornerstone of economic stability and sustainable development.
  • The decline in biodiversity poses a significant threat not only to the natural world but also to the foundation of human economy.
  • This impacts essential aspects such as food security, public health, livelihoods, and risk mitigation.

Economic Underpinnings of Biodiversity


Biodiversity's contributions to the economy, often summarised under the term 'ecosystem services' and 'natural capital', are vast and varied.

These services range from

      • provisioning (e.g., food, fiber, medicine)
      • regulating (e.g., climate regulation, flood control),
      • supporting (e.g., soil formation, nutrient cycling),
      • offering cultural (e.g., recreational) services.


The Millennium Ecosystem Assessment and The Economics of Ecosystems and Biodiversity (TEEB) initiatives have extensively documented these benefits, highlighting how ecosystems' health directly influences economic prosperity and sustainability. The economic implications of biodiversity loss are stark.

According to a World Economic Forum report, over half of the world’s GDP is moderately or highly dependent on nature and its services, underscoring the immense economic risk posed by biodiversity decline.

This loss threatens food security, increases vulnerability to natural disasters, and escalates healthcare costs, among other impacts. Consequently, maintaining biodiversity is not an optional ethical choice but a fundamental economic imperative.


When discussing the topic, the following economic realities must be taken into account:

  • USD 44 trillion of global economic value generation (52% of the world’s GDP) is highly or moderately dependent on nature
  • Fastest-growing economies are particularly exposed to nature loss (e.g., Indonesia, India)
  • China (USD 2.7T), EU (USD 2.4T), and the US (USD 2.1T) have the highest absolute amounts of GDP in nature-dependent sectors

Sources: World Economic Forum ; OECD iLibrary


Biodiversity as an Investment Imperative


Opportunities abound for those who want to invest in sustainable practices and technologies that support biodiversity conservation. Fields such as sustainable agriculture, green infrastructure, conservation finance[1], and the growing bioeconomy[2] are areas ready for investment. These not only offer financial returns but also contribute significantly to ecological resilience. This also aligns with growing trends toward sustainability and social responsibility in the investment community. Initiatives like the Principles for Responsible Investment (PRI) and the Taskforce on Nature-related Financial Disclosures (TNFD) are guiding investors on how to integrate biodiversity considerations into their decision-making processes. By doing so, investors not only mitigate risks but also capitalise on the growing demand for sustainable and responsible investment options.


Integrating Biodiversity into the Investment Process


Investors are urged to integrate biodiversity considerations into their investment strategies, assessing both the risks and impacts of their portfolios on biodiversity. This involves targeting sectors and engaging with companies to improve biodiversity performance and investing directly in projects that promote conservation and sustainable land management. Regulators are increasingly recognising the importance of biodiversity, prompting investors to align with policies supporting conservation and sustainable resource use. Furthermore, by making biodiversity a core part of the investment process, investors can drive corporate behavior towards more sustainable practices and contribute to global conservation efforts. Engaging with companies on biodiversity issues encourages transparency and accountability, leading to better risk management and investment decisions.


The Call to Action for Investors


The urgency to act is now. Investors play a crucial role in shaping the future of our planet's biodiversity. By incorporating biodiversity considerations into their portfolios, investors can drive corporate behavior towards more sustainable practices, influence policy frameworks, and contribute to global efforts to halt biodiversity loss. Investors should start by assessing the biodiversity impact of their investments and engaging with companies to improve biodiversity performance.

These steps can be achieved through strategic planning. At Rothschild & Co. Bank, we are well-positioned to facilitate and support these initiatives. Here's a guideline on how Rothschild & Co approaches  this:

1. Education

Understanding the basics of biodiversity, including key terms, threats, and the role businesses play in either harming or helping to protect ecosystems, is crucial. At the Bank, we offer our clients insights and guidance on understanding the impact of their investments on biodiversity. We emphasize the significance of factoring in these impacts when making investment decisions.

2. Assess Footprint

Investors should start by assessing the biodiversity footprint of their investments. This involves understanding how their investments impact ecosystems and biodiversity. Tools and frameworks like the TNFD provide guidance for evaluating and reporting on these impacts.


3. Engagement

Investors have the opportunity to actively collaborate with companies in their portfolios to promote improved biodiversity practices. This may entail engaging in constructive dialogues with management, exercising voting rights on shareholder resolutions pertaining to biodiversity, and advocating for the integration of biodiversity considerations into business strategies and practices. At the bank, we also undertake these efforts on behalf of our clients.

4. Invest in Biodiversity-positive opportunities

As a bank, we encourage seeking investment opportunities that promote biodiversity conservation, such as sustainable forestry, regenerative agriculture, or conservation financing initiatives. We're committed to developing and providing investment products that prioritize biodiversity conservation and sustainable resource management. Moreover, we have the capabilities to integrate biodiversity considerations into investment analysis and decision-making processes. This involves evaluating the biodiversity risks and opportunities associated with potential investments.

5.Support Biodiversity Reporting and Disclosure

Advocate for improved biodiversity-related reporting and disclosure among investments. Support frameworks and initiatives that promote transparency and accountability around biodiversity impacts.

6. Partner with Experts

Collaborate with environmental NGOs, research institutions, and biodiversity experts to deepen understanding of biodiversity issues and integrate this knowledge into investment practices.

Successfully implementing these strategies necessitates a dedication to continuous learning and adaptation in the dynamic realm of biodiversity finance which is the reason why we remain abreast of emerging research, tools, and optimal approaches for assessing and mitigating biodiversity-related risks and opportunities.

[1] Conservation finance is part of a larger movement that believes that recognising the economic value of nature and incorporating it into economic decision-making will result in better environmental outcomes.

[2] The bioeconomy comprises economic and social developments that rely on renewable and sustainable sources.

At Rothschild & Co, we aim to provide our clients with opportunities to participate in the global effort to tackle climate change across a wide range of sectors and issues.

Join us as we embark on this journey!

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