Sustainability Conversations: The Transition Towards a Nature-Positive Future

Yesterday, AlphaBeta launched the Sustainability Conversations series – a collection of op-eds on the transition to a nature-positive economy.

The first piece in this series by Shivin Kohli, Senior Manager, underscores the urgency of action needed and previews future deep-dives on biodiversity risks, nature-positive business models, and policy/finance enablers.

Framing Environmental Sustainability in 2022

2021 drew to a close with cautious optimism on the future of our degrading planet. COP26 communicated the urgency of the climate crisis by framing it as the challenge of the 21^st century. The strategic rehabilitation and use of nature was also featured for the first time as a serious option to solve the interlinked crises of climate change and biodiversity loss. However, there remains a pervasive sense of unease, backed by scientific projections, that today’s level of ambition and present inaction will not avert environmental catastrophe. Many reasons have been posited for this lack of ambition. The most common concern is the perceived compromise on socioeconomic progress if governments and businesses are to shift en masse to environmentally sustainable production. There is also still a “compliance-check” mentality in the business world on setting and achieving sustainability targets. Despite much progress, many companies focus more on short-term regulatory, reporting, and consumer risks, as opposed to long-term operational risks from continuing practices that damage nature. Biodiversity and nature loss also does not receive nearly as much attention as it deserves. This is primarily because it is scientifically challenging to put in place a global target similar to the “1.5^OC” pathway for climate change – and hence the lack of an articulate and uniting vision. Ecosystem health may indeed be a hyper-local issue, but by many estimations, is just as serious, if not a greater threat, than climate change on the global stage. Climate regulation is but one of the many ecosystem services that nature provides us, with other critical services including flood and storm protection, pollination, and genetic materials.

Underscoring each of these concerns is a lack of understanding on the seriousness of climate change and biodiversity loss in business and economic terms, which makes business-as-usual a more attractive option. AlphaBeta has worked extensively with governments, international organisations, and businesses to build a robust fact base on risks, opportunities, and financing for a climate- and nature-positive economy. Below, we highlight key insights in each of these areas to help frame the issue appropriately.

Nature’s Call to Action

Climate change and biodiversity loss represent a critical operational threat to businesses and the broader economy. AlphaBeta’s Nature Disruption Index indicates that over half of global GDP today – nearly US$50 trillion – is at high or moderate risk of disruption from these crises. This is due to the dependencies of our production activities on nature’s services, that are themselves being damaged by production activities that have a net-negative impact on nature. For instance, when biodiverse mangroves are deforested for firewood, coastal development, or aquaculture, we lose the vital protection they provide our cities and settlements from floods and storms as well as release their rich carbon reserves into the atmosphere.

No sector is “spared” from disruption. While primary sectors such as agriculture, food and beverages, energy and utilities, and mining and metals are naturally at the highest risk of disruption, sectors such as retail, IT and communications, and infrastructure and urban development have at least 60 percent of their output threatened. No ecosystems are spared either. 44 percent of GDP generated in global cities – US$31 trillion – is similarly at risk of disruption, dispelling the notion that cities remain shielded from the worst effects. In fact, cities almost always overlap with biological hotspots because of the services nature provides there – including water, shelter, and protection from the elements. Moreover, regions like Asia Pacific are proving as the battleground for tackling biodiversity loss – 63% of GDP in the region or US$19.5 trillion is at risk of disruption.

It is clear that the resilience of nature is critical to socioeconomic progress. With scientists warning that important biomes from the Amazon to the Great Barrier reef are fast approaching the cusp of irreversible tipping points, business-as-usual is no longer an option.

A New Nature Economy

Three systems of critical socioeconomic importance to are responsible for 80 percent of biodiversity and nature loss. However, these are also the systems with the largest opportunities in pursuing nature-positive growth: (1) Food, land and ocean use system; (2) Infrastructure and built environment system; and (3) Energy and extractives system.

15 priority socioeconomic “transitions” within these systems, underpinned by nature-positive business models, can help reverse their impact on nature and unlock tremendous, resilient socioeconomic progress. These transitions range from productive and regenerative agriculture to nature-positive infrastructure and circular models of production. The prize for business in pursuing these transitions is significant: the 59 identified nature-positive business opportunities that derive from these transitions could unlock US$10.1 trillion of annual incremental business value in 2030. These could also create 395 million associated, resilient jobs by 2030.

From Opportunity to Reality

Achieving these transitions requires concerted action from business, supportive policy and regulation, and shifts in habits and social norms from citizens. However, given the speed of change required, financial constraints faced by governments and consumers in recovering from the COVID-19 pandemic, and fracturing international cooperation and coordination, businesses must leverage their resources to champion the nature-positive economy. They have the most to lose – and to gain – from inaction.

To spearhead these transitions, business leaders should identify the transitions most relevant to them, together with the mix of enablers needed to unlock success. Chief among these enablers is the significant capital investment required – estimated to be US$2.7 trillion annually to unlock the nature-positive business prize. However substantial, this is a fraction of the US$31.1 trillion fiscal stimulus measures announced by just the ADB’s 45 member countries to combat COVID-19. The challenge in crowding in finance for nature-based economic models has never been a lack of capital. More pressing challenges are pricing models that do not account for the externalities of harming nature, a perceived lack of returns on investment in nature-based solutions, and changing entrenched behaviours.

The good news is that businesses are supportive of a number of innovative solutions to tackle these barriers to investment. Through an exclusive survey of business and community leaders in Asia Pacific in 2021, we found strong support for new externality pricing models developed in partnership with government, harmonised biodiversity reporting standards, new financial products and mechanisms, and regulations enforcing compliance as critical solutions to develop as a matter of priority.

The urgency to raise our collective ambition towards a nature-positive economy has never been more evident. To equip our readers with the necessary facts, we will be publishing a series of op-eds delving into each of the topic areas covered in this article in greater detail. For more information and to work with us in this important area, please contact Shivin Kohli.