Alex Martin and Ryan Allison discuss the upcoming UN Biodiversity Conference – and why biodiversity is an aspect of the sustainability crisis that actuaries must not ignore
In November 2021, the UN Climate Change Conference (COP26) took the world by storm. For two weeks, world leaders sat and debated how we might fix the climate crisis. Business leaders flew to Scotland to be part of the debate, and campaigners marched through Glasgow trying to make their voices heard.
The UN Biodiversity Conference (COP15), on the other hand, attracted far less attention.
The importance of biodiversity
Biodiversity is a topic with a wide scope, covering the variety and abundance of all living things, from plants and animals to fungi and plankton. It is vital to humanity in a vast number of ways: it supports food provision, generates raw materials for manufacturing, sequesters carbon via the carbon cycle, and purifies air and water – not to mention the cultural value we place on forests, rivers, lakes and streams. And that is just scratching the surface.
One of the most obvious ways in which biodiversity helps us is in crop pollination, but its value in food production is far wider reaching than this. A plethora of bacteria and fungi are crucial to the breakdown of organic matter in the soil, which produces the nutrients that crops require to grow. A complex web of predator–prey systems ensures that no single pest can take hold in the fields, and farmers can mitigate the impact of crop diseases by having a wide variety of crop species.
In 2015 the UN set out 17 Sustainable Development Goals (SDGs), designed to be a “blueprint to achieve a better and more sustainable future for all” (Figure 1). These are intended to be achieved by 2030, and biodiversity will be key to achieving this aim.
The UN SDGs include two goals for biodiversity: 14 – Life Below Water and 15 – Life On Land. The Zero Hunger (2), Clean Water and Sanitation (6), Sustainable Cities and Communities (11), Responsible Consumption and Production (12) and Climate Action (13) goals also depend on biodiversity in some way.
However, biodiversity is declining. Every 10 years the WWF produces the Living Planet Report, its attempt to measure the population sizes of all mammals, birds, fish, amphibians and reptiles. Between 1970, when it first undertook the exercise, and the most recent report in 2020, this aggregate world population fell by 68%.
If this trend continues, we could see large-scale consequences across a wide range of industries. The World Economic Forum’s 2022 Global Risks Report placed biodiversity loss third-highest on its list of the most severe risks on a global scale during the next 10 years. In pensions, we could see big changes in investment values, as the costs of biodiversity loss will be increasingly internalised in asset values. In general insurance, we might see more claims on farms that fail following years of pesticide misuse, which destroys soil microecology. In health insurance, we might find that a reduction in access to green space has a long-term impact on mental health claims.
COP15 has a mandate to halt and reverse biodiversity loss through the UN Convention on Biological Diversity. The original plan was that it should occur in Kunming, China in early 2021, but it was postponed due to COVID-19 restrictions. In October 2021, a virtual week of meetings was held in which the Kunming Declaration was adopted. This is a high-level set of commitments that will guide the output of the in-person meetings. These will take place in Montreal, Canada, starting on 7 December.
The conference will involve representatives from the original 195 countries that signed the first convention at the 1992 Rio Earth
Summit, including the UK, China, Europe and Japan. While the US signed the treaty, it has not ratified it, so will not have voting rights at the conference.
The focus of the COP15 in-person meetings is the setting of the post-2020 global biodiversity framework. One of the main parts of this framework is expected to be the 30x30 goal, which seeks to protect 30% of the land and seas by 2030. Other areas of focus might include agricultural subsidies or global environmental law.
A previous attempt at goal setting, the Aichi Targets, occurred in 2010, and each of the 20 targets agreed upon have been missed.
The main criticism of the Aichi Targets was that there was a lack of accountability and governance, and so we can expect this to be a hotly debated topic at COP15.
To go with the 2020+ Biodiversity Goals there will likely be a vision for 2050 and 2100. This might include details on how finance companies are expected to report on biodiversity loss, based on work by institutions such as the Taskforce on Nature-related Financial Disclosures.
It could also include specific long-term targets for key biodiversity indices, such as the Biodiversity and Ecosystems Services Index or the WWF’s Living Planet Report.
If COP26 is anything to go by, there will be just as much focus on the peripheral events. This might mean that we see collaborations like the Glasgow Financial Alliance for Net
Zero spring into existence, or perhaps companies will take the opportunity to release biodiversity strategies and targets.
Biodiversity: a call to arms
Three easy questions you can ask to see if your company is switched on to biodiversity loss:
- Does my company have a biodiversity strategy?
- Does my company have any plans to measure biodiversity loss exposure and its impact on biodiversity loss?
- Is my company reporting on biodiversity loss or does it have any plans to do so in the next three years?
If the answer to any of these is ‘no’, perhaps ask yourself if you can be the person to change that.
Time to act
While there may be uncertainty around COP15, biodiversity loss is going to become increasingly significant in our industry. The actuarial skillset will be vital in helping us to navigate the formation of new reporting standards or the introduction of complex metrics.
As risk professionals, it is our responsibility to identify, monitor, manage and mitigate risk. We’ve spent the previous 10 years developing a skillset that can deal with climate risk, and we need to show our adaptability in applying this to biodiversity loss.
Alex Martin is a volunteer for the IFoA Biodiversity and Natural Capital Working Party
Ryan Allison is a volunteer for the IFoA Biodiversity and Natural Capital Working Party
Image credit | iStock