The Economics of Biodiversity: the Dasgupta Review

The Economics of Biodiversity: The Dasgupta Summary brief for Review(2021) business

On 2 February, the UK Government Nature is an indispensable system value of a country’s economic launched The Economics of on which we all depend, and which success, is a necessary step Biodiversity: The Dasgupta Review. must thrive for us to effectively towards returning the world to This independent review was respond to challenges, such as a path of sustainable prosperity commissioned by the UK Treasury those posed by emerging diseases instead of continuing to live beyond to shape the international response including COVID-19 and climate our planet’s means. to biodiversity loss and inform global change. The Dasgupta Review action from all stakeholders. makes clear that conservation and

restoration efforts are solutions WANT TO LEARN MORE? The Dasgupta Review sets out to these critical challenges and a new framework, grounded in provide many other benefits to the You can find the Headlines ecology and Earth Sciences, yet economy and society. Not only does Messages of the Dasgupta applying principles from finance the conservation and restoration Review here. The full report can and economics to understand the of nature reduce serious risks to be found here. sustainability of our interaction our economies, including business There is now ample evidence with nature and prioritize efforts and financial institutions, but it also that nature plays a key role to enhance nature and prosperity. contributes towards the mitigation in the COVID-19 pandemic’s of, and adaptation to, the effects of emergence and recovery. In This business summary highlights climate change. December 2020, WBCSD the main points from the Dasgupta released COVID-19: A Dashboard Review relevant to business and The Dasgupta Review describes to Rebuild with Nature, a white paper that proposes a dashboard puts it in the context of other the hidden costs of depleting based on the two core planetary landmark reports, as well as global natural capital as being a major boundaries of climate change events and frameworks related to constraint for long-term value and nature loss. The report the nature and climate agendas. creation. concludes that a nature-positive food system is the most effective The Dasgupta Review has the It calls for action to increase the way to build resilience against future shocks, including new potential to be a key input into the quantity and quality of our stock of pandemics. Convention on Biological Diversity nature and associated biodiversity (UNCBD) COP15 and its technical and demonstrates that acting now In December 2020, the Nature meetings ahead of the COP. In will be significantly less costly than Action project launched the addition, it could also input into delaying further. We must start report Accelerating business the UN Framework Convention on accounting fully for the impact of solutions for climate and nature, Climate Change (UNFCCC) COP26 our interactions with nature and which aims to clarify definitions where nature and particularly rebalancing our demand with to support the alignment of Nature-based Solutions (NbS) will nature’s capacity to supply. Natural Climate Solutions (NCS) with Nature-based Solutions to play a key role, as well as the UN accelerate investments at scale. Food Systems Summit (UN FSS) Part of the solution lies in changing In addition, the report helps action track on boosting nature- our measures of economic success. business to navigate the nature positive agriculture. Moving to inclusive wealth, which and climate agenda by mapping

measures all capital assets (i.e. the key initiatives, platforms and human capital, produced capital, conventions for collective action. and natural capital) as the aggregate

The Economics of Biodiversity: The Dasgupta Review (2021) Headlines you need to know from the report We need to change how we think, act Decline of biodiversity happens have proved unfit to manage the and measure success. The Dasgupta 30% less in areas that are managed externalities. As such, we need Review proposes three broad and by indigenous people. to recalibrate financial, business interconnected transitions: 1) balance and economic models to better • Nature-based solutions are humanity’s demand with nature’s supply, understand the true value of people estimated to have around 10 and increase supply relative to its and nature and integrate it into all times the job creation rate current level; 2) change our measures of levels of decision-making. of investments in fossil fuels economic success; and 3) transform our according to the ILO. Bringing • An inclusive measure of wealth is institutions and systems. nature and ecosystem services needed to rebalance the risks and 1. BALANCE HUMANITY’S DEMAND into spatial planning is essential rewards for business interactions AND NATURE’S SUPPLY AND to ensure that conservation and with nature. Introducing human INCREASE SUPPLY RELATIVE TO restoration are as effective as capital and natural capital into ITS CURRENT LEVEL. possible in an increasingly crowded national accounting systems world. would inform and improve • Nature is an asset, and we have decision-making at scale globally. failed to manage our natural • Commodity production is the Increased investment in physical capital in a manner that maintains leading driver of biodiversity loss accounts, standardisation of data resilience and productivity. and there is a growing share of and modelling approaches, and According to the Global Footprint global agricultural land that is technical support would facilitate Network, we need 1.6 Earths to used to grow crops other than these shifts. be able to continue current living food, such as biofuels and fiber for standards. textiles. 3. TRANSFORM OUR INSTITUTIONS AND SYSTEMS TO ENABLE AND • The quantity and quality of • Transparency in supply chains SUSTAIN CHANGE. our stocks of natural assets will be a key part of the solution. need to increase significantly. This will enable actors to identify • We must transform our financial Conservation of our natural where they can reduce their and educational systems to assets is easier and cheaper than environmental impacts, and to enable these changes and sustain restoration, as it avoids potential monitor actions taken to achieve them: tipping points and the problems sustainability commitments and º What is required is a set of of reversing regime shifts, and thereby improve accountability. global standards underpinned maintains option values through 2. CHANGE MEASURES OF by credible data that businesses conserving ecosystems and ECONOMIC SUCCESS TO GUIDE and financial institutions can species. US ON A MORE SUSTAINABLE use to fully integrate nature- • Any reductions in demand for PATH. related considerations into their extraction due to increased decision-making, and assess • The Dasgupta Review develops efficiencyhave been neutralized and disclose their use of nature. the economics of biodiversity on by the impact of increases in the the understanding that we- and º Establishing the natural world main drivers of resource extraction: our economies- are ‘embedded’ in education policy is essential human population growth and within nature, not external to it. As to empower citizens to make affluence. nature is only capable of producing informed choices and demand • Increased extraction of a finite flow of goods and services the change that is needed. provisioning services now comes (upon which we rely), the economic • Management and mitigation of at the expense of future provision model of growth is bounded. If nature-related financial risks of those same services, as well capital markets are to function more can lead to increased resilience as regulation and maintenance effectively, we must account fully for of balance sheets for financial services. It is worthy of note the impact of our interactions with institutions. The Dasgupta Review that much of said extraction of nature and rebalance our demand uses the analogy of biological provisioning services is subsidized. on its capacity to supply. diversity playing a similar role to • Conservation and restoration of • Nature’s worth to society (goods the diversity of an investment ecosystems can have a positive and services provided) is not portfolio in mitigating the risk of impact on job creation. The reflected in current market prices betting heavily on a narrow spread International Labour Organization because it is open to all, without any of options. Biodiversity-related risks (ILO) estimates that 1.2 billion jobs cost. But this is not simply a market arise from changes in either the rely on effective management failure: it is a broader institutional stock or condition (or combination and sustainability of ecosystems. failure, too. Many institutions of both) of natural capital from

The Economics of Biodiversity: The Dasgupta Review (2021) societal responses to changes in • Trade plays a major role in the are often home to the world’s most the state or quality of natural capital. nature agenda. Trade expansion biodiverse regions, yet tend to This includes climate change-related over recent decades has allowed have less stringent environmental risks or other environmental financial higher-income countries to off- standards. More than 50% of risks. By channeling credit and shore the adverse impacts of their the biodiversity loss associated investments toward projects that consumption on ecosystems and with consumption in developed enhance, rather than degrade, natural biodiversity through increased trade economies is estimated to occur capital and ecosystem services, in commodities, goods and services outside their territorial boundaries. financial institutions are exposed to with lower-income countries, which investments with relatively lower risk and greater certainty around yields.

Figure 1: Summary of Options for Change

The Economics of Biodiversity: The Dasgupta Review (2021) What can business do? The Dasgupta Review, as with other to vary by ecosystem and over time), The Review highlights analysis from milestone reports, calls for urgent taxes imposed equally on imports and the Waldron Report that we can feed action from the business community domestically produced products. In the population as well as conserve to halt nature loss. It emphasizes the addition, more frictionless trade could more nature (30%) without major necessity of changing how we think, reduce costs and waste, especially financial losses and gain considerable act, and measure success. Businesses in the case of the global food trade. social benefits and small net gains have an important role to play in Fundamentally, the ability to monitor financially. In the Dasgupta Review’s limiting the impact of their activities and regulate supply chains in a more framework, conservation investment. is on the biosphere. That means transparent manner is highlighted, Furthermore, conservation relies accounting for these impacts and their as well as increased development on finance, and also regulation and dependence on nature by obtaining assistance. The latter would improve institutional support, to be effective. reliable and verifiable information all outcomes of trade for biodiversity by Community involvement is particularly along their supply chains, as well as helping countries overcome barriers important, as well. Moreover, agricultural holding actors to account. Private to enter sustainable markets via systems have the potential to be net financial actors need to reduce harmful certification schemes, or strengthen providers of ecosystem services, financial flows that degrade natural capacity building on how to ensure that including regulating and maintenance assets and encourage unsustainable developing countries can protect their services beyond food production activities; and scale-up positive flows natural assets, among others. (i.e. agroforestry), as well as acting as into conservation, restoration and carbon sinks. An action area could be sustainable economic activities. This The role of food production establishing agri-environment schemes requires a greater understanding and that incentivize farmers to adopt Food production is referenced as management of their dependencies, practices that foster biodiversity and one of the most significant drivers of impacts, and nature-related financial increase ecosystem services. Climate nature loss. Coupled with technological risks and uncertainty. change is highlighted as a key driver innovation, producing sufficient food of nature loss, and therefore business in a sustainable manner will be key The role of trade solutions should produce beneficial to decreasing land-use change, and outcomes for both climate and nature. Increased economic activity resulting both halting and reversing nature loss. Investing in nature-based solutions from trade expansion increases human While the Dasgupta Review points out will become imperative to advancing demands on the biosphere and thus that technology alone will not balance both the climate agenda and the nature depletes natural capital. While trade humanity’s demand with nature’s agenda. liberalization can facilitate the adoption supply, it also highlights that it can play of technologies and more efficient an important role in producing food WBCSD members interested in this production practices, which may more efficiently, reducing damage to area can join the new Nature Action reduce demands on the biosphere, ecosystems and the environment. project, which aims to help clarify for it may also encourage specialization These range from genetically modified business the role of nature-based by certain countries in extractive or crops (including gene-editing), vertical solutions in delivering nature and pollution-intensive sectors, and thus farming, precision agriculture, meat biodiversity benefits, as well as climate off-shore damage to natural capital analogues, among others. For instance, (together with the Natural Climate by others. This is particularly apparent life cycle assessments have estimated Solutions project), health and other when there is marked variation between the potential of a plant-based burger societal value, and how these can environmental policies between at around 90% less greenhouse gas contribute towards an apex goal for countries. emissions, 46% less energy, 99% less nature and science-based targets while water and 93% less impact on land use. also supporting development of the The Dasgupta Review considers Task Force on Nature-related Financial several trade practices and policies Disclosures (TNFD). In December 2020, that would mitigate these impacts, such the two projects launched their first as less trade in certain goods, border joint report on Accelerating Business adjustment taxes (which would need Solutions for Climate and Nature, focused on mapping nature-based solutions and natural climate solutions.

The Economics of Biodiversity: The Dasgupta Review (2021) Creating the enabling environment for change 2021 is set to be the super-year September and includes an action track There have been signs that for the sustainability agenda, of dedicated to boosting nature-positive policymakers and financial regulators which nature is a key component, agri-food production. will increasingly demand that financial with the Convention on Biological institutions systematically assess As long as risks emerging from the Diversity’s (CBD) fifteenth meeting of both Nature-related financial risks unsustainable use of the biosphere the Conference of Parties (COP15) and their own impacts on nature. and opportunities to correct the scheduled to happen this year. During Central banks and financial regulators overshoot are not reflected in market the CBD COP15 countries are likely are starting to assess and manage prices, there will be very few incentives to adopt a new Global Framework for nature-related risks, although to date for these risks to be incorporated in Biodiversity, which includes an update they have been largely focused on financial decisions. This will result in of the Aichi targets (none of which were climate change. The Taskforce on the continuation of financial flows to achieved). This new agreement will set Nature-related Financial Disclosures industries that are not sustainable, how the world will measure and tackle (TNFD), for instance, will provide a as they would remain profitable over nature loss for the coming decade. In framework for corporates and financial the short-term. The Dasgupta Review addition, we will also have the UNFCCC institutions to assess, manage and states that corrections to market prices COP26 this year, which has been report on their dependencies and are urgently needed (such as taxes and named the “Green COP” and will focus impacts on nature, aiding in the subsidy reform) as well as a set of global on how to deliver a “green recovery” identification of nature-related risk and standards underpinned by credible data based on the COVID-19 stimulus the redirection of global financial flows which can help companies and financial packages. On top of that, the first ever towards nature-positive outcomes. institutions to fully integrate nature- UN Food Systems Summit will be held in related considerations in their decision- making.

Working together to deliver solutions

WBCSD is working with members on We also participate in multi- Alliance, and multi-stakeholder solution areas to create and mobilize stakeholder initiatives and business initiatives like the Food and Land a collective voice of business and coalitions like Business for Nature, Use Coalition (FOLU) and the Food create solutions to deliver against One Planet Business for Biodiversity System Dialogues. these challenges through, the Climate (OP2B), the Natural Climate Solutions & Energy Program and the Food & Nature Program which includes the Nature Action project, the True Additional resources Value of Food, the Scaling Positive In April 2020, the UK Government launched their Interim Report on the Agriculture (SPA), FReSH, Natural Economics of Biodiversity. This Interim Report provided the foundations for the Climate Solutions (in partnership final Dasgupta Review. Find WBCSD’s business summary of the report here . with the Climate & Energy Program), the sector projects Forest Solutions WBCSD has published business summaries of other important reports over the Group and Global Agribusiness last year. Please see the UN’s IPCC special report on Land, with the business Alliance, and the We Value Nature summary here; the EAT-Lancet Commission on Food, Planet, Health with training in partnership with the the business summary here; The WEF New Nature Economy Series with the Redefining Value Program. business summary here; and the IPBES Global Assessment report with the business summary here.

About the World Business Council for Sustainable Development (WBCSD) WBCSD is a global, CEO-led organization of over 200 leading businesses working together to accelerate the transition to a sustainable world. We help make our member companies more successful and sustainable by focusing on the maximum positive impact for shareholders, the environment and societies. Our member companies come from all business sectors and all major economies, representing a combined revenue of more than USD $8.5 trillion and 19 million employees. Our global network of almost 70 national business councils gives our members unparalleled reach across the globe. Since 1995, WBCSD has been uniquely positioned to work with member companies along and across value chains to deliver impactful business solutions to the most challenging sustainability issues. Together, we are the leading voice of business for sustainability: united by our vision of a world where more than 9 billion people are all living well and within the boundaries of our planet, by 2050.

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The Economics of Biodiversity: The Dasgupta Review (2021)