Nature and biodiversity loss is a risk to economies and societies across the world, but nature capital is often under-valued, and companies are at different stages in their journeys to assess and address these risks.
Wildlife populations have declined by an average 69% in the past 50 years, while some 75% of the world’s surface has now been significantly altered by human actions. One-third of all the world’s natural forests have been converted for human use, and one million of the estimated eight million species of animals and plants on earth are currently at threat of extinction1.
There is a clear imperative for societies around the world to act to address this problem as about 50% of the world’s GDP is moderately or highly dependent on nature2. For example, if natural pollinators had to be replaced by artificial methods, an EU-funded study estimates a €153 billion price tag in labour and technology costs3.
Valuing Nature
Almost all industries rely on nature to some degree, but there remains a gap in evaluating not just the risks associated with nature and biodiversity loss but also how economies and communities rely on nature.
AXA XL’s Roots of Resilience sustainability strategy emphasizes the value of nature and the importance of raising client awareness on the role it plays in building a more resilient future.
This is why “Valuing Nature” is one of the three pillars of AXA XL’s Roots of Resilience sustainability strategy. And we recognise the importance of helping our clients, across industry sectors, to appreciate the significance of often underappreciated nature-related risks to their operations and ultimately to assess and mitigate these risks.
We recently partnered with sustainability consultants Nature Positive Ltd. to produce Nature Risk Insights, a report aimed at enabling businesses – and particularly risk managers – to begin to identify their nature-related risks.
This process can be challenging and complex, and we hope that Nature Risk Insights will highlight practical steps companies can take in integrating nature-related risks into their risk management strategies.
Integrating nature into risk management strategy
The report examines several industry segments and their impacts (drivers of biodiversity loss) and dependencies (ecosystem services that organizations rely on) on nature. It also showcases actions that are already underway to mitigate impacts on nature and promote the protection and restoration of natural habitats and which are applicable to companies across a wide range of industries.
For companies getting started on the journey to assessing nature-related risk, a key initial action is to determine what nature topics are most material. Other key initial actions include raising internal awareness of the topic, conducting an initial screening of your organization’s value chain, reviewing existing datasets to determine any gaps in controls, engage with priority stakeholders, and outline a business case for where further action might be warranted.
Opportunities for growth
There are numerous opportunities for those companies that seek to address some of their nature-related risks, particularly with respect to resource efficiency and potentially gaining access to new markets.
Across all sectors, a focus on using resources efficiently can result in reduced costs, while also reducing environmental impacts. In the aquaculture sector, better monitoring and data analysis can reduce operating costs, while in the construction materials sector, new processes like dry process kilns can reduce water management and treatment costs. In the mining and metals sector, innovations in the reuse and repurposing of waste products, for example processing tailings residues - the material left over when the valuable element has been extracted – into commercially viable products.
In addition, when companies develop new products and strategies that consider nature, they can build reputational capital and gain access to new customers. In the construction materials sector, some sustainable certifications are prioritized by popular green building certifications. In the renewable energy and textiles sectors, showcasing nature positive projects or products can create positive sentiment from local communities.
Intersection of insurance and nature
There is a clear interdependency between businesses and nature, and the insurance industry itself has an important role to play in helping to build a more nature-positive economy.
The UN’s Environment Programme Finance Initiative (UNEP FI), a network of banks, insurers and investors, recent report Nature-Positive 色多多视频: Evolving Thinking and Practices suggests that insurers can take steps towards this goal by setting underwriting criteria and guidelines that specifically address nature, by collaborating with key stakeholders, disclosing nature-related risks, and by offering sustainable claims options, among other things.
We hope that Nature Risk Insights will help clients to assess their own nature-related risks and opportunities, enable them to build nature into their risk management strategies and to communicate with us about those strategies and how insurance can support and enable them.
1. IPBES, The Global Assessment Report on Biodiversity and Ecosystem Services of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), 2019).
2. World Economic Forum, Half of World’s GDP Moderately or Highly Dependent on Nature, Says New Report. (2020). https://www. weforum.org/press/2020/01/half-of-world-s-gdp-moderately-or-highly-dependent-on-nature-says-new-report/.
3. European Commission, Insect Pollination Worth EUR 153 billion a year. (2008). https://cordis.europa.eu/article/id/29867-insect-pollination-worth-eur-153-billion-a-year.
