Topic outline

• Collapse allExpand all
  Why does it matter?

  Why does it matter?

  • This goal aims to conserve and restore the use of terrestrial ecosystems such as forests, wetlands, drylands and mountains. Promoting the sustainable management of forests and halting deforestations is also vital to mitigating the impact of climate change. Urgent action must be taken to reduce the loss of natural habitats and biodiversity which are part of our common heritage. 

    This is summarised very well by the joint SDG Fund – Human life depends on the earth as much as the ocean for our sustenance and livelihood. Plant life provides 80 percent of our human diet, and we rely on agriculture as an important economic resource and means of development. Forests account for 30 percent of the Earth’s surface, providing vital habitats for millions of species and important sources for clean air and water; as well as being crucial for combating climate change.

    Today we are seeing unprecedented land degradation, and the loss of arable land at 30 to 35 times the historical rate. Drought and desertification are also on the rise each year, amounting for the loss of 12 million hectares of land, disproportionately affecting poor communities across the globe. Of the 8,300 animal breeds known, 8 percent are extinct, and 22 percent are at risk of extinction. The SDG Report 2021 states that human activities are causing biodiversity to decline faster than at any other time in human history and that the world has fallen short of 2020 biodiversity loss targets, with the main drivers of species loss being agricultural and urban development; unsustainable harvesting through hunting, fishing, trapping and logging; and invasive alien species. The UN provides more information on Goal 15 here and on its underlying targets and indicators on the SDGs website.

• Supporting initiatives

  Supporting initiatives

  • Biodiversity refers to the variety and variability of life on Earth. Initiatives focusing on biodiversity will often align with both SDG 15 Life on Land and SDG 14 Life Below Water. 

    The Convention on Biological Diversity (CBD) has been ratified by nearly 200 countries since 1992 and is an international legally binding treaty to provide a global framework for action on biodiversity. A Conference of Parties (COP) (similar to the better-known climate COPs) convenes every 2 years. The 15th COP in Kunming, China and Montreal, Canada, took place over 2021-2022 with the Global Biodiversity Framework (GBF) being agreed in December 2023. It has produced a high-level guide for the financial sector. Separately, at the 26th climate COP, held in Glasgow in 2021, leaders of nations home to over 90% of the world’s forests agreed to halt and reverse deforestation and land degradation by 2030. 

    The Dasgupta Review was commissioned by the UK government to examine the global economic benefit of biodiversity, the risks of biodiversity loss and the actions we should be taking. It summarised that biodiversity enables nature to be productive, resilient and adaptable. Our economies, livelihoods and well-being depend on nature but our current demands on it far outweigh its capacity to continue to supply us with the goods and services we rely on.

• Importance for actuarial practice

  Importance for actuarial practice

  • The UN’s Principles for Responsible Investment highlights that biodiversity loss creates risks for society and business that can result in significant negative economic and social outcomes. But that, conversely, by taking action against biodiversity loss provides opportunities. 

    The Taskforce on Nature-related Financial Disclosures (TNFD) has developed a disclosure framework to allow organisations to understand how nature loss may impact financial performance as well as to understand how an organisation impacts nature.. Present and future opportunities are covered as well as risks. The need to address the systemic risk of biodiversity loss is on a par with climate action and, from a financial perspective, is summarised by the assessment that roughly half of the world’s economic output – US$44tn of economic value generation – is moderately or highly dependent on nature. TNFD is expected to be released at the end of 2023 and its ultimate aim is to support a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.

    In the fight to limit climate change we have a defined target of net zero emissions but there is no single straightforward metric to use in the fight to reverse biodiversity loss. However, the Natural History Museum has attempted to come up with an indicator to help with assessments of the change in ecological communities in response to human pressures. The Biodiversity Intactness Index (BII) attempts to measure the percentage of the original ecological community that remains across an area – this can be measured at multiple levels: global, national, and corporate footprint. A score of 90% or more means an area has enough biodiversity to be a resilient and functioning ecosystem. The world’s BII score was below 80% in 1970 and has been steadily decreasing since. 

    Another indicator of extinction risk is the International Union for Conservation of Nature’s (IUCN) Red List Index of Threatened Species, which shows that over 26% of the c.134,000 assessed plant and animal species are threatened with extinction. 

    The Finance for Biodiversity Pledge is a commitment of financial institutions to call on global leaders and to protect and restore biodiversity through their finance activities and investments. The website provides an overview of the different initiatives financial institutions can sign up to, to support biodiversity. They have also released a guide on biodiversity measurement approaches. 

    While actuaries are used to valuing uncertain cashflows, there are valid arguments why the diverse and complex systems of nature cannot and should not be commoditised and priced, which are well set out in the Friends of the Earth Europe position paper “Nature is not for sale”. The Federated Hermes podcast asks questions about the valuation of nature (episode 3 covers deforestation and episode 4 looks at the interactions between agriculture, soil, livestock farming and biodiversity). 

    The IFoA has its own Biodiversity Working Group and learning resources, which works on concepts such as natural capital and valuation of ecosystem services. A summary of its initial output on biodiversity loss and this blog set out the huge scale of the issue and underlined that actuaries are well placed to consider financial impacts of biodiversity loss due to their uncertain nature. The Sustainability Board’s podcast episode on biodiversity covers how insurers are taking account of biodiversity and ecosystem services in risk assessment tools, as well as on the investment side through nature-based investment solutions. It provides the example that expected flood losses from hurricane season in the US could be reduced by $5.3bn p.a. if ecosystems along the coast of Louisiana are restored, and that this could then be reflected in insurance premiums. 

    The IFoA’s Biodiversity and Nature-Related Risks Policy Statement was launched in July 2023 with a webinar. New resources include an introductory guide, ‘Biodiversity and nature related risks for actuaries: an introduction’, and a summary of IFoA research and policy around biodiversity and nature risks in an IFoA Policy Briefing.