In this month’s instalment of our visual series on topical themes, we explore the world of biodiversity.

Read this article to understand:

  • The main drivers of biodiversity loss and which species are at risk
  • The importance of forests and soil
  • The impact of biodiversity loss on food security
  • Why nature can be part of the solution

Our relationship with nature and other species is out of balance, which is causing barely conceivable damage to the planet. Biodiversity, which refers to the variety of species on Earth, is a key indicator of the health of the planet and its many ecosystems.

For in-depth analysis on biodiversity loss, please read our feature article, Life Force: Why nature matters. Here, we explore the subject using a visual approach. 

The problem

If nothing changes, the world will experience 17 per cent loss of species by 2100. For over two centuries, there has been a direct correlation between species loss and the amount of land converted for human use: the more land we use, the more species are lost.

While this is alarming, there is an alternative scenario: according to Spanish utility Iberdrola, following a green model would reduce species loss even with a sizeable increase in the human population (Figure 1).

Figure 1: Loss of biodiversity over time
Source: Iberdrola, 20221

However, if recent experience is anything to go by, a radical shift in mindsets and human activity is required to achieve the green model scenario.

As Figure 2 highlights, over the period 1992 to 2014, while globally produced capital per head doubled and human capital increased by around 13 per cent, the value of natural capital – the world’s stock of natural assets, including all living things, but also air, water, geology and soil – declined by nearly 40 per cent.

Figure 2: Global wealth per capita, 1992-2014 (per cent)
Global wealth per capita, 1992-2014
Source: HM Treasury, February 20212

As to why investors should care, beyond the clear ethical imperative to act, there is also the potentially massive financial cost to consider. According to research by the World Economic Forum and PwC, over half of global GDP – equivalent to $44 trillion – is highly or moderately dependent on nature.

The three sectors with the biggest dependence on nature – construction, agriculture and food and beverages – generate around $8 trillion of gross value added (GVA), the value of goods and services produced by an industry minus the cost of inputs and raw materials attributed to that output.

Figures 3 and 4 show the dependency of various sectors on nature, whether directly or through their supply chains. For the most dependent sectors, it stands to reason that natural capital loss would hurt their long-term financial prospects too.

Figure 3: Percentage of direct GVA by industry
Percentage of direct GVA by industry
Source: World Economic Forum, 20203
Figure 4: Percentage of supply chain GVA by industry
Percentage of supply chain GVA by industry
Source: World Economic Forum, 20204

Causes of destruction

To address the erosion of natural capital, we need to understand the causes. Research by the Millennium Ecosystem Assessment Board shows habitat change, climate change, invasive species, overexploitation and pollution are the main direct ones, but they have different impacts in different areas. For example, habitat change is a strong driver in tropical regions, but doesn’t affect deserts or polar areas as much (Figure 5).

Figure 5: Five main direct drivers
Five main direct drivers
Note: The cell colour indicates the impact to date of each driver on biodiversity in each biome over the past 50–100 years. The arrows indicate the trend in the impact of the driver on biodiversity. Horizontal arrows indicate a continuation of the current level of impact; diagonal and vertical arrows indicate progressively increasing trends in impact.
Source: Millennium Ecosystem Assessment, 2005
5

Figure 6 shows the species most under threat, including cycads, amphibians and dicots. Also known as living fossils, cycads are one of the oldest plant groups on Earth and existed in the time of the dinosaurs, once covering the whole planet. Nowadays, they are struggling for survival mainly due to the illegal plant trade.6

Figure 6: Extinction rates (per cent)
Extinction rates
Source: International Union for Conservation of Nature’s Red List of Threatened Species, 20227

The wildlife trade has expanded significantly in the last few decades. Although the data is not fully available for domestic trade (or illegal activity), the international legal wildlife trade has increased 500 per cent in value since 2005 – and 2,000 per cent since 1980. 

Figure 7: The value of the wildlife trade (US$)
Source: UN Comtrade Database. Data as of June 10, 20228

Not all trees are born equal

Trees are extremely important for biodiversity, supporting many different species of fungi, lichens, mosses and plants, as well as birds, invertebrates and other animals. Unsurprisingly, given what is happening to the Amazon rainforest on a daily basis, Figure 8 shows Latin America is the region with the highest level of deforestation.

Figure 8: Drivers of deforestation and forest degradation, 2000-2010
Drivers of deforestation and forest degradation
Source: Environmental Research Letters, 20129

As well as being an essential habitat for many living species, forests provide a natural carbon sink – through living biomass (such as roots and leaves) to soil. But what many tend to forget is that soil contains nearly twice as much carbon as the atmosphere, plants, and animal life combined, as Figure 9 reveals. However, soil type, vegetation, and climate all affect how carbon is stored (for instance, colder and wetter climates promote the most effective carbon storage in soil).

Figure 9: Comparing carbon stores (in GT)
Source: Journal of Environmental Management, 202110

The loss of forests and trees also impacts food security in poorer countries, with Africa the worst-affected region (Figure 10).

Figure 10: Number of tree species providing food of importance to smallholder livelihoods
Number of tree species providing food of importance to smallholder livelihoods
Source: FAO and UNEP, 202011

A different world is possible

In our article Waste not, want not: An investor's guide to the circular economy, we highlighted the benefits of a more efficient and holistic approach to the use of scarce natural resources. The fashion industry is a large polluter, with huge social and environmental consequences. It uses vast amounts of water and pesticides to grow cotton, petroleum to make polyester and produces enormous quantities of waste as more and more clothes are dumped.

However, younger generations appear more committed to sustainability – online marketplaces such as Vinted, Poshmark and Depop specialise in second-hand clothes and target a growing market of millennials and members of Generation Z. The market is projected to double in the next five years, reaching $77 billion – as Figure 11 shows – and become twice the size of fast fashion (at about $84 billion) by 2025.

Figure 11: The growth of the second-hand market (US$bn)
Source: thredUP, 202112

Food production is another significant cause of biodiversity loss. The conversion of land for agriculture, as well as the intensification of that sector, impacts the quality and quantity of available habitats. The biggest driver of habitat loss on land has been the conversion of natural ecosystems to crop production or pasture, as Figure 12 shows.

Figure 12: Global land use (in per cent and m km2)
Source: Our World in Data, 201913

Incorporating more sustainable diets would have a positive knock-on effect on biodiversity and ecosystems. Shifting from animal-based agriculture to more plant-based foods would free an incredible amount of land. See more on sustainable diets in Change diets, not the planet.

Solutions to save nature can be found in nature itself

Lastly, solutions to save nature can be found in nature itself. A single millilitre of sea water – the size of a sugar cube – might contain one million bacteria and ten million viruses (Figure 13).

Figure 13: Nature’s complexity
Nature’s complexity
Source: Aviva Investors, May 2022. Data from ‘Wild solutions: How biodiversity is money in the bank’, 200114

According to Indiana University, the planet is home to a trillion species of microbes invisible to the naked eye and we have only discovered 0.001 per cent of them.15 This means there are plenty of untapped potential sustainable solutions available.

The planet is home to a trillion species of microbes invisible to the naked eye

For example, Japanese company Spiber created a material called ‘brewed protein fibre’16 made from proteins (created through a microbial fermentation process that does not depend on petroleum), which are then spun into a fibre with the strength and elasticity of silk and the softness of cashmere wool.

The material is not only made from plant sources but is also biodegradable in soil and water, creating products for a circular fashion industry with a lower footprint than conventional textiles.

References

  1. ‘The loss of biodiversity over the last few centuries’, Iberdrola, 2022
  2. Partha Dasgupta, ‘The economics of biodiversity: The Dasgupta Review’, HM Treasury, February 2021
  3. ‘Nature risk rising: Why the crisis engulfing nature matters for business and the economy’, World Economic Forum, 2020
  4. ‘Nature risk rising: Why the crisis engulfing nature matters for business and the economy’, World Economic Forum, 2020
  5. ‘Ecosystems and human wellbeing: Biodiversity synthesis’, Millennium Ecosystem Assessment, 2005
  6. Katie Avis-Riordan, ‘Criminal underworld of the cycad trade’, Royal Botanic Gardens Kew, August 5, 2020
  7. ‘More than 40,000 species are threatened with extinction’, International Union for Conservation of Nature’s Red List of Threatened Species, 2022
  8. UN Comtrade Database. Data as of June 6, 2022
  9. Noriko Hosonuma, et al., ‘An assessment of deforestation and forest degradation drivers in developing countries’, Environmental Research Letters, 2012
  10. Pat Tuohy, et al., ‘Field scale estimates of soil carbon stocks on ten heavy textured farms across Ireland’, Journal of Environmental Management, January 6, 2021
  11. ‘The state of the world’s forests 2020. Forests, biodiversity and people’, FAO and UNEP, 2020
  12. ‘2021 resale report’, thredUP, 2021
  13. Hannah Ritchie, ‘Half of the world’s habitable land is used for agriculture’, Our World in Data, November 11, 2019
  14. Andrew Beattie and Paul Ehrlich, ‘Wild solutions: How biodiversity is money in the bank’, April 10, 2001
  15. ‘Earth may be home to one trillion species’, Indiana University, May 2, 2016
  16. ‘Brewed protein’, Spiber, 2022

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