Much of the investment industry’s rhetoric is about capital – whether that’s financial, produced, human or social. But we have long neglected the other crucial resource: natural capital.

In the past, participants in the global economy have taken nature for granted, viewing it as a perpetual resource. But evidence emphatically shows nature is degrading fast as a result of human activity.

While investors, companies and policymakers have in recent years focussed on climate change and its devastating effects on the world, they are also growing more aware of our impact and dependence on nature and the existential risk that biodiversity loss poses to us.

The financial materiality of biodiversity loss across sectors is clear. Compromised ecosystems threaten systemic risks to industry and the economy, whether that’s through downward valuation adjustments to vulnerable or stranded assets, the failure of previously reliable ecosystem services that are essential to certain industries, or impaired operations due to physical risks.

To be clear, climate change and biodiversity are interconnected. Biodiversity is affected by climate change, while biodiversity, and the ecosystem services it provides, is integral to climate-change mitigation and adaptation. However, biodiversity loss, while also a major threat to humanity, is far broader in its causes and more complex in measuring how economic players contribute to its deterioration.

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