7 May 2024

We should be more worried about nature-related risks

A new report estimates UK GDP could drop by 12 per cent owing to declining biodiversity.

This article was originally published as an edition of the Green Transition, New Statesman Spotlight’s weekly newsletter on the economics of net zero. To see more editions and subscribe, click here.

Picture the scene. You switch on the news in early 2020 and top of the evening bulletin is the story of a suspicious new virus, with the UK seeing its first reported cases. Soon after, you’re forced to get used to a new way of living as the country is plunged into lockdown. The Covid-19 pandemic has begun.

The pandemic and its aftermath have highlighted issues around NHS capacity, changes in the labour market, and widening inequality in educational outcomes. They have rightly been widely covered. Yet, in comparison, the pandemic’s intersection with the natural world has had little-to-no airtime. The emergence of Covid-19, and other similar zoonotic diseases (pathogens which jump from animals to humans) such as swine flu, bird flu, or Sars, can be directly traced back to our relationship with nature. Maintaining diverse ecosystems and healthy biodiversity is an important way of preventing this kind of crisis.

What does this have to do with the green transition and the green economy? Well, here’s where things get technical. According to a landmark new report from the Green Finance Institute (GFI), with support from experts at the University of Oxford and the University of Reading, damage to the UK’s natural environment is slowing down economic growth. Their analysis suggests that under the current circumstances, with nature degradation continuing at its current rate, the UK risks GDP being 6 per cent lower by the 2030s than it would have been otherwise.

More strikingly, the GFI’s research revealed that a further breakdown in the UK’s natural environment could see 12 per cent wiped from the UK’s GDP. That’s the equivalent of between £150bn-£300bn and would cause more damage than that caused by the 2008 financial crisis (which took 6 per cent off UK GDP), and the Covid-19 pandemic (which took 11 per cent from the UK’s GDP). The 12 per cent figure presented in the report emerged from modelling completed by the report’s authors and directly relates to damage accrued from an anti-microbial-resistant pandemic scenario.

The UK ranks among one of the most nature-depleted countries in the world. Three quarters of UK land is currently experiencing serious ecosystem degradation and nearly one in six species are currently at risk of extinction. Nature degradation in the UK, therefore, is likely to have devastating effects. According to the GFI’s analysis, gradual year-to-year damage to the environment is as detrimental, or more so, than the damage caused by climate change. Even more worryingly, nature-related impacts will certainly not be felt alone but will be compounded by the damage caused by rising temperatures.

The report identifies the manufacturing, agriculture and utilities sectors as most susceptible due to their interconnectedness with natural assets and environments. The utilities sector, for example, is particularly reliant on surface water to cool power stations, but could suffer serious disruptions due to any scarcity. The report identifies that nearly £300bn is at risk due to water shortages alone. That’s just shy of two years of NHS spending, i.e. a lot.

Indeed, not all nature-related threats to the UK economy come from domestic degradation. As with Covid-19, there is an international element to the risk posed by ecosystem breakdown. The experts at the GFI found that half of the UK’s nature-related risk originates from overseas. According to the report, several trillion pounds’ worth of UK financial assets are dependent on nature, and are therefore highly exposed to climate breakdown. “It is estimated that the £3.8 trillion in assets from UK banks and insurers are dependent on a wider set of assets through supply chains (domestic and international), which may represent approximately £5.8 trillion of assets”, says the report, “of which £3.2 trillion, or 56 per cent of the total upstream exposure are highly or very highly dependent on nature [emphasis added by the GT]”. These are most acutely felt through – again – water provision, and risks caused by flooding, storms, or droughts.

It all makes for bleak reading. So, what can we do about it?

The report itself does not include recommendations (it only models what might happen if current trends continue). But it was written with backing from the Department for Environment, Food and Rural Affairs (Defra) and the Treasury, who will hopefully take its findings on board. Responding to the report, Richard Benyon, the environment minister pointed out that “nature underpins the health of our economy, and it is under threat from a global nature crisis.” He said he hoped the research would help the corporate and finance sector to “understand that it is in their own interests to go further and faster for the planet to protect it for future generations”.

But, with an election on the horizon – and Labour set to win handsomely, according to the polls – it could be another government that finds itself responsible for cleaning up the mess. Steve Reed, the shadow environment secretary, told the GT that the report shows “our economic security depends on nature”. The party has outlined plans to put failing water companies into special measures to tackle water pollution, clean up air quality by building better public transport, and establish a flood resilience taskforce.

According to Ed Miliband, actions on nature will also play a prominent role in the party’s Green Prosperity Plan, but details have been sparse. Reed said Labour plans to “reverse the tide of destruction of our natural world by cleaning up our water and air, and growing nature-rich habitats for wildlife to thrive”.

Still – amid all this politicking – the natural world continues to decline. Regardless of who ends up in government, it’s clear that we need to act fast to protect the UK’s green and pleasant land.