This is part two in a series of blogs about nature-related risk from the IFoA’s biodiversity Working Party. Both nature-related and climate-related risks are topical fields often discussed together. Here we explore the similarities and differences between these two concepts.
No. Climate change relates to changes in global temperatures and weather. Nature-related risk relates to the reduction in the many services nature provides.
Although climate change and nature-related risks interact, there are many other causes of nature degradation unrelated to climate change. Examples include water pollution, overuse of natural resources, changes in land use, and zoonotic or disease vector risks.
Nature-related risks would still occur even if climate change was not an issue. We highlighted a case study unrelated to climate change in our 2021 sessional paper on biodiversity and justice. The study was about how the overfishing of northern cod off Canada’s Atlantic coast had significant negative economic impacts on local communities.
Climate change and nature-related risks interact with each other. The solutions to both crises can be mutually beneficial if managed carefully.
In Australia, intense fires in 2019 and 2020 made worse by climate change destroyed 97,000km2 of forest and habitats. The fires increased the number of threatened species in the area by 14%, according to a Royal Society piece on climate change and biodiversity.
Restoring 15% of lands converted from one land classification to another (for example, forest to farmland) could sequester 30% of the total CO2 increase since the Industrial Revolution. And it could avoid 60% of expected extinctions. This is according to a 2020 study published in Nature: ‘Global priority areas for ecosystem restoration’.
Mangroves are hotspots for biodiversity and conserving them can reduce the impact of storms and sea level rises, says a UN piece about these tropical forests.
There is a growing demand for lithium for batteries used in renewable technologies. Mining the metal is associated with water pollution, according to a 2021 IPCC report on biodiversity. Sometimes there need to be trade-offs to manage overall risks. But we need to minimise risks and impacts where they are unavoidable and consider how to grow nature elsewhere.
Nature-related and climate-related risks are interrelated but there are some key differences in their characteristics. Here we look at their similarities.
Shifts in global temperature and loss of ecosystems are both gradual processes. This means changes can take several decades to materialise and cascade down into observable economic, social, and environmental impacts.
Nature-related risks and climate change are non-linear in their progress. ‘Regime changes’ – dramatic ecological changes – are unpredictable (with tipping points). For example, it could take decades for a rainforest to tip over into a savannah, whereas grasslands have been known to tip into shrub in years, says a UK government report on the economics of biodiversity.
Some of the effects of climate change and nature-related loss are irreversible on human timescales. One example is rising global sea levels, according to a report on irreversible climate change. Another is the extinction of species.
Both nature-related and climate-related risks can be categorised into two categories: physical and transition risks. The physical and transition risks for nature-related risks will be covered in the next blogs in this series of blog posts.
The impact of risks on economic activity (dependencies) and the risk of economic activity on impacts (principle adverse impacts) apply to both risks.
These two concepts are interrelated but there are some key differences in their characteristics. Here we look at their differences.
Climate change impacts are realised at the global scale – for example, increases in global temperatures and rising sea levels.
With nature-related risks, there is an ecosystem and local interdependency. Communities that have a direct reliance on natural capital feel the impacts – for example, farmers dealing with soil degradation – says a UK government report on the economics of biodiversity.
A small set of gases create climate change risks and it does not matter where they are released. Absorbing a CO2 molecule from the atmosphere can offset another that has been released into the atmosphere elsewhere.
Nature loss is local and case-by-case. Location matters especially when approaching tipping points. Cutting down a tree cannot necessarily be made equivalent by planting another elsewhere.
Social tipping can be defined as “a form of social change whereby a small change can shift a sensitive social system into a qualitatively different state due to strongly self-amplifying…feedback mechanisms”. This is according to an Ecological Economics report on social tipping.
Climate change may be approaching this point in some (European) countries with behavioural, political and technological changes observed. Nature-related risks such as biodiversity loss are yet to reach this point.
Climate change is shown by greenhouse gas concentrations.
There is no global equivalent and certainly no singular measure of nature either locally or globally.
There is an established carbon accounting framework to provide a monetary measure of climate change.
Natural capital accounting and assessment frameworks are in early stages of development. Given the complexity, they have problems with design and measurement regarding measuring the intrinsic value of nature, says a UK government report on the economics of biodiversity.
For climate change, there is a high-level evolved global policy architecture in place that can give guidance to:
But the application of these is extremely limited relative to the quantum required.
For nature-related risks, there is little awareness that we failed to meet any of the Aichi targets due in 2020. There is currently no formal global framework to replace this although a new framework is expected to be agreed at the UNCBD COP 15. Policy architecture has been incredibly limited and would still need to be developed after this framework. Currently, there are little to no clear guidelines.
For climate change, the UN Paris Agreement was put in place to limit global temperature rise this century to below 2C.
For nature-related risks, while agreements like Aichi targets and COP 15 (later in 2022) are set, these are not considered ambitious global targets to counteract the effects.
For climate change, there is a significant amount of global data available to analyse and predict trends – for example, global temperature records.
When it comes to nature-related risks, the effects are experienced at local levels where measurement and recording of data can be inconsistent. This means there is a lack of comparable long-term data.
There has been progress in identifying, modelling and managing climate change. The frameworks and governance structures used for climate change can be used when looking at nature-related risks.
But we need to improve our understanding of nature-related risks to ensure we are appropriately identifying, measuring and managing the risk. Improvements in disclosures could help with this.
Climate-specific models are unlikely to capture nature-related risks without significant adjustments.
Paper: How far are biodiversity loss and climate change similar as policy issues?
Climate change and biodiversity: twin challenges for today’s business leaders (Zurich)
