According to a study by the Green Finance Institute, environmental degradation could potentially lead to a 12% decline in the UK’s GDP in the coming years.
The comprehensive report evaluates the economic repercussions of declining natural ecosystems, highlighting that the loss could surpass the impacts of the Covid-19 pandemic, which resulted in an 11% decrease, and the 2008 financial crisis, which saw a 5% decline.
Tom Oliver, a lead author of the study and a professor of applied ecology at the University of Reading, remarked, “This analysis illustrates that nature is not just a luxury; it forms the bedrock of a stable economy. Our findings indicate that risks related to nature—such as soil degradation, antimicrobial resistance, and zoonotic diseases—are interconnected and pose considerable threats to the UK populace within the next decade. This underscores the urgent need for enhanced domestic environmental policies and international collaboration to mitigate risks at their origin.”
The report emphasizes that the deterioration of the natural environment will significantly impact the economy through escalating nature-related risks driven by climate change, including declines in soil health, food shortages, natural disasters, and water scarcity. It identifies the agricultural sector as particularly vulnerable due to challenges in soil health, water availability, pollution, and climate regulation, all of which threaten product quality. Similarly, the utilities sector faces significant risks from water shortages essential for cooling and supply.
In terms of financial implications, the research predicts that banks’ domestic portfolios could experience reductions of 4-5%, impacting overall financial stability. These findings suggest that governmental and regulatory bodies must take proactive measures to mitigate the impacts of nature-related and biodiversity risks and address the evolving dynamics of the natural environment.
Lord Benyon, Minister of State at the Department for Environment, Food and Rural Affairs, stated, “Nature is fundamental to the well-being of our economy, and it is currently jeopardized by a global crisis regarding biodiversity. Conserving nature is a collective responsibility that spans all sectors of society, and green finance is pivotal in this endeavor. This report’s insights will aid both individuals and institutions in the corporate and financial sectors in recognizing the necessity of accelerating efforts to protect our planet for future generations.”
Nicola Ranger, another lead author and director of the UK Integrating Finance and Biodiversity Programme at the Environmental Change Institute, University of Oxford, added, “In the past decade, central banks and financial institutions have begun to understand the risks associated with climate change, leading to significant actions such as mandatory disclosures and a shift of capital toward green technologies. This report comprehensively showcases that the threats posed by environmental degradation and biodiversity loss are at least as critical and urgent, and if left unaddressed, could result in losses that are double those of climate change.”
This research was a collaborative effort involving the Green Finance Institute, the Environmental Change Institute at the University of Oxford, the University of Reading, the UN Environment Programme World Conservation Monitoring Centre, and the National Institute of Economic and Social Research, with contributions from the Financial Conduct Authority, the Department for Environment, Food and Rural Affairs, HM Treasury, and the Taskforce on Nature-Related Financial Disclosure. The findings were derived through rigorous risk-based and scenario-based analyses assessing the impact of nature and biodiversity loss on the UK economy.