A new report via insurance firm Swiss Re warns that one-fifth of countries worldwide are at risk of their ecosystems collapsing because of a decline in biodiversity.
The reinsurer said more than half of global GDP, equal to about $41.7 trillion, is highly dependent on “high-functioning biodiversity and ecosystem services” and warns 20% of countries are nearing tipping points.
Swiss Re Institute’s new Biodiversity and Ecosystem Services Index (BES), built on ten critical ecosystem services (water security, timber provision, food provision, habitat intactness, pollination, soil fertility, water quality, regulation of air quality and local climate, erosion control and coastal protection), offers government officials and business leaders with a more enhanced view into their local ecosystems that are so critical to their economies. Reinsurers can use BES to develop insurance solutions that protect communities at risk from biodiversity loss.
Among G20 economies, South Africa, India, Turkey, Mexico, and Italy had the highest shares of fragile ecosystems within the BES index. Meanwhile, countries, including Germany, Canada, Indonesia, Brazil, and the United Kingdom, had very low percentages of their ecosystems in a fragile state.
Global BES Index Map
BES Index Ranking G20 Countries
Christian Mumenthaler, Swiss Re’s Group Chief Executive Officer, said: “This important piece of work provides a data-driven foundation for understanding the economic risks of deteriorating biodiversity and ecosystems. In turn, we can inform governmental decision-making to help improve ecosystem restoration and preservation.”
“We can also support corporations and investors as they fortify themselves against environmental shocks. Armed with this information, we can also ensure the provision of stronger sustainable insurance services,” Mumenthaler said.
One example Swiss Re said is that certain developing and developed countries were at risk for water scarcity issues, which could damage manufacturing sectors, properties, and supply chains. The domino effect of biodiversity loss could have on economies is catastrophic if nothing is done.
The report discusses “simple preservation actions” that could be enough to address BES challenges.
“For example, ecosystem restoration along the coast of Louisiana could reduce expected flood costs by USD 5.3 billion annually2. Steps to ensure functioning coral reefs globally could lower estimated flood damages for 100-year storm events that would otherwise increase by 91% across the globe 3,” the report said.
It also highlights the impact of BES on economic sectors:
“Using Swiss Re Institute’s BES Index as a basis for decision-making in underwriting and asset management will make businesses and investments more resilient,” said Jeffrey Bohn, Swiss Re’s Chief Research Officer.
“This index also underlines the important need for relevant nature-based insurance solutions and will create a new business segment for insurance, thereby strengthening resilience of affected regions and communities,” Bohn said.
Alexander Pfaff, a professor of public policy, economics and environment at Duke University in the US, who was quoted by The Guardian, said:
“Societies, from local to global, can do much better when we not only acknowledge the importance of contributions from nature – as this index is doing – but also take that into account in our actions, private and public.”
Pfaff said it was important to note that the economic impacts of the degradation of nature began well before ecosystem collapse, adding: “Naming a problem may well be half the solution, [but] the other half is taking action.”
The report’s release comes as presidential candidate Joe Biden warms up to the Green New Deal, a proposed package that aims to address climate change and economic inequality.