How can finance shape a nature-positive economy?

According to the World Economic Forum, around $44 trillion in annual economic value generation – over half of the world’s GDP – is moderately or highly dependent on nature. In reality, nature powers all industry and enterprise.

Yet with one million species at risk of extinction, and the risk of catastrophic global heating of 2.7°C or more, we face a double emergency of nature loss and climate breakdown that is eroding the foundations on which our collective health, wealth, and security depend.

As we degrade ecosystems, we radically restrict opportunities to harness nature-based solutions to climate change and other societal challenges. In turn, climate change further drives nature loss and lessens the resilience and productivity of natural systems.

Globally, we spend $1.8 trillion a year on environmentally harmful subsidies while the potential collapse of ecosystem services such as pollination threatens a $2.7 trillion annual decline in global GDP by 2030.

Almost every sector is exposed to climate- and nature-related risk. Tackling nature loss and climate breakdown is an economic imperative and a fiduciary duty.

The good news is that opportunities for scaling credible net-zero and nature-positive investment continue to grow. Food systems, for example, are responsible for 70% of global biodiversity loss on land and 50% in freshwater, and around a third of global greenhouse gas emissions - but rehabilitating the 52% of farmland that is currently degraded or disused would alleviate much of the pressure for further conversion of natural ecosystems for agriculture.

Every $1 spent on restoration promises to deliver up to $30 in economic benefits, and transitioning to a nature-positive economy – that sustains nature and its services – could generate annual business opportunities worth $10 trillion and create 395 million jobs by 2030.

We need to reshape economic and financial systems so that we move away from a global economy based on the pursuit of indefinite production and consumption and toward sustainable management of the global commons.

Financial institutions can start by factoring natural capital and climate – and nature-related risks into financial decision-making – including by following guidance from the Task Force on Climate-related Financial Disclosures (TCFD) and the Taskforce on Nature-related Financial Disclosures (TNFD), and by aligning portfolios for a 1.5°C future through initiatives such as the Net-Zero Asset Owner Alliance and the CDP-WWF Temperature Rating tool.

Governments and central banks must address the financial risks posed by climate breakdown and nature loss, incentivise business models and portfolios that work with nature rather than against it, and help close the $4.1 trillion financing gap for nature by 2050. And as the world struggles with multiple crises, now is the time to expand the global financial safety net, and promote new financial instruments such as nature-performance bonds that link debt restructuring with resilient climate and nature outcomes.

Reform must also include changing the ‘rules of the game’, properly valuing natural resources and nature’s services, pricing environmental externalities into financial and commodity markets, complementing GDP with new yardsticks of progress that track well-being and prosperity across generations, and integrating nature, climate, inclusion, and equity into decision-making.

In Switzerland, it is encouraging to see policymakers and financial institutions adopting TCFD-aligned disclosure requirements and increasing transparency on Paris-aligned investments but more remains to be done, especially on setting credible net zero targets and acting for nature.

Together, we must put nature on the path to recovery by 2030. If we redirect financial flows away from activities that degrade natural systems towards those that protect and restore nature, the financial system can drive the transition to a more equitable, net-zero, nature-positive global economy.