Risk and Resilience - a thought-piece for Finance Innovation Lab

Oliver Greenfield

Head of Sustainable Business and Economics, WWF-UK

Sue Charman

One Planet Finance Leader, WWF-UK

WWF MISSION

to stop the degradation of the planet’s environment and to build a future in which humans live in harmony with the natural world

Financial Stability, Economic Growth and environmental health

• the current economic paradigm is one of trade-offs based on assumption of replacement

Current economics – the trade-off

More economic activity

Less environment

Less economic activity

A spiral of decline

More economic activity

More environment

A spiral of flourishing

OR - We ensure ecological health and so support greener economic growth

the real economic loop – a choice

Less environment

• The One Planet Economic model is defined and driven by its ecological context – where we understand the choice:

– if we continue to deplete ecological assets we will undermine economic activity

Unsustainableecological instability leading to economic and social instability and financial losses

Planetary carrying capacity

• This model works until ecological systems can no longer carry the burden of absorbing pollutants and replacing extracted resources – ie. we move beyond planetary carrying capacity

Environmental risk - Not just a beautiful world… - We need to understand ecosystems are the operating system which support the conditions for life, and economic activity

1. That support: nutrient cycling, soil formation

2. That provide: food, freshwater, wood and fibre

3. That regulate: climate, water, nitrogen, phosphorous

4. That give cultural context

Forests Rivers Oceans

Healthy ecosystems provide ‘Ecosystem services’. There are four categories:

Millennium ecosystem assessment identifies 15 of 24 key ecosystems services are in decline

Forests Rivers Oceans

Supporting:•nutrient cycling,•soil formation•Flood defences Regulating:•Climate regulation•Disease regulation•nitrogen cycling•Carbon cyclingProviding•Biodiversity•Food•Wood and fibre

Supporting:•nutrient cycling,•soil formation•Flood defences Regulating:•nitrogen cycling•Carbon cyclingProviding•Freshwater•Biodiversity•Fish

Supporting:•nutrient cycling,•soil formation•Flood defences Regulating:•Climate•nitrogen cycling•Carbon cyclingProviding:•Biodiversity•Fish

Planetary system – indicators & boundaries – a thirty percent decline in species numbers is an indicator of planetary health and is driven by living 35% above biocapacity = its carrying capacity – the planet’s ability to assimilate pollutants and regenerate ecological assets

Biodiversity Footprint & Planetary carrying capacity

Planetary system – 9 planetary boundaries - 3 of which are already breached

1. Climate Change - 2ºC is <450ppm (@ 384ppm)

2. Ocean Acidification

3. Stratospheric Ozone

4. Phosphorous & Nitrogen cycles

5. Atmospheric Aerosol loading

6. Freshwater use

7. Land-use change

8. Bio-diversity loss

9. Chemical pollution

Source: stockholmresilience.org

Decline in ecological systems will reduce the availability of ecosystem services – creating new business operating risks, especially for Food, Energy, Housing and Transport systems

2050

Ecological systems

Food systems

Energy systems

Transport systems

ForestsFreshwaterMarine

Ecosystem health

Housing

Less nutrient cycling, and poorer soils, more floods, less predictable climate, more invasive species and diseases, imbalanced nitrogen cycles – leading to algal blooms, dead marine zones, less fish

More floods risking infrastructure, less freshwater risking cooling, less availability of resources

More floods risking infrastructure, less freshwater risking viability of homes, less availability of building resources

More floods risking infrastructure, less availability of resources, costs of carbon change transportation viability

The ecosystem decline will prompt rapid change in social and governance systems. Will Economics and finance be proactive or reactive and what can it do to drive change?

2050

Ecological systems

Political & Governance systems

Economics & Finance systemsIndustries: • Food • Homes • Transport• Energy

Social systems

ForestsFreshwaterMarine

Ecosystem health

Carbon price, Reporting legislations, removal of subsidies, water rationing

Licence to operate, disruptive change, opportunities and liabilities, stranded carbon assets

Changing consumer behaviours and preferences

Flooding, crops and fish failure, food price rises, energy systems failing

Thank you.

Oliver Greenfield, WWF-UK ogreenfield@wwf.org.uk

Sue Charman, WWF-UK scharman@wwf.org.uk

WWF One Planet Business, Creating Value Within Planetary Limits

Recommended further reading

WBCSD, 2050 Visionhttp://www.wbcsd.org/Plugins/DocSearch/details.asp?DocTypeId=33&ObjectId=Mzc0MDE