Understanding our Biodiversity Crisis

A Biodiversity Strategic Valuation Approach

Introduction

In a world where economic interests often clash with ecological preservation, we face a critical challenge: how to integrate finance with biodiversity without allowing one to dominate the other.

This paper explores how we can develop a regenerative design framework that aligns financial systems with the principles of nature, ensuring that our efforts to support biodiversity are not merely extractive but genuinely restorative. By leveraging cutting-edge technologies and systemic strategies, we can create a future where economic and environmental health are not mutually exclusive but mutually reinforcing, paving the way for a truly sustainable and thriving world.

The paper is divided into two essential parts. The first part delves into understanding the biodiversity crisis, emphasizing that building a capacity for understanding is crucial before we can develop the capabilities for systemic interventions. Indeed, understanding is half the solution.

We must grasp the scope of global ecological awareness, the shifts in environmental legislation, the emergence of new environmental and digital markets, and the evolution of exponential technologies. These converging trends are creating significant disruption, challenging us to fundamentally rethink our approaches. At the heart of this challenge is the necessity for trustworthy systems of measuring, monitoring, verifying, and certifying biodiversity ecosistemic services.

The greatest risk we face today is the commodification of nature, reducing its intrinsic value to mere economic units.

The second part of this paper proposes a systemic solution.

It explores the urgent need to address the biodiversity crisis by developing an MMVC process that generates regenerative flows.

By harnessing the transformative power of these converging trends, particularly our exponential technology, we can understand and model the patterns and principles that nature, and life, use to create regenerative processes.

This new plateau, shaped by disruptive technologies like artificial intelligence, blockchain, machine learning, and advanced Bayesian modeling, are reshaping our approach to understanding nature, ecosystem behavior, and ecosystem services.

By integrating these elements, we can create a holistic and regenerative framework that addresses immediate ecological needs while fostering long-term planetary health and resilience.

Here we go…

Understanding our Biodiversity Crisis

Over the last 50 years, the planet has witnessed a staggering loss of 70% of its Wildlife population and 50% of its marine life in the last 40 years. These figures are not mere statistics; they signal a profound unraveling of the ecological fabric that sustains life on Earth. The urgency to redirect efforts and resources to preserve and restore the natural world has never been greater.

We are at the cusp of a profound transformation, driven by several converging trends that will create significant disruptions. Together, these forces are reshaping our approach to both the economy and the environment, paving the way for innovative solutions that harmonize human activity with the natural world.

1) Global Ecological Awareness

The realms of policy and finance are awakening to a crisis that eclipses even climate change: the catastrophic loss of biodiversity.

Proof that the mainstream has awakened to the ecological crisis is evident in the latest UBS paper titled “Bloom or Bust by the UBS Sustainability and Impact Institute, which underscores four critical statements.

• Economic Dependence on Nature: Approximately 60% of global GDP is at moderately or highly dependent on nature, underscoring the long-neglected importance of biodiversity.
• Global Biodiversity Framework: The global community has reached a consensus through the Paris Agreement for Nature in 2022, establishing the Global Biodiversity Framework. Its principal objectives are to reverse global biodiversity loss by 2030 and achieve a nature-positive world by 2050. This entails doubling the amount of nature on land and quadrupling marine life within the next 25 years.
• Demand for Nature-Related Data; Today’s global markets demand precise nature-related data. Effective measurement is a critical enabler for managing biodiversity loss, yet the world currently lacks the necessary infrastructure to track local ecosystems on a global scale.

2) Groundbreaking Environmental Legislation

30 by 30 Agreement, Kunming-Montreal Global Biodiversity Framework, and the Paris Agreement for Nature

Adopted at COP15 in December 2022, the 30 by 30 agreement aims to conserve 30% of the world’s lands, oceans, coastal areas, and inland waters by 2030. It outlines 23 targets to halt and reverse nature loss, focusing on the protection and restoration of ecosystems and ensuring the sustainable use of biodiversity. This framework represents a significant global commitment towards sustainability and biodiversity conservation.

European Union Law: Nature Restoration Law and Biodiversity Strategy by 2030

• Nature Restoration Law: The EU commits to restoring 20% of its land and sea areas by the end of the decade, addressing environmental degradation and enhancing biodiversity.
• Biodiversity Strategy: The EU Biodiversity Strategy for 2030 aims to protect nature and reverse ecosystem degradation, with ambitious targets for ecosystem restoration, species protection, and sustainable land and sea use.

Natural England BNG (Biodiversity Net Gain)

• Overview: Biodiversity Net Gain (BNG) is a UK policy initiative requiring developments to leave biodiversity in a better state than before, ensuring that any loss is outweighed by measures to enhance and restore biodiversity.
• Implementation: All new developments in England must result in a net gain in biodiversity, verified through specific guidelines and frameworks.

Biodiversity Credits Initiative by the World Economic Forum

• Overview: This WEF initiative aims to develop and scale markets for biodiversity credits, financial instruments representing the value of preserved or restored ecosystems.
• Significance: It seeks to unlock private sector finance for biodiversity conservation, providing new investment avenues and promoting sustainable development.

BIOFIN Biodiversity Finance Initiative by the UNDP

• Overview: BIOFIN (Biodiversity Finance), a UNDP program, is collaborating with 41 countries to create 150 sustainable finance solutions aimed at protecting and enhancing biodiversity.
• Significance: This initiative not only seeks to safeguard biodiversity but also to ensure its flourishing by mobilizing financial resources and fostering sustainable development globally.

3) The Emergence of Environmental and Cryptocurrency Markets

Carbon Credit Markets

• Overview: The voluntary carbon market allows entities to buy carbon credits to offset their emissions, despite challenges such as inflated baselines and non-additionality.
• Market Size: Valued at approximately $950 million in 2023.
• Evolution and Potential: Despite challenges, the carbon market paves the way for biodiversity credits, with frameworks being developed to address both climate and biodiversity crises.

Cryptocurrency Markets

• Overview: Cryptocurrencies represent a rapidly growing financial market, with a total market size of approximately $3 trillion and a daily trading volume of around $100 billion.
• Potential for Nature-Based Currencies: The scale and liquidity of cryptocurrency markets highlight the potential for developing and trading nature-based currencies and biodiversity credits.

4) Exponential Technological Advancements

Advancements in Metrics and Monitoring Technologies

Recent innovations in agricultural technology (AgTech) have significantly enhanced our ability to monitor and measure ecosystem health. Tools such as remote sensing, sensor technologies, bioacoustics, and eDNA sequencing now provide real-time data on plant health, wildlife sounds, and species presence, enabling better management and conservation practices.

Digital Biology

Jensen Huang, CEO of NVIDIA, describes digital biology as a transformative revolution, allowing biology to transition from a purely scientific field to an engineering discipline. Technologies like eDNA sequencing have revolutionized biodiversity monitoring by providing non-invasive methods to detect and catalog species presence and abundance, offering a more accurate and holistic assessment of ecosystem health.

Artificial Intelligence and Digital Twins

AI-driven Bayesian models and digital twins enable real-time monitoring and management of ecosystems.

Bayesian models are a powerful statistical tool that refine predictions with each new piece of evidence, combining prior knowledge with new data to continuously update their understanding.

These digital replicas integrate various data sources to simulate ecosystem behavior and health, facilitating predictive analysis and more effective conservation strategies.

Market Size and Investment Requirements

Potential Market Size

The potential market size for biodiversity-related investments is estimated to be approximately $1 trillion per year.

Investment Requirement

To meet biodiversity goals, an estimated annual investment of $850 billion is necessary. 150 financial institutions, representing over $24 tn in assets under management, have called on world leaders to adopt an ambitious Global Biodiversity Framework at the UN Biodiversity Conference COP15.

Aditional financial Migration: Reallocation of Subsidies

Achieving these targets requires redirecting $7 trillion annually from subsidies currently supporting industries that degrade nature. Combined with the required investments, this totals around $8 trillion annually, or approximately 7.3% of the global GDP.

Economic Perspective

To put this in perspective, consider the economies of Germany and India. Together, these two economies total $8 trillion, which is the economic value needed to invest or redirect from nature-degrading activities each year.

Importance of the Shift

This shift is critical, as approximately 60% of global GDP is moderately to highly dependent on nature, and its ecosystem services. Addressing these investment needs is vital for sustaining global economic stability and environmental health.

Challenge and Opportunity

The realization that $44 trillion of economic value, representing more than half of the world’s GDP, is moderately or highly dependent on nature underscores the importance of addressing biodiversity loss.

Governments and financial institutions are increasingly recognizing the significance of biodiversity and are working to create the necessary policies, regulations, and laws to mitigate this crisis. This includes voluntary investments and the development of technology for monitoring, measuring, and verification.

The Need for Trustworthy MMVC Systems

What is critical at this moment is the development of trustworthy Measurement, Monitoring, Verification, and Certification (MMVC) systems. This requires a qualitative, holistic, and systemic measurement process understood through the patterns and principles of living systems, necessitating an integral understanding of nature’s interdependencies.

Biodiversity as Living Capital

We are not seeking to commoditize nature by reducing the complexity of life into quantitative data points. The task before us is far more profound:

to recognize and honor the intrinsic value of the ecosystem services provided by biodiversity. This means embracing a systemic perspective, understanding living ecosystems as dynamic, interdependent networks of energy and life.

Our goal is not to turn nature into a commodity but to foster a regenerative investment approach. This approach, aptly termed ‘Nature Finance,’ should aim to create conditions for restoration and regeneration, directing financial flows towards nurturing the capacities of ecosystems to heal and thrive. Through this holistic and systemic understanding, we can honor the essence of life on Earth and pave the way for a sustainable future.

The Path forward

Awareness and the Urgency of Biodiversity Solutions

Understanding is 50% of the solution.

Before we jump into action, it’s crucial that we develop the capacity to truly understand our current predicament, with biodiversity loss being a critical component.

We need to see life and biodiversity from a systemic perspective, recognizing them as an interconnected, interdependent system of energy flows and relationships.

Biodiversity isn’t just a collection of quantitative metrics; it’s a vibrant tapestry of unity in variety and diversity, a network of forces and connections. This means we must shift our focus from isolated data points to understanding the intricate relationships and connections. By embracing living systems thinking and systemic design, we can create interventions and conditions that unlock potential and possibilities for a sustainable future.

Link to Part 2

For further reading, you might find the following resources interesting:

Our Upcoming Challenge is not How, but “Who” can value Biodiversity

The Next Frontier: Transforming Conservation into Regeneration

$8 Trillion (7% of Global GDP) Must Shift to Save Biodiversity

White Paper for Designing Nature Finance

White paper

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