A scenario approach for the United Kingdom

summary

Nature degradation poses material financial risks to the UK economy with potential GDP losses estimated at up to 12% vs baseline by the 2030s, larger than the economic impacts of the 2008 financial crisis and the COVID-19 pandemic (Ranger et al., 2024). Nature risks stem from both domestic and international environmental degradation. Half of the UK’s nature-related financial risks originate internationally, emphasising the need for international cooperation on disclosure and risk management (Ranger et al., 2024). The UK’s domestic vulnerability is compounded by severe nature depletion undermining the ecosystem services on which economic activity depends.

The UK’s international biodiversity footprint is also substantial, exceeding the global average in many domains, with the UK’s historical and current consumption patterns creating substantial biodiversity impacts in other regions through supply chains and commodity imports. Understanding the international biodiversity impacts of UK private financial flows is a complimentary approach to the country’s footprint via consumption and production. Elucidating the international biodiversity impacts of UK private financial flows highlights policy interventions necessary to realign financial flows in line with the targets of the Global Biodiversity Framework (GBF).

Realigning financial flows is also vital as global nature negative financial flows (~$7 trillion annually ) are more than 30 times greater than current annual funding on nature-based solutions ($200 Billion) (UNEP, 2023). Nature negative financial flows are the outcome of an economic system that explicitly and implicitly subsidises activities harmful to nature. Realigning these flows into nature positive activities is not simply about reallocating capital but also about reshaping the underlying incentives that guide economic behaviour. Policy responses aim to reduce demand for nature-damaging goods and services, and to change the incentive structures within key sectors so that producers are rewarded for adopting practices with lower environmental impact (IPBES, 2024). In essence, public policy is seeking to align private finance with nature positive objectives, encouraging “economic activity done differently,” rather than redirecting financial flows.

This report aims to assess the impact of privately UK-financed activities (UK supply chains, overseas financing and foreign direct investment) on biodiversity and the potential impacts of interventions to align the UK’s international finance flows with the GBF.

Authors

Jimena Alvarez, Emma O’Donnell, Juan Sabuco, Lydia Marsden, Isobel Hawkins, Sarah Gall, Mattia Troiano and Sophus zu Ermgassen