‘Nature risk is financial risk’

New report: food security is under threat, which could lead to economic and social instability
Katie Hill - Editor-in-Chief, My Green Pod
A farmer stands in his flooded maize field with rubber boots. Extreme weather such as torrential rain, causing more and more crop failures

A new report from Anglia Ruskin University (ARU) and the Institute and Faculty of Actuaries (IFoA) warns that biodiversity loss, alongside climate shocks and geopolitical conflict, is disrupting our food system, risking catastrophic impacts for the financial system and for society as a whole.

Recent events in the Gulf region show a fragile food system being further threatened by disruption to fertiliser supply chains passing through the Strait of Hormuz. There is a real risk of further food price shocks which, alongside sharp rises in energy costs, will drive up the cost of living.

‘The wild unknown’

‘Planetary Solvency: Tipping into the wild unknown’, the joint Anglia Ruskin University (ARU) and IFoA authored report, explains that chronic pressures such as soil degradation and water scarcity are already leading to lower crop yields, pushing up food prices and reducing availability.

Acute shocks including trade disruption, extreme weather events and ecological collapse add further stresses, resulting in higher and more volatile food prices.

‘Nature is not a luxury; it is our most fundamental form of critical infrastructure. Yet, as this vital report on Planetary Solvency makes clear, we are currently managing our global natural assets with a level of negligence that would be unthinkable in any other sector of the economy. We are treating a finite, interconnected ledger of biological wealth as an infinite extraction fund, and the maths simply no longer adds up. To the finance sector, the message is clear: nature risk is financial risk.’

EMMA HOWARD BOYD CBE
Chair of ClientEarth’s Group Board

Long-term food security is at risk as key ecosystems approach irreversible tipping points. Large-scale deforestation, particularly in the Amazon rainforest, threaten rainfall patterns and global carbon cycles, which are essential for stable crop yields.

The decline in pollinators, which underpin around three-quarters of global crop production, could decrease crop yields and increase food prices. And pressures on marine ecosystems from overfishing, pollution and climate change are pushing marine systems past critical thresholds, leading to a collapse in fish populations.

‘This report underlines how deeply our food system depends on a healthy natural world. Yet in the UK, nature is too often demonised as a barrier to development. Vital habitats are destroyed in the name of growth, while the overuse of pesticides and fertilisers undermines the very systems farming relies on.

‘With global shocks already disrupting fertiliser supplies, this is a moment for decisive action before we face a full-blown food crisis. The UK government must work much harder to protect our wild spaces and must urgently steer UK farming towards a more resilient, nature-friendly system – significantly cutting chemical use and working with nature, not against it.’

DOUG PARR
Greenpeace UK chief scientist

Urgent intervention

The report warns that urgent intervention is needed and highlights actions for policymakers, regulators and those working in the financial sector to integrate nature into decision-making in order to safeguard the food system.

The actions include urgent investment in measures to support sustainable land use, protect pollinators and strengthen supply-chain resilience. Prevention is cheaper than crisis response and reduces the likelihood of acute shocks such as crop failures and recurrent double digit food price inflation.

The report also calls on policymakers and regulators to recognise nature as the critical foundation of our society and economy, and use integrated climate-nature scenarios to understand the interconnection between biodiversity and climate.

Actuaries and the financial sector must also recognise food system fragility is a systemic financial risk, with impacts far greater than the GDP contribution of agriculture, the report says.

‘The recent National Security Assessment on Global Ecosystems from the UK Government has shown that the potential collapse of nature is a realistic possibility. Our current economy is set up to deliver efficiency, profit and thereby a just-in-time system that both drives this threat and provides little to no resilience against it.

‘We need radical new policy and direction to tackle these emerging risks and, with this report, the actuarial profession is signalling its desire to contribute its unique expertise to shaping our response. In the report, we highlight key risks from food through pandemics and outline a set of recommendations including the need to move away from waiting to measure and quantify everything before we take the urgent action that is needed.’

PROFESSOR ALED JONES
Lead author and director of the Global Sustainability Institute at Anglia Ruskin University (ARU)

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