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

Millennium ecosystem assessment identifies 15 of 24 key ecosystems services are in decline ForestsRiversOceans Supporting: nutrient cycling, soil formation Flood defences Regulating: Climate regulation Disease regulation nitrogen cycling Carbon cycling Providing Biodiversity Food Wood and fibre Supporting: nutrient cycling, soil formation Flood defences Regulating: nitrogen cycling Carbon cycling Providing Freshwater Biodiversity Fish Supporting: nutrient cycling, soil formation Flood defences Regulating: Climate nitrogen cycling Carbon cycling Providing: 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 Forests Freshwater Marine 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 systems Industries: Food Homes Transport Energy Social systems Forests Freshwater Marine 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 Sue Charman, WWF-UK WWF One Planet Business, Creating Value Within Planetary Limits Recommended further reading WBCSD, 2050 Vision