The deterioration of the UK’s natural environment could cause an estimated 12% loss to its GDP in the years ahead, according to new findings from the Green Finance Institute (GFI). This would be a stronger blow than those dealt by both the financial crisis (5%) and Covid-19 (11%). The report – ‘Assessing the Materiality of Nature-Related Financial Risks for the UK’ – looked at the impact of the degradation of natural ecosystems, both domestically and internationally, to the economy and financial sector in the UK. Some sectors in particular face higher levels of nature-related financial risk, the GFI said, including agriculture, manufacturing, and utilities. Impacts on the real economy could also cause material losses for financial institutions, with banks exposed to potential reductions in the value of their domestic portfolios of up to 4-5%. The report called for swift action from the government, the Bank of England, regulators and the financial sector to proactively manage nature-related risks and position the UK as a global leader in addressing them. In particular, the GFI recommended disclosures of such risks and taking urgent action to meet the targets of the Global Biodiversity Framework. “This is the first time the material risk posed by nature degradation to the UK economy and financial stability has been comprehensively assessed,” said Helen Avery, Director of Nature Programmes at the GFI. “Evidencing this material risk is a vital step towards transitioning our economic and financial system to one that values and invests in the natural environment.” The report included input from the scientific and financial communities, and direction from the UK’s Department for Environment, Food and Rural Affairs, the Financial Conduct Authority, HM Treasury and the Taskforce on Nature-related Financial Disclosures.
