Report Predicts a 12% Drop in UK GDP Due to Nature Degradation
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
A report by the Green Finance Institute predicts that environmental degradation could result in a 12% decline in UK GDP in the future.
The report has assessed the effect of environmental degradation on the economy and the financial industry. According to the report, environmental degradation could have worse effects on the economy than the COVID-19 pandemic and the 2008 global financial crisis.
Nature Degradation May Cause A 12% Drop in UK GDP
According to the analysis, nature set the foundation for a stable economy. The report said that risks coming from nature like a drop in online health, animal-borne illnesses, and antimicrobial resistance pose a significant threat to UK citizens over the next ten years.
“This highlights the need to really step up implementation of domestic environmental protection as well as working internationally to mitigate risks at their source,” the report said.
The report noted that if the natural environment continues to face deterioration, it will have a real impact on the economy. For instance, this event can result in food shortages, natural disasters, a decline in soil health, and water deficiency.
The report also said the agricultural industry was facing increased risks because of soil and water degradation, pollution, and regulations around climate change. The utilities sector also faces a risk because of water shortages needed for water and cooling supplies.
The research further estimates that the domestic portfolios of banks could drop by between 4%-5%, which will affect the resilience of the financial industry. Therefore, regulators and governments need to take measures to limit the damage of risks arising from nature and biodiversity.
Nature Has an Impact on Economic Health
The Minister of State at the Department for Environment, Food and Rural Affairs, Lord Benyon, noted that nature could affect the health of the economy. Therefore, to conserve nature, all sectors and sections of society had a role to play.
Benyon also noted that the report demonstrated the need for people and institutions to work together to protect the planet for future generations.
The report also mentions that over the last ten years, financial institutions and central banks have become more aware of the risks posed by climate change. These institutions were also taking measures to address these risks by requiring disclosures and shifting capital flows to technologies and the green sector.
The report also mentions that the risks of environmental degradation and the loss of biodiversity were “severe and urgent.” Therefore, if these risks were not addressed, they would double the losses that come from climate change.
The research was conducted with the help of top regulators in the UK including the Financial Conduct Authority (FCA) and the HM Treasury. The findings come following the use of risk-based and scenario-based approaches to determine the risks that come from nature and the biodiversity loss on the UK economy.
