Biodiversity Loss Carries Potential for Sovereign Credit Downgrades

Economists at Cambridge University and other UK academic institutions have created biodiversity-adjusted sovereign credit ratings, laying out how ecological destruction can impact public finances. Of the nations to be hardest hit by biodiversity loss, the study of 26 countries showed China and Indonesia dropping by two notches on a 20-notch scale by 2030 if business continues as usual. If countries experience “partial ecosystems collapse” to fisheries, tropical timber production or wild pollination, then more than half the 26 nations studied faced downgrades, with India falling four notches and China plummeting by six on scale. Across the 26 countries, according to the Cambridge report, these further downgrades would increase the annual interest payment on debt by up to US$53 billion a year, leaving some developing nations such as Pakistan at significant risk of sovereign debt default. Earlier this month the global environmental community together in Stockholm, Sweden for the UN Stockholm+50 event to discuss ongoing threats to biodiversity around the world. UN-facilitated talks aimed at finalising a Global Biodiversity Framework are currently taking place in Nairobi.

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