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Biodiversity loss has implications on the economy, financial stability - BNM

Publish date: Sun, 02 Apr 2023, 01:57 PM

KUALA LUMPUR: Humanity has benefited from the biodiversity of ecosystems and the interactions between various living species of plants, microbes, fungi, and animals, as well as non-living elements such as water, soil, and sunlight.

The benefits are many such as a supply of food, raw materials, water, and clean air and it is important to maintain a balance in the ecosystem, which has directly contributed to the country's economic development, according to the Bank Negara Malaysia (BNM).

In its Annual Report 2022 released recently, BNM, however, said excessive extraction and usage can deplete resources over time and cause harm to society and the economy, while excessive economic development activities could also degrade ecosystem services.

These include deforestation, pollution, overfishing, land-use change, and other human activities that drive habitat loss and fragmentation, it added.

"Climate change is also accelerating biodiversity loss and reducing the resilience of ecosystems, and this heightens nature-related risks which in turn can put the viability of businesses and lives at risk.

"Businesses that are highly dependent on ecosystem services for ongoing business operations are most exposed to such risks," said the report.

According to the report, holistic and carefully designed measures that promote responsible usage, or replenishment of resources are, therefore, essential to preserve lives and livelihoods.

"Nature- and climate-related risks are closely connected. As with climate change, nature-related risks can manifest in physical, transition, and liability risks.

"These risks can also lead to financial and economic losses due to a diminished capacity to adapt and build resilience against adverse events," it said.

A World Bank study have assessed the damage that would be caused if certain parts of the ecosystem, like marine fishing, wild pollination, and timber supplies in the ecosystem were to be reduced by 90 per cent.

The study found that in East Asia and the Pacific region, this could lead to a loss of 3.4 per cent of the gross domestic product (GDP) by 2030 compared to the baseline scenario.

In Malaysia, the loss is expected to be even bigger at six per cent of GDP by 2030 due to adverse impacts from the collapse of Malaysia's forestry and fisheries ecosystem services.

"To this end, the central bank plans to extend current engagements and capacity building initiatives within the bank and the financial sector to the consideration of nature-related risks.

"The immediate focus is to identify opportunities to build on ongoing efforts to strengthen climate resilience," it said.

For example, the joint committee on climate change (JC3) sub-committee on Bridging Data Gaps (BDG) is already exploring ways to improve collection of data relevant to nature-related risks in Malaysia.

"This aims to facilitate more granular analysis on how the financial sector drives nature-related risks and on the flip side, the impact of biodiversity loss to the financial system to serve as a basis for prioritising the industry's response to nature-related risks," it said. -- BERNAMA

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