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Greening Globalilzation

The loss of biodiversity is a top risk to the global economy. Reducing that risk depends on securing property rights and embracing free trade.

  • Catherine E. Semcer
  • Davos, Switzerland / Photo courtesy of Robert J Heath

    This week world leaders from business, civil society, and government are gathering in Davos, Switzerland for the annual meeting of the World Economic Forum, an international organization for public-private cooperation. The meeting follows the organization’s release of its annual Global Risks Report, a study identifying threats to economic prosperity worldwide. For the first time since the report’s inception, the loss of biodiversity has been identified among the top five risks to the global economy. Whether world leaders will take the report’s warnings seriously remains to be seen. One sign that they may would be a deeper commitment by governments to free trade and the protection of property rights. Both are fundamental to encourage private sector investment in commercial enterprises that foster conservation.

    The Global Risks Report is based on a survey of more than 1,000 leaders in business, civil society, and government. The term “global risk” is defined as “an uncertain event or condition that, if it occurs, can cause significant negative impact for several countries or industries within the next 10 years.” Survey respondents are asked to assess whether the risks associated with 40 current issues would increase or decrease in the coming year compared to the previous year. Respondents also have the option of identifying other issues, not among the 40 listed, that they expect to be a source of increased risk.

    Survey respondents for the 2020 report ranked the loss of biodiversity, and the associated destruction of ecosystems, as the fourth-largest factor likely to shape our world for the worse in the coming decade unless concerted action is taken. With more than half of global GDP depending in some way on the services of healthy ecosystems, the potential loss of a million species due to habitat degradation presents significant risk to bottom lines. The collapse of commercial fish stocks, the loss of pollinators and reduced crop yields, and infrastructure destruction from flooding fueled by deforestation are just some examples of why businesses are increasingly concerned with stemming ecosystem degradation.

    The Global Risks report correctly states that stemming the loss of biodiversity and securing the health of ecosystems depends on “finding investment models that mobilize private finance to capture a share of this opportunity.” However, the best investment models are unlikely to gain sufficient traction absent secure property rights, especially land tenure. Such rights give investors confidence that their capital and its dividends are not at risk of government expropriation.

    This challenge was highlighted in a 2018 report issued by the U.S. Agency for International Development, the Investor Survey on Land Rights. The report found that investors and business operators ranked insufficient land tenure security as the seventh- and second-most serious risks they face, respectively. The report further noted that 58 percent of all respondents reported that land tenure risks were increasing and that those risks had led to a rejection of investment in more than 60 percent of projects sampled.

    Even where property and land tenure rights are relatively secure, restrictions on free trade can severely limit the potential of private investment to conserve healthy ecosystems. This fact is also overlooked in the Global Risks Report but nevertheless should remain a key concern for decision-makers going forward.

    The most salient example of the potential for trade restrictions to hinder conservation investment is found in Africa’s trophy hunting industry. While politically contentious, there is no doubt that the trophy hunting industry has created the economic incentives and delivered the private investment necessary to conserve a massive area of wildlands in Sub-Saharan Africa. These conditions have led to the conservation of more than 344 million acres—a figure that exceeds the size of all of the region’s national parks by 22 percent and includes more than 50 million acres of former cattle ranches in South Africa that have been converted back into wildlife habitat.

    This conservation success is at risk, however, due to debates in the United States, United Kingdom, and elsewhere over whether to restrict trade on hunting trophy imports. Such bans, especially in the United States, which comprises 70 percent of the global trophy market, are likely to drive Africa’s hunting operators out of business by shutting their core clientele out of the market. 

    Recent experience from Tanzania, where restrictions on the importation of lion trophies into the United States have bankrupted multiple hunting operators, strongly suggests that trophy import bans will cause areas managed for conservation to be abandoned and vegetation to be cleared to convert land to marginal livestock pasture of little ecological value. Indeed, the Organization for Economic Cooperation and Development has noted that such land conversions caused the world to lose as much as $20 trillion worth of ecosystem services between 1997 and 2011.

    Scientists estimate that the cost of maintaining the status quo of global ecosystem integrity and biodiversity is $100 billion a year. This is a small price to pay to remove a top threat to a global economy with more than $80 trillion—especially when significant private capital currently rests on the sidelines, still searching for the right conservation investment opportunities that justify getting into the game. Unleashing that capital, however, will require world leaders to resist fashionable calls to adopt illiberal economic policies and double down on securing property rights and avenues of free trade.

    Written By
    • Catherine E. Semcer
      Catherine E. Semcer

      Catherine E. Semcer is a research fellow with the Property and Environment Research Center in Bozeman, Montana and the African Wildlife Economy Institute at Stellenbosch University in South Africa. She also serves as a member of the Sustainable Use and Livelihoods Specialist Group of the International Union for Conservation of Nature.

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