Embedding nature at the very core of what insurers do (I/II)

“Nature can never be completely described, for such a description of Nature would have to duplicate Nature.” 

Lao Tzu

Tinker, conquer and err: Nature and us thus far!

Civilisations living in harmony with Nature are the only ones that have survived. For this very reason, Indigenous Peoples have been around the longest. The rest are now fossils. As we continue breaching planetary boundaries - and inch towards the brink - this is a hard truth to reconcile. Isn’t there anything that insurers can do and act as a bulwark? Is insurance really last in the queue of financial services or money pipelines, thereby waiting for others to act? As risk carriers, risk managers and investors, they don’t have to. 

After Hurricane Sandy hit the northeastern United States in 2012, TNC scientists, in partnership with Lloyd’s of London, found that coastal wetlands prevented more than $625 million in potential property damages by absorbing wave energy and reducing storm surge. This is how climate adaptation works! Insurers should embrace it.

Just as nature can be multi-faceted - destroyer, preserver and healer - so can insurance. However, insurance has thus far generally chosen to be the handmaiden of a coloniser mindset. It is inclined to approach any threat as a conqueror or tinkerer and not a healer. Thus, it is likely to go for ‘killing’ a heat dome in the coastal U.S. using climate engineering - much to the relief of people there. What about its unintended consequences? There will be a price for the aftereffects of the transferred heat to parts of Europe. I quote German polymath Albert Schweitzer here: “Man has lost the capacity to foresee and forestall; he will end by destroying the world.” 

Blending Nature’s benign powers with the insurer’s healing capability ought to be the ultimate goal.

Counteracting anthropogenic climate change

Geoengineering, according to the Convention on Biological Diversity, is “A deliberate intervention in the planetary environment of a nature and scale intended to counteract anthropogenic climate change and its impacts.” In a chapter titled Geoengineering As A Response To The Climate Crisis, Helena Paul and Rupert Read remind us about serious issues of equity to be considered. “Climate change itself tends to impact regions and populations of the global south more seriously while some of the proposed geoengineering techniques would also tend to do this, as could poorly thought-out adaptation approaches, leading to increased inequality. 

Even afforestation and deforestation could have serious negative consequences if they involve huge plantations of non-native trees, especially on so-called marginal land or land used by local communities but to which their rights are not recognised by governments. This point is worth exploring further because it brings out nicely the conceptual distinction crucial to this section between geoengineering on the one hand and large-scale but more bottom-up interventions designed to return the geosphere to a more natural and self-sustaining state on the other.”

“If insurance companies took climate science seriously, they would fully align their underwriting and investment strategies with a credible 1.5°C pathway,” said Peter Bosshard, the outgoing head of IOF. “They would be suing fossil fuel companies to make polluters pay for the growing costs of climate disasters and keep insurance affordable for climate-affected communities.”

Rays of hope: Provided we act

The economy is the “wholly owned subsidiary” of the environment said Herman Daly. By many estimates biodiversity and ecological services (BECS) account for 50% of the global GDP.

The intersection between the natural world and business finance is evolving quickly. Leaders can draw on nature to both grow revenue and reduce costs and risks, explains Chris Wedding of Fuqua School of Business.

Climate change and nature loss bring direct risks to the profitability and cash flows of companies, thereby to cost of capital. The interface between business and Earth’s complex natural systems has become a mainstream concern, reminds Sharmla Chetty of Duke Corporate Education.

According to the World Economic Forum, a systemic transformation to a nature-friendly economy could create 395 million jobs and deliver $10.1 trillion in economic value by 2030. 

Circularity

Research from Bain suggests that the share of revenue from circular products and services by 2030 could grow 30% from its 2021 levels. The old model - “take, make, and dispose” - assumes a linear throughput from supply chains to customers to landfills. The European Parliament defines circularity: “A model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible.”  

Deloitte and the Circle Economy Foundation indicate that while 100 billion tons of virgin materials are extracted from the Earth annually, only 7% of the materials consumed by the global economy are secondary. Waste is usually a sign of inefficiency, an enemy of well-managed companies. 

Biomimicry

The consultancy Biomimicry 3.8 defines biomimicry as “learning from and then emulating nature’s forms, processes and ecosystems to create more sustainable designs.” One of the key ideas is helping numerous companies grow the top line and capture market share by working with nature. Manuela Batul Giangrande explains that biomimicry is a blueprint for a more sustainable and successful organizational future.

Heliogenesis civilisation

The fluid boundaries between technology and nature are blurring, giving rise to a new epoch where innovation comes not from the mechanistic depths of isolated technology but from the synergistic dance of biology and engineering, explains Malte W. Here, in this harmonious ballet, architects, biologists and engineers are the choreographers of a new heliogenic world where design, like the natural ecosystems it seeks to emulate, is dynamic, responsive and deeply interconnected. 

Nature-based infrastructure for coastal flood and erosion risk management

This Canadian Design Guide showcases natural or built assets that rely on, or mimic, natural system processes to provide coastal flood and erosion risk management functions, while delivering environmental and other societal co-benefits.

Defending coastal ecosystem

Nature-based solutions can build resilience in the face of systemic shocks in our economies and ecosystems. For example, studies show that conserving and restoring wetlands, salt marshes and mangroves is one of the most cost-effective ways to protect coastal areas from storms and floods. 

Smartly constructed, self-growing mussel reefs at the boundary of shallow water (the foreshore) can reduce coastal erosion while making a positive contribution to biodiversity and the coastal ecosystem. This result comes from The Coastbusters research project. The new technique uses mussels to build a reef that acts as a biologically-reinforced dune-by-dike underwater, as the first hurdle against storm surges. Beach and dunes then become the second line of defence.

91% of European cities are using nature-based solutions (NBS) as their tool of choice to improve resilience. Despite the uptake in nature-based solutions, the European Environment Agency (EEA) says the magnitude of expected climate impacts means it may still be necessary to combine them with other types of actions, including physical infrastructure. The University of Washington recently reinforced this by emphasising that: “Weaving nature more deliberately into the fabric of our urban communities can improve our quality of life. From urban parks to sustainable infrastructure, integrating nature into our cities makes us healthier, happier, smarter and safer.”

Flora and fauna

Wildlife, from elephants, whales, and sharks to invertebrates and fungi, all play a role in carbon capture. Wild animals can help stabilise the global climate. Rewilding biodiversity should be a priority in the fight against climate change. A recent review study estimates that global plant communities transfer 13.1 gigatons of CO2 to the underground mycelium of mycorrhizal fungi each year - equivalent to roughly 1/3 of annual CO2 emissions from fossil fuels. 

The amount of time the carbon is locked up in fungi’s mycelium remains unknown. Nonetheless, the influx of such a massive amount of carbon into the soil is a boon for soil ecology, nutrient cycling, and the health of water cycles, explains cell.com.

Take the industrious beaver, referred to as “ecosystem engineers’’ by ecologists. Dams built by them reduce stream erosion and flooding, help maintain biodiversity in wetlands, and provide new habitats for plants, animals, and insects. Left to themselves, they can regenerate their terrain. Insurers need to leverage such regenerative powers. Treating nature as an ally will help us prevent catastrophic climate change.

The soft-pedaling sixth extinction

In December, a historic agreement on nature conservation was reached at the United Nations Biodiversity Conference (COP15) in Montréal, Canada, to guarantee the protection of at least 30% of nature on our planet by 2030. On our current course, one million species on Earth are headed for extinction by 2050. However, scientists agree that at the current rate of decline, only the effective conservation of 30-50% of global land and sea resources would be sufficient to maintain a life-supporting environment on Earth.

Do we even realise the magnitude of this irreversible loss and its implications? Can insurers do nothing to arrest this process?

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