This year’s UN Biodiversity Conference (COP15) was larger than ever. Held in Montreal in December, the event hosted nearly 20,000 leaders and representatives, a significant increase from the 3,800 participants at the previous edition in 2018. More than 1,000 companies were represented in comparison to only dozens at past biodiversity COPs. The diversity of attendees at COP15 fostered deeper dialogue and transparency among all the stakeholders that need to engage in restoring natural capital and the conditions for making that happen. The agenda focused on how to protect natural capital and limit biodiversity loss around the world—and the attention the gathering received highlighted growing recognition that the state of nature is now a cause of widespread and immediate concern.
Among the key questions debated in Montreal were the extent of the challenges facing terrestrial and marine ecosystems. Participants examined methods for protecting and restoring those ecosystems with a special focus on loss mitigations and financial models for achieving protection and restoration goals. New research by McKinsey and Company that was published to coincide with COP15 makes a first quantified attempt to address how companies can engage.
Taking a multi-stakeholder approach to restoring natural capital
The report, Nature in the balance: What companies can do to restore natural capital, seeks to calculate the impact of human activity on natural capital. Its findings are far from fatalistic: the report suggests that while a range of economic sectors contribute to the depletion of natural capital—primarily agriculture, but also retail sales and services and the power sector—specific actions by companies using current technologies could not only reverse the trend but also generate positive return on investment in a substantial number of cases.
The report is the latest McKinsey research to address natural capital and focuses on corporate actions while mentioning policy enablers. In June 2022, we published a quantitative nature and risk assessment for financial institutions in Africa And our September 2020 report on Valuing nature conservation estimated that action on nature could support about 30 million jobs and $500 billion of GDP in ecotourism and fishing and particularly benefit remote and vulnerable communities.
Our analysis shows that, to be effective and efficient, corporate actions would need to be accompanied by support from other stakeholders in both the public and social sectors.
The business imperative for investing in nature
Mitigating climate risk is impossible without investing in nature, but unlike climate risk—which has been studied for the past two decades and has prompted a global target framework, corporate targets and action guides, metrics and accounting, and emerging global currencies—basic questions on nature remain unanswered. Nature-related risk has no single unit of comparison and there is no single goal for preserving natural capital, such as limiting global warming to 1.5°C. As a result, nature-related corporate commitments have been largely opportunistic rather than grounded in strategy, footprint, or global targets.
COP15 outcomes have several implications for businesses. On December 19, the Kunming-Montreal Global Biodiversity Framework was adopted as the main outcome from COP15, providing clear targets. These include, by 2030, protecting at least 30 percent of terrestrial, inland water, and of coastal and marine areas and ensuring that at least 30 percent of degraded areas are under effective restoration. Accomplishing these goals would nearly double the amount of conserved land and national waters, which may affect business operations relying on natural resources, current and future.
Other targets also have significant business and financial implications. Target 15 of the agreement, for example, aims to encourage and enable businesses to monitor their risks, dependencies, and impacts on biodiversity and may be translated into national reporting regulations. And Target 19 aims to mobilize $200 billion per year by 2030 (a similar goal was adopted for climate in 2009 in Copenhagen). This assumes that private finance will be activated and the private sector incentivized to invest in biodiversity.
The path forward
McKinsey aspires to be a catalyst in two areas: helping businesses design and implement nature-positive transformations, and guiding governments on how to optimally design and implement their 30x30 targets. For instance, McKinsey is working with Blue Nature Alliance, which aims to advance large-scale ocean conservation, and Enduring Earth, which aims to accelerate ocean, land, and freshwater conservation, and support community development worldwide. “We want to replicate our ambition on climate as a catalyst to nature” says Josh Katz, partner.
2023 will be a crucial year to make progress, and businesses, governments, and nongovernmental organizations alike have important roles to play. Corporate leaders need to understand the magnitude of the challenge ahead, the risks that the loss of natural capital could pose, and the opportunities for more sustainable business building—as well as the implications of the newly adopted Kunming-Montreal Global Biodiversity Framework for their company. Patagonia CEO Kris Tompkins, who has dedicated her life to both business and the planet, in our interview with her in 2021, says pointedly, “We are past the moment where inaction is acceptable.” The efforts that companies have made on climate action and the lessons they have learned could build on existing decarbonization efforts to help preserve natural capital—and the Earth as we know it.
Caroline De Vit is an associate partner in Montreal. Tony Hansen is director of Natural Capital and Nature at McKinsey, based in Seattle. Duko Hopman is a partner in New Jersey. Josh Katz is a partner in Stamford. Hamid Samandari is a senior partner in New York.