Jane: Hello and welcome to the LSEG Sustainable Growth Podcast, where we talk to leading experts about sustainability and finance. I'm Jane Goodland, and this week we're talking to Karen Ellis, who's the chief economist at WWF, which over the last 60 years has grown from a small group of wildlife enthusiasts to one of the world's largest and most respected independent conservation organisations. It works in over a hundred countries and has 5 million supporters and a very clear mission to protect our natural world. As chief Economist, Karen is responsible for leading its work on economics and finance, promoting a net zero nature positive economy and financial system. Now, I can't wait to find out more about Karen's work. But before we get into the conversation, a quick reminder to follow us so you never miss an episode and also help others find the show by rating us on Spotify, Apple Podcasts, or any other platform you use. Right, let's hear from Karen.
Jane: Hi, Karen. Thank you so much for joining us today on the Lseg Sustainable Growth Podcast. How are you doing today?
Karen: I'm very good. Thank you.
Jane: Good. Excellent. So I'm really looking forward to our conversation. And I'm going to start with the obvious one, because I think you've got a very rare and fascinating job. And I'm really curious to know how do you become the chief economist at WWF and what does that actually involve?
Karen: Okay, so I actually started my career as a mainstream economist working in consultancy and then at the Treasury, the Ministry of Finance for the UK. And then I actually worked on macroeconomic policy issues and the budget, and then I moved into development. So international development, working at DFID, the Department for International Development and travelled to many different countries, helping them develop their growth strategies and providing them overseas assistance. So I've had quite a far ranging background and I only moved into environment in the last sort of 11 years where I moved to WWF, and that was because when I was in development, I really saw firsthand the impact of the growing environmental challenges on many countries around the world, which are already beginning to play out. And it made me realise that that is going to be the most significant challenge facing many developing countries going forward. And so I really wanted to throw myself into thinking about how can we find a solution to these environmental challenges. And the conservation movement was going through a bit of a journey of its own as well, when I first joined traditional conservation was about national parks and putting fences around land to protect it.
Karen: But it's moved more and more towards realising that we need to tackle the drivers of environmental degradation, climate change and nature loss, which are largely economic drivers. So it was really about how do we start to influence the economic drivers and turn things around, transform the economy and the financial system, and how do we integrate an understanding of economic incentives into our advocacy work and our policy work to have more fundamental impacts on the issues that we care about and really realise that that was the only way we were going to be able to achieve our goals. So in terms of what we do, we now have a programme of work on creating the incentives for that transition, largely through policy change, but also working with businesses to demonstrate the business case and to work with the private sector to unlock the financial flows that will support that transition. And to make the case to government for the policy changes that are needed, really to support that transition as well.
Jane: Brilliant. And it sounds like a dream job. You mentioned there actually something that I want to pick up on, which is kind of when we say conservation, I think lots of people kind of immediately kind of their mind goes to, like you said, it's about national parks or sort of traditional conservation activities. But nature risk is something that is important. Right? And I guess it would be good for us to sort of be clear about what do we mean when we're talking about nature risk. So particularly as obviously your work relies on you thinking about that kind of at a systemic level. So tell us what that really means.
Karen: Yeah. Well, I mean, there are huge risks to the economy and to the financial system from nature loss, and there's growing evidence of that these risks are actually on a par with climate risks, which are becoming much better known now. But nature risks are also very interlinked with climate risks. So our whole economy is actually dependent on nature. Some sectors are more directly dependent than others, but ultimately all of us are dependent on nature in terms of providing the air we breathe and the food we eat and our security from natural disasters, etc.. yet we continue to destroy nature in a way that's really jeopardising our, our future, ongoing prosperity and growth on this planet. And we are approaching tipping points. The scientists have said there are tipping points that we might reach, which would irreversibly change the way certain ecosystems work, like the Brazilian rainforest, for example, or the Arctic ice caps. So these are going to have significant and somewhat unpredictable impacts on the way our economy works. And this is being increasingly recognised by mainstream economic actors. So we've got the network for Greening the Financial System, which is a network of financial regulators and central banks working internationally to understand these risks. Also, the Coalition of finance Ministers for Climate Action, who are also working on this, and they've both published reports and doing growing work streams around nature risks and trying to understand it and work out how they can respond to it in their own decision making.
Karen: In the UK, the Green Finance Institute recently published a report quantifying the economic cost to the UK economy from Nature Risk. And they were huge numbers like 6 to 12% of GDP impact of nature loss. These are bigger numbers than even the financial crisis or even Covid in some scenarios. So these risks are really huge and a bit terrifying in many ways. And they pose risks to the government in terms of fiscal costs, but also in terms of financial system stability. And, you know, it's going to work. It's going to play out through different businesses like particularly the food sector, is very vulnerable to nature related risks. The risk of supply chain disruption also associated with water shortages, floods, wildfires and the knock on impacts those things have on energy supply, on access to insurance health costs from pollution. There's a whole series of very significant risks that are now increasingly being quantified and starting, only starting to be factored into decision making.
Jane: I mean, it's quite stunning really, isn't it, when you think about kind of the potential quantum of the financial impact, yet we're only really starting to talk about this in a kind of meaningful way. Somewhat worrying actually. You've talked about macroeconomic drivers of environmental degradation. And I think that's a really interesting kind of lens to look at things through, particularly because obviously that's very much core to what you're doing. But can you help us understand a bit about what are the biggest drivers in your view, which we really do need to effectively kind of fix in order to address the nature risk that we've talked about?
Karen: Sure. I mean, I think one of the biggest is the sort of desire for income growth and jobs at sort of short term focus. So and the incentives embedded within the system really drive that short term focus, so you can generate a lot more money from cutting down your forest than leaving it standing, even though that forest contributes significantly to our global climate. Acting as a carbon sink and will have huge economic impacts if it does, you know, specifically like the Brazilian Amazon, then that is going to have huge impacts if that's cut down for the whole global economy. And yet it still makes more sense in financial terms for them to chop that down and use it for, different production. So also the sort of desire for short term profit maximisation. So there's huge short termism in the market as well, in both in government and in the market. So, you know, to invest in the transition for example, into regenerative agriculture, you can expect a positive rate of return within 8 to 10 years. That's usually too long for many investors and for many farmers. So it's just that short termism that's really embedded. And I guess risk and uncertainty around that transition as well. That is preventing the action that we need to see. And fundamentally, I mean, nature is free or has been considered to be free. So we've overexploited it. That's what you would expect the economic to the economy to do. If it's free, it will be overexploited. But those negative impacts, they are externalities, as economists would say. They're not that visible, but they are coming back to bite us increasingly in ways that weren't necessarily foreseen a few years back. So I think there is some fundamental things in the economic system that need to be addressed, particularly through policy, but also through new cultural norms and ways of doing business. You know, in the financial sector, doing new kinds of modelling and taking a more long run approach, for example. So there's some really fundamental things that need to be tackled.
Jane: And then, I mean, you talked about kind of like the, the Amazon rainforest. Are we seeing kind of the incentives globally? You know, this is a global phenomenon, though, isn't it? This is not just incentives elsewhere, because there are incentives here in the UK, but also kind of developed economies. Right. It strikes me that there needs to be a sort of a wholesale change of incentives across the board. But my goodness, how do you do that?
Karen: Well, so we are developing the architecture to drive this now, so you can sort of see what's already happened on climate change. So we have the climate the climate cop, you know, those annual meetings where all of the ministries get together to discuss how we're going to tackle climate change? They haven't been hugely successful in recent years, and we've just seen the most recent climate cop not ending in a very positive way, but nonetheless, that is one of the biggest sort of global processes that we have that can drive global cooperation around climate change. And we do have the same thing for biodiversity. So we have the convention on Biological diversity, which is the equivalent of the UNF triple C, but for biodiversity. And that has biannual Cop. So every two years there's a cop. And there was a conference actually also very recently in October in Cali and Colombia of the CBD and there's a global biodiversity framework, which is a set of goals that that convention has set up, set out, and many countries have signed up to that many, many countries. So all of those countries are now committed to work towards developing, delivering those goals. And one of those goals includes aligning all financial flows towards the delivery of the global biodiversity framework targets equivalent to what the Paris Agreement did, which was, you know, align say it will align private sector and financial sector with those the Paris goals.
Karen: So we have that commitment. It's now about how do we actually do that, how do we align the private sector to that. And we still need to build quite a lot of the architecture around that, but it is beginning to happen. So for example, for climate, you have these net zero sectoral pathways mapped out at the global level and sometimes also at the national level. So for the International Energy Agency published a global sectoral pathways towards net zero so that you can see what needs to change in the energy sector by what date in order to deliver net zero by 2050. And you have that for many other sectors as well. And we have them in the UK at the national level as well, published by the Climate Change Committee. You don't have any of that for nature positive goals. So we've been advocating for that to happen for nature as well. Nature, positive sectoral transition pathways. That would give much greater clarity to the private sector and the financial sector about what needs to change over time, what needs to be invested in, and also about the policies that will be put in place to support that transition as well. And that would give us. It would help to flesh out what needs to happen to deliver on those global biodiversity framework targets.
Jane: But who would be putting those pathways together? Is there a natural home for that type of activity? Or again, is that something that needs to be kind of created?
Karen: So that's a good question in so we've been advocating for national level pathways. But what you have in climate is global level pathways as well. And we don't have global level pathways either. So that is something else that needs to be done. And actually the FAO did commit to developing a global food pathway, I think, or pathway for the food sector, but I haven't seen that come out yet. So we do need global level pathways as well. But there's still a lot you can do at the national level because countries have their own sort of commitments to deliver on the GBF and they have their own National Biodiversity Strategy and action plan. Every country that's part of that framework has to have that, and that has goals in it, so they can work out how they are going to deliver on those goals and how they're going to mobilise the private sector to do that through appropriate policies and incentives. And, you know, the right framework. So we've been advocating for that. So you can do a lot at the national level, but you also probably need some global level action as well done by the right sort of global bodies for each sector.
Jane: And because this is, you know, with our supply chain, so kind of like long and interconnected across different countries, there needs to be a sort of a big dollop of collaboration, doesn't there, in terms of between different countries on those pathways. So this is not just something you can do within the boundaries of your country. Complicated stuff. So tell me in your role. I mean, we've talked about the big picture, but what are some of the specific things that you've been doing over and above the advocacy work? What? Let's get into the detail of in practice what you spend your time doing.
Karen: We advocated successfully for the UK to make that commitment, which it did back at Cop26, to be the first net zero aligned financial centre in the world. And that kicked off a whole load of activity, including the transition Plan Task Force, which the UK Treasury set up to define best practice guidance for company transition plans that would be required going forward from all large companies and financial institutions. And we were part of that transition task force, so we helped develop that guidance. Specifically, we chaired the Nature Working group. So that was looking at how you include nature in those transition plans. And that's crucial because we won't be able to deliver on net zero without tackling nature loss for a start, because that's about a third of the emissions is from nature loss, deforestation, land use change. And also because nature based solutions can be around a third of the solution in terms of those emissions reductions as well. So it's really central to delivering on net zero. So we helped produce the guidance that the Transition Planning Task Force then published about how companies should think about nature in their transition plans. And we worked with a lot of companies on how to do that. We published our own paper called Nature in Transition Plans a couple of years back as well, which signposted for companies where they can go for different tools and guidance and sectoral sort of guidance as well to help them navigate that new sort of sort of recommendation that they think about nature and transition plans because we know it's all new and not straightforward.
Karen: So that at least was a start. But since then there's been a lot has built on that. So the Tcfd and also Gfanz have both recently published papers on nature in transition plans as well. Which is great. So it's moving on. And then the other thing we've been doing as, as I mentioned, is developing the case for these nature positive sectoral transition pathways. And in fact, now we're working with the UK government who have now said they will support the development of these pathways for the UK as part of their review of the Environmental Improvement Plan, which they are currently reviewing and will publish an update about in the new year. So that's very exciting. I think they have committed to sort of develop those pathways, working with us and with the Green Finance Institute and with the private sector and with academics to come up with a kind of shared vision for what those pathways should look like for key sectors of the economy. And then, you know, use that to sort of mobilise private sector and unlock that private finance that we need for the transition.
Jane: So, I mean, without getting ahead of that work, what sectors are kind of top of the list in terms of thinking about the nature transition, like which sectors really need to kind of get cracking on this?
Karen: Yeah. So I think that does often vary by country. But for the UK the top three sectors that we're thinking we will focus on, although we're still in the prioritisation process, but at the moment we're thinking it will probably be agriculture, water utilities and built environment because those are the three that are having or could have the biggest impact on nature loss in the UK. And also you know, the built environment, there's a lot of ambition from the current government to expand housing. And so that will pose challenges, of course, in terms of impact on water sources. And also the water sector as we've seen, has been under a lot of scrutiny for the water quality issues. So there's a lot that those three sectors together need to do to particularly tackle water issues, but also land use. So those three sectors have a lot of interlinked challenges. And so we want to work probably with those three sectors to develop a shared pathway that can deliver on some of those gbf targets. They include things like nitrogen pollution. You know, there's targets set for nitrogen pollution and land use and other types of pollution. So we want to work to sort of unpack how they can each contribute towards that, delivering that goal, and what kind of policies would be necessary to support them to do that.
Jane: Interesting stuff you mentioned about integrating nature into climate transition plans. And that that in itself is kind of a key point, right, in terms of saying this is not a separate endeavour. This should be part and parcel of a organisations climate transition plan. Can you help us kind of understand a bit more practically what that would look like? Because I think people are probably quite familiar with the fact that if you have a climate transition plan, you're likely to have targets around decarbonisation and reducing emissions, etc., but what would you likely see if an organisation was integrating nature effectively in its climate transition plan, what would you see?
Karen: Yeah, well, it will vary depending on which sector that company is in obviously. But so I mean I guess basically they would need to think about any impact they may be having in terms of climate impacts through nature loss. So if they are like a food company, for example, are they contributing to deforestation through their supply chains? Have they done everything they can do to ensure their supply chains are deforestation free? Also, for the financial sector, we know the financial sector is very exposed to deforestation risk. So have they done all they can do? Are they building the transparency of their client base to ensure that they're tackling deforestation? Also, can they invest in nature based solutions in a way that would help contribute to their own climate targets and also potentially, you know, contribute to climate resilience. So insurance companies, for example, could probably do a lot to invest in nature based solutions that will reduce risks of flooding, for example, that would benefit their clients and customers and improve their resilience at the same time by investing in different natural assets, that in a way that would actually contribute to carbon emission reduction as well and improve nature for the financial sector, I think it's about investing in the transition as well.
Karen: So engaging with your clients and understanding what nature risks and opportunities they're facing, and also helping them to navigate this and helping them to finance that transition themselves and make those investments that will enable them to improve their nature impacts and manage their nature related risks. So investing in regenerative agriculture for farmers, for example, and for a company like Lseg, I think. Can it take a proactive role in spreading awareness and action on nature within the companies that use its services? And it's a big data provider? I believe so. Can it play a role in collecting and compiling data on nature related risks to help companies assess and manage those risks much better? Especially building on the sort of growing disclosures that we hope to see under the Tnfd and then help the financial institutions to support the transition to more nature positive business models as well. So I think a big part of transition plans is actually about what can a company do even beyond its own direct operations in terms of helping its customers, its clients, its supply chain, wider society, to think about how they can do more on these agendas as well?
Jane: Yeah, absolutely. And when you talk about investing in nature based solutions, is there a couple of examples of what those solutions might be?
Karen: Yeah. So I think for example water companies can invest in wetlands in a way that both reduces the risk of flooding because wetlands can absorb you know, large amounts of flood water also improves water quality, which actually makes their lives easier and means they don't have to do lots of extra filtration. And wetlands are great for biodiversity as well. So that's one example. And obviously there are carbon markets that companies can invest in that will invest in forests or other conservation activities that can have a beneficial impact on, on nature as well as reducing emissions. We wouldn't like to see that as offsetting, but it's more a part of a company's contribution to nature tackling nature loss alongside its own efforts to reduce its own emissions.
Jane: Yeah. Got it. Okay. Interesting stuff. So we're going to wrap up now and I'm kind of the challenge here is a bit of what's the call to action? Do you have a couple of things that listeners can take away from this in terms of thinking. Right. I'm going to go and do you know, 1 or 2 things to actually get started on nature or kind of really start to think more meaningfully about kind of integrating nature into their sort of sustainability and climate plans. What's the 1 or 2 jobs that you're going to give us to do?
Karen: Yeah, absolutely. I mean, I think obviously championing this agenda within your business and there are lots of tools out there to support that now. So obviously there's growing expectation that companies will be assessing their nature related risks and impacts and opportunities using some of the tools that Tcfd has come up with and produced like that, including the Leap assessment as the starting point. So encouraging your company to do that and incorporating that, starting to think about how to incorporate that into transition plans as well, using some of the guidance I mentioned earlier to this to sort of build awareness within your company. There's also other sort of starting point or entry points you can think about, like we've produced a number of films. There was our planet too big to fail a few years back, which looked at the role of the financial sector in both kind of contributing to, but also potentially solving the climate crisis and nature loss. And that was screened by many, many companies and financial institutions around the world because it was really quite a powerful film. That really sort of showed the huge role that the financial sector can potentially play in this. Save Our Wild Isles was a more recent set of films we produced, looking at different sectors of the economy with a more UK focus actually that one, and looking at how they can engage to become more nature positive and contribute to nature goals.
Karen: All of those films can be screened with your staff within a company to raise awareness and have the conversation. WWF has often supported that and provides speakers for panels and everything like that. We did that with our partners RSPB and National Trust as well, so they're also part of that. They can support that kind of engagement as well. And another tool that we produced off the back of that was something called Nature's Workforce, which is provides materials and an approach for individual employees within a company to start thinking about the nature related issues in their company and then how to champion that internally. So there's a lot that individuals can do to raise awareness and champion this agenda in their own company. And then on a more personal basis, of course, you can support organisations like WWF and other conservation charities. And, you know, Christmas is coming up. So you could even buy a WWF animal adoption as a gift from for one of your family. So it's a great idea. There are lots of ways you could support this agenda within your company and beyond.
Jane: Yeah, I really like that. I like the idea of sort of thinking at an individual level and then at an organisational level. And I love the idea about film because often you know, they can be very emotive, can't they? And they can really trigger conversations. So I'm going to check out the ones that you mentioned actually I'm hoping that they're going to be online. are they online?
Karen: They're all online, freely available to use for anyone who wants to use them. Absolutely.
Jane: So it's my commitment to you. My promise is I'm going to go and find that film, and I'm going to try and find a way to share it internally at LSEG. So I've got my homework. I'm going to I'm going to leave it there before I get any more. Thank you so much for sharing your expertise and kind of telling us about your fascinating job and the work that you do at WWF. It's incredibly important. So thank you for doing it. And yeah, look forward to speaking to you again soon.
Karen: Thank you so much. And thank you for doing the homework as well. That's very exciting to hear.
Jane: That's it for this episode of the Lseg Sustainable Growth Podcast. I do hope you enjoyed that conversation with Karen. I thought it was fascinating, and I mean so important that the work that she im going to check out the films she mentioned. So if you've got questions, comments or someone you'd like us to talk to, then do get in touch by email at
[email protected]. So this is the last episode of this season, so we'll see you again in the new year.
