A shift in New Zealand’s economic policy today restores our children’s future

By Ian Herbert, Simon Hunt, Mahmoud Sarhan, and Matthew Caro
Publishing as members of the University of Otago, New Zealand BIOFIN Assessment Working Group

In just 50 years, the Living Planet Index, which monitors 35,000 global wildlife populations, has declined by 73%.[1] In Aotearoa New Zealand alone, more than 4,000 species are threatened or at risk of extinction.[2] A change in mindset is vital.

The UN is calling for urgent action, warning that biodiversity loss is accelerating due to an annual shortfall of approximately US$700 billion[3] in nature investment. Alarmingly, global spending on cosmetics and cosmetic surgery[4] exceeds investment in biodiversity. Yet adequate biodiversity financing is essential to achieving the targets set under the Convention on Biological Diversity (CBD) Global Biodiversity Framework (GBF) [5]. Collectively, 197 nations have signed the CBD, committing to leave our children a living planet [6].

1. The University of Otago, New Zealand BIOFIN Assessment

The University of Otago's BIOFIN Assessment aims to evaluate how much is spent on biodiversity in New Zealand, how effectively those funds are used, and how financing can be improved across both the public and private sectors. The assessment focuses on delivering better biodiversity outcomes, generating revenues, avoiding future costs, and realigning budgets. Establishing a baseline for biodiversity expenditure through the BIOFIN methodology marks a pioneering step for New Zealand.

As a first step, the BIOFIN Assessment reviewed the country’s Policies and Institutional Review (PIR), which maps the landscape of biodiversity-related investment. The PIR helps us understand the drivers, pressures, state, impacts, and responses to national biodiversity loss. It also assesses biodiversity strategies, institutional delivery mechanisms, and provides evidence of the economic value of nature.

2. Should New Zealand transition towards a nature-positive economy?

New Zealand has taken an intergenerational economics perspective in the PIR; what we leave behind to future generations. This is captured in the Aotearoa New Zealand BIOFIN Vision:

A strong nature-positive economy as an endowment to our children.

A nature-positive economy maintains and restores nature or ‘biodiversity condition’ by investing in our children’s future with nature. This is a response to the drivers of loss to maintain and restore the state of biodiversity in New Zealand. Without investment, nature declines. The Biodiversity Investment Ratio (BIR) is a ratio of biodiversity investment to GDP.[7]  New Zealand’s BIR is declining as we consume more and invest less.

Biodiversity decreases year after year in a nature-negative economy. This impacts the quality of life for us and our children. Recent research in New Zealand shows that we could save our children and grandchildren $270 billion in cost burden and/or nature degradation over the next 50 years if we invest now.[8]

3. Is a BIOFIN Assessment important to managing national accounts?

Yes. Accountancy is based on double entry accounting – one entry on the profit and loss and one entry on the balance sheet. The New Zealand BIOFIN Assessment considers New Zealand’s biodiversity as a ‘natural capital asset’ in the balance sheet. If we invest in biodiversity, the natural capital asset can be maintained, just like other like physical assets.

The New Zealand BIOFIN Assessment can help fix this problem. The BIOFIN financial needs assessment (FNA) measures the level of investment needed to maintain and restore our ‘natural capital asset’ for a nature positive economy. The investment needed can be expressed as a target BIR.

We trade off nature for more consumption, leading to fiscal imprudence and intergenerational inequity. We show the benefits of consumption as part of Gross National Product but fail to include the cost burden and nature decline on the balance sheet.

4. Could an indicator for biodiversity condition help Treasury maintain fiscal prudence?

Yes. Biodiversity condition could be represented by a New Zealand living planet index. This could be estimated from the same point in time as the Global Living Planet Index (from 1970). It provides a way to measure if we are maintaining and restoring biodiversity and provide insights for transitioning towards a sustainable, nature-positive economy.

New Zealand living planet indicator is a guide for understanding the level of investment needed to maintain and restore biodiversity condition over time. The indicator can measure the (a) intactness (including reducing endangerment) and (b) extent (increasing underrepresented ecosystems) of our biodiversity.

Investing in biodiversity conservation is like assessing the danger at the top of a cliff and then building a fence to reduce the need to fund ambulances at the bottom. Understanding the level of biodiversity investment to maintain the fence at the top of the cliff is critical to transition to a nature-positive economy. If the condition of the fence goes unrecorded in natural capital accounts, it’s equivalent to a broken fence at the top of the cliff, not getting reported nor fixed.

Therefore, understanding biodiversity condition is an important economic policy change needed in New Zealand to improve fiscal prudence (benefit now, pay/invest now).[10]