Loss of nature threatens Norwegian economy

Nature Risk Commission issues report and recommendations

Photo: Gry Thunes / Colourbox
Norway is home to idyllic landscapes with mountains, cotton grass, wetlands, and lakes, but a new report issued by the country’s Nature Risk Commission warns that Norway’s economy and welfare are in danger because of a rapid loss of nature.

Steinar Schjetne
NTB

Changes in the use of and excessive exploitation of nature threaten the Norwegian economy and welfare. A calculation of natural risks must be included in all decisions, both public and private, according to Norway’s Nature Risk Commission.

“Nature all over the world is being degraded faster than ever before in human history, despite the efforts made to take care of it,” writes the Nature Risk Commission in the report that was handed over to Climate and Environment Minister Andreas Bjelland Eriksen (Labor Party) on Feb. 12.

The loss of nature, climate change, and pollution reinforce each other and produce effects that have serious consequences for nature and society. The Norwegian economy in general­—and Norway’s primary industries in particular—are vulnerable. It is therefore crucial that authorities and businesses assess natural risks to a greater extent when decisions are to be made, the committee believes.

“Our most important message is that there is a real financial risk, whether we’re talking about the public sector, private business, or you and me. And we have to take that into account in a different way than we have done before,” said Aksel Mjøs, board member and head of the Institute for Finance at the Norwegian School of Economics.

The background is that, according to the committee, accelerating human influence causes a global loss of nature that weakens nature’s contribution to people and threatens their well-being:

“The loss of nature affects everyone, but the poor and vulnerable are hit the hardest, and this could have serious consequences for today’s young and future generations,” the report states.

Norwegian economy exposed

The Nature Risk Commission was appointed by the government in the summer of 2022. It is the committee’s goal to describe the concept of natural risk, assess how Norwegian industries and sectors are and may be affected by loss of nature and natural diversity, and look at how affected players in Norway can analyze and manage natural risk in the best way possible.

Three critical factors are underlined:

During the last 50 years, the world’s population has doubled, the extraction of natural resources such as food and energy has tripled, the global economy has nearly quintupled, and world trade has increased tenfold.

Changes in land use contribute to a quarter of all global warming.

Around 85% of the world’s wetlands have been degraded or destroyed. This weakens the ecosystems’ ability to store carbon and water and to buffer against extreme weather such as floods and droughts.

In the more than 300-page report, the committee comes up with a number of recommendations and initiatives. Among other things, a five-step analysis and decision-making guide has been laid out, with the purpose to help farmers and authorities identify risks, nature loss vulnerability, and land use changes before a decision is made.

Want to change the mandate

The committee emphasizes that it is essential to include both national and global conditions in the analysis of the overall natural risk to actors in Norway. This means, among other things, that the pension funds that are to safeguard Norwegian welfare in the future must include natural risk assessments in their investment decisions. Not in the least, they must use their shareholder power to get the companies they invest in to reduce negative natural impact.

For businesses that are exposed to the global financial markets, the international outlook could be of decisive importance. This applies, for example, to the State Pension Fund Abroad, which only invests outside Norway.

The mandate of the advisory committee for climate risk in place for Norway’s oil fund should therefore be extended to also include risks to nature, according to the committee’s report.

“The fund and Norges Bank Investment Management are very aware of natural risk from before, so our recommendation must not be interpreted to mean that they are not doing good work, they absolutely are. But they have created the climate risk committee, and our request is that they take natural risks into account there as well,” said Mjøs.

This article originally appeared in the March 2024 issue of The Norwegian American.