New report finds that more than half of global trade is dependent on nature

With natural capital and biodiversity rising up the global agenda, Planet Tracker examines countries’ dependence on nature and the implications for financial markets.

Financial markets need to understand international trade’s dependence on nature: around 40% of total annual world trade is nature dependent, financial think tank Planet Tracker’s latest report highlights.

For some countries, more than 80% of exports are dependent on natural resources. This raises questions about how well this natural capital is looked after, since sovereigns’ economies depend on it.

By presenting a new metric of countries’ nature dependence based on trade, Planet Tracker reveals not only the scale of certain economies’ dependency on nature, but also the results of this dependency. Understanding this is crucial to reducing export risks as climate change accelerates as well as building sustainable economies for nature-dependent exporters.

The report:

Classifies world exports into those dependent on nature – both renewable (like agricultural, forestry and seafood products) and non-renewable (such as oil, minerals, metals, ores etc) and those which are not.

Divides countries into high, medium and low nature dependent exporters.

Examines countries with high dependency, by looking at common characteristics based on a few broad measures.

Some of the report’s key findings include:

• Countries with a high dependency on renewable resources generally have poorer credit ratings than countries with medium to low dependency.
• Countries with a high dependency on non-renewable resources, notably those with well-established oil wealth and good governance, are much more likely to have strong credit ratings.
• Economic, political, financial and technological improvements lead countries to become less dependent on natural resources and more dependent on production- or service-based economies.
• Political instability is a likely result of non-renewable resource extraction.
• Less inequality and greater GDP per capita levels can lead to decreases in renewable exports.

John Willis, Director of Research at Planet Tracker, adds: “Russia’s invasion of Ukraine has pushed the international trade of natural resources – such as oil, gas and wheat – to the top of the international agenda. But there are other systemic risks associated with the trade of natural resources that long pre-date the invasion.”

Read the full article here.