How Climate and Biodiversity Crises Are Impacting the Economy

Nature’s invoice has arrived, and Australia is facing its inaction of not acting on climate and nature. In the first half of 2025, natural disasters have cost the national economy an estimated $2.2 billion, according to new analysis from the Australian Treasury. A figure that might seem insurmountably large, but with inaction this is set to skyrocket in coming years.

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As Climate Change Speeds Up, GDP Slows Down

In the most recent quarterly figures, Australia’s GDP growth slowed to just 0.2%, well below what was expected. Economists attributed this underperformance to the effects of natural disasters. Crops have failed, homes and roads have been destroyed, and businesses have been forced to close, some permanently. The financial burden is not just immediate; it compounds over time through insurance claims, health impacts, and long-term recovery needs.

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This slowdown is part of a larger global trend. The World Economic Forum found that over half of the world’s GDP, approximately $44 trillion, is moderately or highly dependent on nature and its services. When ecosystems are degraded by biodiversity loss, the economic risks are profound. Industries like agriculture, construction, and tourism become especially vulnerable, creating ripple effects across supply chains and labor markets. As nature breaks down, so does economic productivity, reinforcing the urgent need to protect and restore the natural systems our economies depend on.

The Cost of Inaction

Publications such as Forbes and the World Economic Forum have been warning businesses of the long-term costs of not investing in protecting nature. But even with this knowledge, there is a big funding gap. According to BloombergNEF, an estimated $1.15 trillion in financial flows is needed annually to restore and maintain biodiversity. Currently, only about $208 billion per year is being invested, less than one-fifth of what’s required. This gap poses a threat to economic stability, especially for countries where ecosystems offer critical services like flood protection, carbon storage, and agricultural resilience. Without scaling up investment in biodiversity, both environmental collapse and economic fallout are inevitable.

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Why Restoring Nature Is Critical for Climate Stability

Climate change has been a large part of the conversation, but it’s majorly influenced by biodiversity loss. Healthy ecosystems, like forests, wetlands, and mangroves act as natural buffers. They regulate temperatures, store carbon, and absorb floodwaters. When these ecosystems are degraded or destroyed, their protective functions also perish.

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Governments and organisations are catching onto the need for these ecosystems to protect us against other extreme events. Back in 2015, the town of Pickering, UK went against the suggested solution of building a £20 million concrete wall through the center of town to protect against flooding, opting for a 'new' approach that cost £2 million (saving them £18 million); reintroducing naturally occurring large woody debris as dams. This offered additional benefits to climate regulation, flood regulation, habitat provision, and erosion regulation.

Mangroves are one of the many naturally occurring super heroes for fixing these problems. Mangroves have been instrumental in preventing and reducing damage and lives lost in extreme weather events such as floods, typhoons/hurricanes and tsunamis. Across Vietnam, India, and China, mangroves account for protecting over 12 million people from flooding. Typhoon Rai struck Siargao Island, Philippines, and over 8,000 hectares of mangrove forests absorbed a significant portion of the forces, protecting coastal villages and contributing to a lower fatality rate. A new study estimated that mangroves provide $855 billion in flood protection services worldwide. The complex, tangled root systems of mangroves trap sediments and organic matter, preventing coastal erosion and even actively building up land over time. This makes them a vital defense against rising sea levels and coastal degradation.

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The relationship is cyclical and destructive. Climate change drives biodiversity loss, and in turn, that loss accelerates climate impacts. From dams and mangroves to trees absorbing CO2, the solution to fixing climate impacts lies within nature-based solutions.

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Cleaning Up the Climate Tab With Our Taxes

The financial burden of climate change and biodiversity loss is increasingly falling on taxpayers. The impacts of this are being felt across the world. Since 1980, climate change-related natural disasters have cost Americans over $2 trillion in recovery costs. With the recent event of the Alpine village of Bletterbach being buried by a 9-million-tonne falling glacier, we don’t know how much this will cost – but we know there isn’t a price on communities.

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To mitigate future damage, governments are now investing in climate-resilient infrastructure through initiatives like the Disaster Ready Fund, which allocates $1 billion over five years, fully funded by taxpayers. Every major natural disaster has a cost, triggering billions in government spending for emergency response, infrastructure repairs, and community recovery. Taxpayers are already paying for environmental inaction, and unless strategic action is swiftly taken, the tax burden will only grow heavier.

‍Getting Our Heads Out of the Microplastic Sand

It’s no longer economically viable to ignore biodiversity loss. The longer we delay substantial action on climate and biodiversity, the more frequent and severe natural disasters will become, and the more we’ll all pay for it. Investment in climate resilience and ecosystem restoration is a financial imperative for a thriving economy and livelihoods. Stakeholders are becoming increasingly aware of the need to act on climate and biodiversity for the longevity of a healthy economy.

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Hope on the Horizon

Even though businesses know they need to act, they don’t know how to get started. But today there are so many climate and biodiversity startups that have been developed to help fix these problems. It all starts with measuring and understanding your impact, then taking nature-positive actions to create a better future.

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At Xylo Systems, we turn organisations’ biodiversity challenges into opportunities, through reliable insights and nature-positive recommendations. Led by science-backed data, we simplify biodiversity measurement with instant access to trusted localised data, metrics, and ground-truthing. Enabling organisations to gain actionable insights to mitigate risk, maximise regeneration opportunities, and align seamlessly with global reporting standards of the Taskforce on Nature-Related Financial Disclosures, the UN's Global Biodiversity Framework, Science Based Targets Network, and beyond.

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Start your nature positive journey today 👉 https://www.xylo.systems/request-a-demo