Minister of Finance Annika Saarikko's speech at the economic policy conference

Minister of Finance Annika Saarikko gave a speech at the conference on the theme of ecologically sustainable economic policy in the 2020s on 1 June 2022.

Professor Sir Partha Dasgupta, Members of the Economic Council, and other followers of the economic policy conference

Promoting biodiversity and combating biodiversity loss are among the key challenges facing humanity. The report published in February 2021 under Professor Dasgupta’s leadership has been a much-needed and welcome opening for discussion on the relationship between the economy and nature. 

A key driver of biodiversity loss is the ecologically unsustainable economic activity of humankind. One of the main points of the report is that we should address the management of natural capital just like the management of other assets, taking into account its value to both the economy and otherwise to humankind. The report can be considered pivotal and even revolutionary. The report has also significantly increased discussion on nature and the economy in Finland. 

It is important to assess the impact of biodiversity and climate change on the economy and economic policy instruments in cooperation with international partners and institutions. Finland is engaged in this work through, for example, the Coalition of Finance Ministers for Climate Action, which brings together more than 70 countries and 25 international institutions for economic cooperation. Finland currently co-chairs the Climate Coalition with Indonesia. 

The task of the Climate Coalition is to help our member states adapt to and combat climate change based on the Helsinki Principles. The goal is also to utilise the Climate Coalition to assess impacts on biodiversity and increase understanding from an economic policy perspective. 

The Climate Coalition supports concrete action in its member states. We seek, among other things, to assess the importance of the circular economy and how finance ministers could promote it. In this field, we Finns could add value based on our experiences.

We are currently considering in the Climate Coalition how to integrate aspects related to biodiversity and biodiversity loss into our work with the Helsinki Principles. A report on nature-related risks and policy recommendations will be published in June. The aim of the report is to enable us as finance ministers to better identify the economic impacts and risks of biodiversity loss and to take them comprehensively into account in planning economic policy. The work of Sir Dasgupta and the UK Treasury has been a basis for our deliberations. Your work is ground-breaking and lays the foundation for progress!  Many thanks for that! 

It should be emphasised that economic policy or increasing economic growth have no intrinsic value in themselves. Economic growth, and particularly sustainable economic growth, can, however, facilitate the achievement of primary goals. We can aim, for example, to increase wellbeing, promote health or safeguard biodiversity. Maintaining a welfare state requires sustainability of public finances. 

In Finland, the idea of the government programme and, at the same time, our entire welfare society is to build a socially, ecologically and economically sustainable society. The three dimensions of sustainability must form a balanced and compatible entity. A sustainable economy is a prerequisite for the stability of society and thereby also for attention paid by society to the environment. A sustainable society reduces the risk of crises.

Sustainability challenges for public finances mean at least three things in terms of biodiversity. Firstly, sustainable public finances and sustainable economic growth enable the protection of biodiversity with public funds. Secondly, biodiversity loss is a phenomenon of such magnitude that it cannot be resolved by public funds and actions alone; the whole of society must be involved – both civil society and the private sector. Thirdly, we need to find the means to enable humankind and nature to exist together while simultaneously preventing biodiversity loss. 

Biodiversity is a more challenging phenomenon than climate change, particularly from the perspective of economic control. To meet the challenge of measurement, the goal is ecosystem accounting that would also take into account natural capital services that do not generate marketable products or services. Utilising ecosystem accounting in economic decision-making would require monetary indicators. Alongside this development work, it is essential to develop and improve other metrics and indicators that will help us to improve the effectiveness and evaluation of the fight against biodiversity loss. 

In addition to monitoring the state of nature, it should be possible to use information to select cost- efficient and effective measures, even though evaluation is challenging. It is not just a matter of using public funds efficiently, but also of achieving as effective measures as possible with public funds.

A large, and perhaps the most significant, proportion of measures affecting biodiversity are local. This is another reason why biodiversity loss is a more complex phenomenon than climate change. We cannot solve diversity loss solely through regulatory control such as emissions regulations. The local dimension emphasises the need for bottom-up measures based on local solutions.  

The local dimension is also highlighted with regard to where decisions are made. For example, in terms of forest policy, we Finns know best about the state our own forests and believe in Finland that detailed forestry regulations must remain within the competence of individual EU Member States.  

Global markets and chains of operation are expanding local problems into global ones. On the one hand, our consumption and investment choices may cause biodiversity loss on the other side of the world. On the other hand, the loss of biodiversity on the other side of the world is also affecting our consumption options and prices due to impaired production opportunities there.

Biodiversity and biodiversity loss, as well as the associated risks, have also emerged in the financial markets. Compared to climate risks, however, their definition has proved even more challenging. 

Biodiversity loss and climate change are strongly interlinked and cannot be resolved as separate phenomena. At best, their connection offers the opportunity for synergies, with benefits for both biodiversity and climate. This is also an important theme in the current green transition. 

Emission-based taxes and emissions trading, among other things, have been used to mitigate climate change. However, biodiversity is difficult to address with equally straightforward economic control. Therefore, in addition to taxes and fees, the range of instruments must also include legislation and lighter measures, such as advice and voluntary commitments. Various standards, regulations and licensing systems can also include effective instruments. When comparing instruments, attention should be paid to their effectiveness as well as to their harmful side effects. 

There also remains much work to be done to increase our understanding in the Ministry of Finance of the phenomena of climate change and biodiversity. Correspondingly, moreover, the Ministry of the Environment should have a better understanding in the future of economic realities. Cross-administrative expertise is needed on both sides.

Work on identifying and defining risks to biodiversity is only just beginning. Reaching a sustainable growth path requires a change in the structures of the economy and society. Achieving change requires not only changes in the private sector, but also action by the public sector to support and accelerate this change. 

There is an urgent need to combat biodiversity loss and promote biodiversity, so it is important to act now. However, few things move forward globally without a financial interest. Understanding the market economy and recognising countries’ economic boundary conditions is also the beginning of wisdom in promoting biodiversity.