Researchers from Queensland University in Australia have used modern portfolio theory (MPT), a mathematical framework developed to help risk-averse investors maximise returns, to make decisions about what coral reefs to protect in the face of climate crisis.
In October this year, the Global Coral Reef Monitoring Network reported that the world has lost 14% of its corals from 2009 to 2018. This is a direct environmental impact of global warming. Even if emissions are drastically reduced and limited to 1.5C above pre-industrial levels as highlighted in the Paris Agreement, 70% – 90% of today’s corals would still vanish.
Overtime, rising ocean temperatures induce large-scale coral bleaching. This means that when the water is too warm, corals expel symbiotic algae living in their tissues, causing them to turn completely white. The coral is under increased stress and can die as a result.
Other environmental threats to climate change include ocean acidification, overfishing, destructive fishing practices, unsustainable coastal development, disease, and declining water quality.
It is so crucial that new and innovative solutions are developed that will work towards protecting the world’s coral into the future.
‘Treating conservation’ as ‘an investment opportunity’
This is where modern portfolio theory or MPT comes in. In 1990 Harry Markowitz received the Nobel Prize for developing this conceptual framework “to help risk-adverse investors to construct diversified portfolios that maximise their returns without unacceptable levels of risk.”
The new study, developed by University of Queensland researchers considers reef preservation as an “investment opportunity”. The theory will help scientists to choose a balanced portfolio of coral reefs from across the world to protect. As University of Queensland fellow Dr Hawthorne Beyer says, “talk to people in the business world and they get it immediately. It’s a very logical idea and makes a lot of sense. Ours was the first to apply it on a global scale.”
How are coral reef scientists deciding how and where to focus conservation efforts in the face of climate change?
Read on to hear how @BloombergDotOrg is using portfolio theory to save the most biodiverse ecosystems in our oceans, via @guardian | https://t.co/O7GocnmFtb pic.twitter.com/puMQog8d86
— WCS Ocean (@WCSocean) November 30, 2021
Scientists divided the world’s coral reefs into “bioclimatic units” of 500 square miles. They use 174 metrics, in five categories, including variables such as temperature history and projections, ocean acidification and invasive species. Using a process called “scalarisation”, they produced estimates for each bioclimatic unit. This allows scientists to understand the widest range of possibilities for the future of each area of the world’s reefs.
MPT was then used to quantify these future threats and identify those reefs offering the best options for conservation. The application of MPT means that conservation efforts are not all betting on one risk which is especially necessary as there are huge uncertainties about what the main risks will be.
Related Articles: Why Coral Reefs Need All Our Attention | Global Coral Reef Destruction – Can We Stop It? | Healthy Oceans: The Cornerstone for a Sustainable Future
The need for innovative solutions
Whilst stock market theory and conservation may seem to be an unlikely pairing, climate change requires unconventional solutions. Climate change is an unpredictable challenge that is having an impact on an increasing number of areas of the day-to-day running of life on earth.
And conservation funds are recognising the potential of these findings. Bloomberg Philanthropies’ Vibrant Oceans initiative and others have invested $93m into the project already. The report has found that this 50 reefs approach has helped at least 26 organisations globally.
Director of the coral reef conservation at the Wildlife Conservation Society, Emily Darling has said that “one of the biggest benefits of the 50 reef approach has been this compelling message that climate change is the critical threat to coral reefs and this is an approach that can give reefs a fighting chance”.
With innovative solutions like this, perhaps the coral reefs that are home to more than 25% of all marine life, might yet be saved.
To sum up: The modelling is based on a well-known business precept, never throw good money after bad – no doubt the reason why it makes so much sense for the business community. This still leaves unanswered the question: Are there coral reefs that might cost more to save and yet might be worth saving for non-financial reasons (for cultural reasons, for example)? And could we expect that, as a result of this approach, no effort will be made and they won’t be saved at all? To answer such questions would require a careful evaluation of all the 174 metrics in five categories that went into building this analytical approach. Only time (and additional evaluations from experts) will tell. Stay tuned for further developments.
Editor’s Note: The opinions expressed here by Impakter.com columnists are their own, not those of Impakter.com. — In the Featured Photo: Dalaithngu featured in Storm Boy (1976). Featured Photo Credit: Jerry Reid, U.S. Fish and Wildlife Service