From Forest To Flood How Lost Biodiversity Shows Up In Your Wallet

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WHEN floods hit Malaysia, the first thing we notice is the rising water. It moves quickly, fills our streets, enters our homes and brings life to a temporary standstill. What we do not always see is the deeper story behind these disasters.
The decline of forests, weakened river systems and shrinking mangroves has slowly reduced the ability of our landscapes to absorb heavy rain and buffer storms.
The World Wildlife Fund’s (WWF) Living Planet Report 2024 highlights that wildlife populations in the Asia Pacific have fallen by about 60% since 1970. Freshwater species worldwide have declined by 85%. These figures signal that ecosystems everywhere are struggling to cope with climate stress.
Biodiversity may sound like a scientific term, but it simply refers to the variety of life that keeps our natural systems running. Forests hold rainwater and release it gradually into rivers. Wetlands act like natural sponges. Healthy soils prevent erosion and landslides. Mangroves cushion coastal villages from strong waves.
Scientists refer to these benefits as ecosystem services, and they form the foundation of Malaysia’s safety, wellbeing and economic activity.
Global studies by the World Bank in 2023 and the WWF report in 2024 show that more than half of the world’s economic output depends on these natural systems. When they deteriorate, the services they provide weaken, and the consequences are felt across homes, businesses and public funds.
(Image: Unsplash/Iuliu Illes)In Malaysia, healthy forests, wetlands and rivers are often the first and most affordable defence against severe weather. The financial impact of natural disasters goes beyond the immediate clean up after a flood.
Floods disrupt transport networks, slow down deliveries and force businesses to close temporarily. Agricultural areas take longer to recover, which affects harvests and reduces supply.
Local authorities spend more in drainage upgrades, river maintenance and emergency services. At the same time, families face higher repair bills and lost income during periods when they cannot work.
The Bank Negara Malaysia (BNM)-World Bank’s 2022 analysis of nature-related financial risks in Malaysia notes that repeated climate-related disasters place growing pressure on both household finances and national development plans.
Each flood becomes part of a larger cycle that drains resources and reduces long-term financial security. For ordinary Malaysians, the decline of natural systems creates three financial pathways that impact the cost of living and long-term financial wellbeing.
The first is the cost of food. Farming depends on stable rainfall, healthy soils and functioning rivers. When these systems are disrupted, harvests become unpredictable and fish stocks decline.
Supply tightens when weather events destroy crops or reduce fishing days, and prices rise as a result. Even modest disruptions in agricultural regions can create noticeable changes in market prices because the food system is closely linked to climate and ecosystem health.
The second pathway is the burden on monthly expenses. Frequent floods increase insurance claims, which leads to higher premiums. Households may also face repeated repair costs for vehicles, appliances and building structures.
Small businesses lose revenue when they have to close temporarily, and this affects overall household income. Local councils and utilities also face higher operating costs when infrastructure is repeatedly damaged, which increase pressure on public funds.
The third pathway relates to long term savings. Pension funds and financial institutions invest in sectors that rely on nature, such as agriculture, plantations, fisheries and tourism. These sectors rely heavily on stable ecosystems.
When natural systems decline and climate impacts grow stronger, investment risks increase, and returns may be affected. Over time, this trend can influence the performance of savings and investment instruments that Malaysians depend on for retirement.
(Image: Utusan Malaysia)The link between nature and money becomes even clearer when we consider how land utilisation decisions are made. Floods intensify when land use decisions do not consider the long term impact on water catchments and coastal ecosystems.
Forests are sometimes cleared too extensively, hills are cut in unsafe ways and rivers are constrained by development. These changes weaken the landscape and increase vulnerability.
Malaysia has strong frameworks for environmental management, yet the challenge often lies in consistent enforcement and long-term coordination. This is where financial institutions become important.
Banks and investors play an important role in shaping land use through the projects they choose to fund, and their decisions can either support healthy ecosystem or increase environmental risks.
Nevertheless, there is a hopeful side to the story. Nature can recover when given the chance, and restoration often costs far less than rebuilding after a flood. Evidence from WWF Malaysia and global nature based solutions research shows that restoration is both practical and cost effective.
For example, the mangrove rehabilitation in Kuala Selangor and Sabak Bernam has helped stabilise shorelines and protect fishing villages. In the Ulu Muda water catchment, conservation efforts have supported cleaner rivers and reduced sediment entering treatment plants.
Reforestation in highland areas such as Fraser’s Hill has improved slope stability and helped regulate water flow downstream. These projects show that strategic investments in nature can provide reliable and long lasting protection.
The growing impact of floods in Malaysia serves as a reminder that climate and biodiversity risks are closely connected to financial wellbeing.
Nature provides essential protection, and when it weakens, the costs fall on households, communities and the national economy. By strengthening land use planning, safeguarding forests and rivers, and expanding restoration work, Malaysia can reduce future losses and build a more resilient foundation for growth. 
Dr Siti Hawa Yusof is a Senior Lecturer at the Department of Finance, Faculty of Business and Economics, Universiti Malaya.
The views expressed are solely of the author and do not necessarily reflect those of  MMKtT.
- Focus Malaysia.

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