Biodiversity, Ecosystem Function, and Investment Risk

ABSTRACT Biodiversity has the potential to influence ecological services. Management of ecological services thus includes investments in biodiversity, which can be viewed as a portfolio of genes, species, and ecosystems. As with all investments, it becomes critical to understand how risk varies with the diversity of the portfolio. The goal of this article is to develop a conceptual framework, based on portfolio theory, that links levels of biodiversity and ecosystem services in the context of risk-adjusted performance. We illustrate our concept with data from temperate grassland experiments conducted to examine the link between plant species diversity and biomass production or yield. These data suggest that increased plant species diversity has considerable insurance potential by providing higher levels of risk-adjusted yield of biomass. We close by discussing how to develop conservation strategies that actively manage biodiversity portfolios in ways that address performance risk, and suggest a new empirical research program to enhance progress in this field.

[1]  Henk Grootveld,et al.  Variance vs downside risk: Is there really that much difference? , 1999, Eur. J. Oper. Res..

[2]  M. Loreau,et al.  The relationship between biodiversity and ecosystem functioning in food webs , 2005, Ecological Research.

[3]  F. Figge.  Bio-folio: applying portfolio theory to biodiversity , 2004, Biodiversity & Conservation.

[4]  R. D. Groot,et al.  A typology for the classification, description and valuation of ecosystem functions, goods and services , 2002 .

[5]  Pereira,et al.  Plant diversity and productivity experiments in european grasslands , 1999, Science.

[6]  J. Lawton,et al.  Empirical Evidence that Declining Species Diversity May Alter the Performance of Terrestrial Ecosystems , 1995 .

[7]  M. Loreau,et al.  Biodiversity and ecosystem productivity in a fluctuating environment: the insurance hypothesis. , 1999, Proceedings of the National Academy of Sciences of the United States of America.

[8]  Patrik Jean Paul Mouron,et al.  Ecological-economic life cycle management of perennial tree crop systems: the case of Swiss fruit farms , 2005 .

[9]  S. Polasky,et al.  Agricultural sustainability and intensive production practices , 2002, Nature.

[10]  D. Doak,et al.  The Statistical Inevitability of Stability‐Diversity Relationships in Community Ecology , 1998, The American Naturalist.

[11]  Robert Costanza,et al.  The value of ecosystem services , 1998 .

[12]  H. Akaike.  Prediction and Entropy , 1985 .

[13]  G. Daily.  Nature's services: societal dependence on natural ecosystems. , 1998 .

[14]  Stefan Baumgärtner.  THE INSURANCE VALUE OF BIODIVERSITY IN THE PROVISION OF ECOSYSTEM SERVICES , 2005 .

[15]  D. Tilman,et al.  Diversity‐Stability Relationships: Statistical Inevitability or Ecological Consequence? , 1998, The American Naturalist.

[16]  S. Polasky,et al.  Diversity, productivity and temporal stability in the economies of humans and nature , 2005 .

[17]  A. Stuart,et al.  Portfolio Selection: Efficient Diversification of Investments , 1959 .

[18]  P. Vitousek,et al.  The Effects of Plant Composition and Diversity on Ecosystem Processes , 1997 .

[19]  I. Seidl,et al.  Returns from Hay Cultivation in Fertilized Low Diversity and Non-Fertilized High Diversity Grassland , 2002 .

[20]  E. Elton.  Modern portfolio theory and investment analysis , 1981 .

[21]  Oswald J. Schmitz,et al.  Biodiversity and the need for habitat renewal , 1995 .

[22]  G. Gigerenzer.  Dread Risk, September 11, and Fatal Traffic Accidents , 2004, Psychological science.

[23]  Holmes Rolston.  Value in Nature and the Nature of Value , 1994 .

[24]  R. Mittermeier,et al.  Biodiversity hotspots for conservation priorities , 2000, Nature.

[25]  M. Weitzman.  Economic Profitability Versus Ecological Entropy , 2000 .

[26]  H. Akaike.  INFORMATION THEORY AS AN EXTENSION OF THE MAXIMUM LIKELIHOOD , 1973 .

[27]  H. Brachinger,et al.  Risk as a primitive: A survey of measures of perceived risk , 1997 .

[28]  J. A. Renkema,et al.  Location-Specific Modeling For Optimizing Wildlife Management On Crop Farms , 2004 .

[29]  E. Borer,et al.  Predator effects on herbivore and plant stability , 2005 .

[30]  A. Roy.  Safety first and the holding of assetts , 1952 .

[31]  Robert Costanza,et al.  49 Chapter 4 VALUING ECOSYSTEM SERVICES WITH EFFICIENCY , FAIRNESS , AND SUSTAINABILITY AS GOALS , 1999 .

[32]  David Tilman,et al.  Biodiversity, Stability, and Productivity in Competitive Communities , 2000, The American Naturalist.

[33]  H. Markowitz.  Portfolio Selection: Efficient Diversification of Investments , 1971 .

[34]  P. Fishburn.  Mean-Risk Analysis with Risk Associated with Below-Target Returns , 1977 .

[35]  Brian D. Inouye,et al.  RESPONSE SURFACE EXPERIMENTAL DESIGNS FOR INVESTIGATING INTERSPECIFIC COMPETITION , 2001 .

[36]  J. P. Grime,et al.  How much will it cost to save grassland diversity , 2005 .