The FT’s Leslie Hook talks to leading economists, business leaders, asset managers and ecologists to redefine the value humanity puts on Earth’s natural resources. See if you get the FT for free as a student ( or start a £1 trial:
Life on earth anyone who has ever stepped outside can appreciate the value and the richness that the natural world brings to our lives but right now we are destroying nature much faster than it can be restored so if nature is so valuable why are we so bad at preserving it one reason is that that value is very hard to measure in conventional economic terms there’s
A disconnect between appreciating the damages we’re causing and embedding it to our own way of economic thinking it’s been a free resource which it can’t be 75 of our land is now damaged 66 of our marine life and many businesses are starting to see these pressures this disconnect between nature and the economy is evident in the level of financing available to
Projects that protect plants and animals and their habitats which is somewhere between 80 to 90 billion dollars a year that’s just a fraction of the total that’s needed to reverse the loss of species that we see today but if the economics were different could businesses be incentivized to protect the natural world and would investors follow suit the challenge
Is that many of the benefits of nature are intangible and the costs of destroying it often go uncounted but it turns out there are a number of ways that you can measure the value of nature and some of them might surprise you too often nature has been seen as a source of unlimited materials and a free dumping ground for industrial output but that could change
If we start to count the cost of destroying natural habitats professor parta dasgupta is leading a review into the economics of biodiversity for the uk treasury part of his work is to look beyond the market price of natural resources many resources have a market price but they’re wrong ones so for example a fishery has a market price you can you can buy and sell
Fisheries as we do farms for example fish farms but that’s not quite dish because the shrimp frogs for example are extremely polluting they discharge salt and other chemicals that adversely affect neighboring paddy fields for example if you happen to be in sri lanka that damage needs to be costed and deducted from the value of the fishery costing up the damage
From one fishery is one thing but applying that thinking on a global scale is another while economists are trying to change the framework of our economic thinking businesses are not waiting around for many companies the cost of climate change and the impact of damaging nature are already too apparent we see businesses being worried about stranded assets we
See disruptions in the business process so investing in nature on the one hand means mitigating risk paul pullman is a former chief executive of unilever he now leads an organization calling on other ceos to change the way they do business to safeguard natural resources broadly business people know what needs to be done where the challenge has come in is the
Complexity of the issues and a feeling for yeah we know that we want to restore it but how can i as a business integrate that into my business models and one of the things that are absolutely needed to make that evolution at the speed and scale is to put a price on these scarce resources put a price on water put a price on carbon and put a price on forests i’ve
Said many times as long as a dead tree is valued more than a tree that is alive we are in trouble underlying all of this is the idea of natural capital that means valuing forests and other habitats not only for the goods they could be turned into if they’re chopped down but for the services they can provide if they’re left standing ecologists already understand
How nature acts as a climate buffer by pulling huge amounts of carbon dioxide out of the atmosphere through photosynthesis plants converts co2 in the atmosphere into reduced forms which they use to grow and that carbon enters plants and soil pathways and as soon as it’s there it’s essentially scrubbed out of the atmosphere and so these natural processes offset
About one one-third of our global carbon dioxide emissions every year this has made planting forests a very popular option for companies that want to offset their carbon emissions but colin thinks restoration projects could do even more you know we can go there and plant pine trees and they grow great they sequester carbon but they’re not restoring any of that
Native biodiversity and so when we do restoration we’re looking for to hit both of these goals both this sort of nature-based climate solution of sequestering carbon but also addressing sort of this habitat loss and this biodiversity loss you know this is one of few climate solutions that also has the opportunity to actually address the biodiversity crisis that
Awareness is starting to work its way into how businesses and governments think about conservation at the same time something just as significant is happening in the financial sector investors are finding new ways to fund nature-based projects hsbc is launching a new natural capital fund which will invest in projects that restore nature and deliver financial
Returns it will invest in in real assets so in in in land in forests in mangroves and the returns will come from long-term preservation as well as the goods and services or goods that we’ll be generating with those assets so food and timber so we’re trying to establish nature based investing as an asset class in its own right that pension funds insurance companies
Asset allocators would make a discrete allocation to in the same way as they would real estate or infrastructure this fund is the first of its kind and it doesn’t have regulatory approval yet but if other asset managers follow suit it could start to unlock some of the financing that’s needed to repair nature at a large scale by some estimates it would take more
Than two trillion dollars to truly restore nature and transition to a low-carbon economy that’s a tall order for governments still grappling with the impacts of covid19 but as economists companies and investors start to measure the value of nature in new ways maybe the way we think about this challenge will change the trillions of dollars that are required to
Be invested in nature need to come from somewhere private sector is is best position and if business speaks up and says when we do this collectively it creates more jobs it makes your economies more resilient it gives these politicians that are often short-term focused it gives them more ammunition to move things forward that value which is so important for
Enriching our lives why shouldn’t that be included in economic reasoning in a natural way as opposed to constantly have to do special pleading protest marches and so forth we’re in a biodiversity crisis the trees can’t wait the forest can’t wait we need action now
Transcribed from video
How to put a price on nature | FT By Financial Times
