Valuing Natural Capital in a Perfect World…A Response.

The UNEP Natural Capital Declaration was a commitment proposed by the United Nations Finance Initiative and its partners in late 2011. The Declaration was circulated to financial institutions to gain their signature and support with the aim of taking the Declaration to the Rio+20 conference in summer 2012.

Taking the commitment seriously will require fundamental changes in the intent and nature of investment activities in order to:

  1. Understand risk – recognise threats to Natural Capital as existential, systemic level risks, and;
  2. Recognise value – develop the means to undertake investment activities on the premise that natural systems provide the basis of all life and hence underpin all ‘real’ economic value.

In a perfect world… an adequate response to the challenge

The cynical might suggest that many organisations will sign up and consider that their existing ESG activity adequately supports or responds to the issue or perhaps that marginally wider ESG activity is required. However, the opportunity exists to provide a deeper, broader response that better reflects the scale of the challenge. Signatories who recognise the value and primacy of Natural Capital and wish to develop an appropriate response should consider some key issues outlined below.

What does Natural Capital need?

To survive and thrive, Natural Capital needs to be diverse, resilient and healthy. Looking to the future, the current paradigm of minimising harm must be replaced by one where economic activities cultivate and enhance these system conditions as a matter of course.

New Natural Capital Asset Classes

To achieve the right system conditions for Natural Capital, we need to consider ‘new’ asset classes for restorative services and vital technologies and to develop the means by which to price and value such assets.

Restorative services – refer to human activities (and inactivity) which support and foster the protection and development of diverse, resilient and healthy ecosystems.

Vital technologies – are those which either operate within the limits (carrying capacities) of healthy natural systems or which utilise and mimic the performance characteristics of natural production.

We believe that a meaningful response to the declaration provides an unrivaled opportunity for radical innovation in the way that natural capital and ecosystem services can be valued by investors and financial institutions. Please feel free to download the full paper.

This article was originally published on the Terrafiniti website
Joss Tantram is a recognized expert in sustainable strategy, reporting and management. With 15 years’ experience in sustainability consultancy, combined with 5 years with WWF, he provides a mix of technical knowledge, passion and a track record of innovation in sustainability. Read more on the Towards 9 Billion blog.