• Helen Avery

Pricing in Natural Capital: An Urgent Need

Climate is no longer the only risk in town. Thanks to a loud call from the scientific community, nature has finally been given a seat at the table with finance ministers, regulators and central bank governors. Degradation of natural capital through human activity has brought us to a tipping point. The risks are multiple and varied, from precipitous declines in economic growth to the uncertain future of our species. All sectors of society are being called on to go ‘beyond carbon’ and reduce their negative impact on the natural environment, finding solutions that regenerate natural resources. How can financial institutions best be of service? By examining their balance-sheet exposure to nature-related risks and by channelling finance to businesses and projects that are restoring natural resources. They have the full support of the scientific community..

Tucked in a box that seemed almost an afterthought in the April inaugural report on climate change and financial risk from 42 central banks and observers, including the World Bank, OECD and the IFC, was a clear signal that measuring climate-related risk is only a starting point for the financial industry.

The report from the new Network for Greening the Financial System (NGFS) said there were “compelling reasons” to look beyond climate risk to broader environmental risks. It raised concerns that environmental degradation could “cascade to risks for financial institutions” because “reduced availability of fresh water or a lack of biodiversity could limit the operations of businesses in a specific region” – businesses that banks are exposed to.

It was certainly not an afterthought, however.

Since April, heads of sustainable finance around the world say they have been in closed-door meetings with their central banks, regulators, politicians and peers to discuss how to measure environmental risk exposure, how to begin to price natural capital (minerals, water, oxygen, biodiversity) and the ecosystem services they provide, and to weigh in on a potential follow-up or expansion to the current Task Force on Climate-related Financial Disclosure (TCFD) – a Taskforce on Nature-related Financial Disclosure (TNFD).

The NGFS isn’t the only group pushing for greater global debate around finance and nature.

Continue reading here at Euromoney for interviews with The World Bank, IUCN, WWF, Natural Capital Project, Natural Capital Finance Alliance, NatureVest, The Conservation Fund, CPIC, Credit Suisse, Mirova, HSBC, Bank of America Merrill Lynch, and many others, including Thomas Lovejoy below.

The Godfather of Biodiversity, Thomas Lovejoy.

“The living planet and its diversity of life is fundamental to a sustainable and promising future for humanity. We are in the initial stages of a human- driven crisis, the likes of which has not been experienced in the history of life on Earth and which is neither necessary nor inevitable. We need to wake up to the peril and the promise – and lift our eyes above our immediate surroundings and self-interests to scope out the path to sustainability for humans and all forms of life.”

See Resources Page for useful links related to this large article.

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