By Michele S. Byers
In the world of finance, “capital” usually refers to monetary wealth, often needed for starting and maintaining a business. Businesses without enough capital may be doomed to failure.
Did you know nature has capital? Nature’s capital includes water, air, geology, soil and the planet’s diverse plant and animal species. These assets are collectively known as “natural capital” and just like monetary capital, they can be depleted – with potentially disastrous consequences.
With an economist’s eye, a new British government report warns that corporations face serious financial risks due to the depletion of natural capital, including the loss and extinction of plant and animal species, air and water pollution, soil depletion, and habitat degradation.
“The Economics of Biodiversity: The Dasgupta Review” describes the impacts of the world’s loss of natural capital: lower crop yields, reduced fish catches and disrupted corporate supply chains, as well as more flooding and other natural disasters. The report was published in February.
“At their core, the problems we face today are no different from those our ancestors faced: how to find a balance between what humanity takes from nature and what we leave behind for our descendants,” wrote the report’s lead author, Partha Dasgupta, an economist and professor at the University of Cambridge. “While our ancestors were incapable of affecting the Earth system as a whole, we are doing just that.”
The report reaches several conclusions:
• Economies, livelihoods and well-being all depend on nature – Nature provides food, water and shelter; regulates the climate; maintains nutrient cycles and oxygen production; and provides recreation opportunities and spiritual fulfillment. The planet, however, also absorbs waste, including carbon dioxide, plastic and other pollutants.
• Human society has failed to engage with nature sustainably, to the extent that our demands far exceed nature’s capacity to supply the goods and services we rely on.
“Estimates of our total impact on nature suggest we would require 1.6 Earths to maintain the world’s current living standards,” the report said.
• Unsustainable use of nature is endangering the prosperity of current and future generations – Many ecosystems, from forests to coral reefs, have already been damaged beyond repair or are at imminent risk of exceeding their “tipping points.” Low-income countries, whose economies most rely on nature’s goods and services, stand to lose the most from ecological collapse.
• Deep-rooted, widespread institutional failure is at the root of the problem – The report asserts that nature’s true worth is not accurately reflected in market prices, because so much has been available for free. Pricing distortions have led society and corporations to under-invest in protecting and restoring nature and to over-invest in “produced” assets like roads and buildings.
Species diversity is especially at risk.
“Biodiversity is declining faster than at any time in human history,” the report said. “Current extinction rates, for example, are around 100 to 1,000 times higher than the baseline rate and they are increasing. These declines are undermining nature’s productivity, resilience and adaptability, and are in turn fueling extreme risk and uncertainty for our economies and well-being.”
There are no easy solutions, but the first step is to understand that human economic activity exists within nature, not apart from it. That means societies and businesses must ensure that demands on nature do not exceed its capacity, and they must find ways to restore nature’s ability to rebound from stresses placed on it.
The report recommends that corporations recognize the true worth of nature and structure businesses to sustain it: “Nature needs to enter economic and finance decision-making in the same way buildings, machines, roads and skills do.”
Citizen action is needed, as are educational programs to help people understand and connect with nature. Citizen engagement would not only improve public health and well-being, but would also improve choices about investments.
For example, the report said, consumers should insist that financiers invest sustainably and that companies disclose environmental conditions along their supply chains; people should also boycott products and services that cause harm to nature and biodiversity.
“Putting things right will take collaborative action by every nation on Earth,” naturalist David Attenborough wrote in the report’s introduction. “It will require international agreements to change our ways. Each ecosystem has its own vulnerabilities and requires its own solutions. There has to be a universally shared understanding of how these systems work and how those that have been damaged can be brought back to health.”
Preserving natural lands and protecting habitats is another key step in protecting biodiversity. The good news for New Jersey residents is that this state we’re in has already preserved about a third of its land mass and is committed to saving even more.
And the worth of natural capital has been on the state’s radar for years. In 2007, the New Jersey Department of Environmental Protection released a report, “Valuing New Jersey’s Natural Capital,” which assigned dollar values to various “ecosystem services” provided by the land.
To read “The Economics of Biodiversity,” go to https://www.gov.uk/government/publications/final-report-the-economics-of-biodiversity-the-dasgupta-review
Three versions are available: the full 600-page report, a 100-page abridged version, and a 10-page “headlines” version.
Michele S. Byers is the executive director of the New Jersey Conservation Foundation, Far Hills.