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11 February 2021

Valuing our debt to nature

This article, by Tracey Davies, was first published in the Financial Mail on 11 February 2021.

The launch last week of the Dasgupta Review on the Economics of Biodiversity was a quietly significant moment for the planet.

Professor Sir Partha Dasgupta, a Cambridge economist, was commissioned in 2019 by the UK treasury to write the review: the first time any national finance ministry has commissioned a report on the economic importance of nature.

The review assesses the consequences of an economic system that assumes the natural world is irrelevant, rather than recognising it as a common good that underpins every aspect of our economic, social and spiritual wellbeing.

The Royal Society’s live-streamed event to mark the publication of the review featured an impressive lineup of speakers. In addition to Dasgupta himself, Nobel prize-winning biologist Venki Ramakrishnan, Prince Charles, Sir David Attenborough and UK Prime Minister Boris Johnson spoke passionately of the urgent need for humans to cease placing demands on nature’s goods and services that have, for some decades, outstripped its ability to supply them sustainably.

It is hugely significant that “natural capital accounting”, which aims to measure and assign value to natural assets, to improve our understanding of the connections between the economy and ecology, now attracts such high-profile adherents.

Dasgupta cites climate change and Covid-19 as evidence of our biosphere’s increasing loss of resilience in the face of an exponential human onslaught. Since 1970, populations of mammals, birds, fish, reptiles and amphibians have declined on average 70%. As many as a million animal and plant species — a quarter of the globe’s total — are threatened with extinction.

Attenborough’s introduction to the review cites the terrifying facts that humans and the animals we farm for food make up 96% of the mass of all mammals on Earth, and that “70% of all birds alive at this moment are poultry — mostly chickens for us to eat”.

The review posits that, much as diversity in a portfolio of financial assets protects against disasters that befall one asset or an asset class, so too is biodiversity essential to nature’s resilience and its ability to withstand shocks.

In recent decades, “eroding natural capital is how the world economy has achieved the economic growth celebrated”. GDP as a measure of prosperity ignores this depletion, and is therefore “wholly unsuitable for identifying sustainable development … nations need to adopt a system of economic accounts that records an inclusive measure of their wealth”.

This system must include nature as an asset.

Dasgupta recommends the establishment of “supranational institutions to monitor and administer the global commons”, including the collection of rents for the use of natural resources traditionally treated as free, such as the oceans.

The review calls for the elimination of the enormous subsidies paid by governments to enable people to destroy nature. (A 2020 report by the International Institute for Sustainable Development, for example, estimated the value of subsidy support in 2019 to Sasol, one of the world’s 100 biggest carbon emitters, at $490m.)

Hidden costs

While many baulk at the idea of assigning monetary value to nature, valuing it at zero — as we currently do — has had few benefits for the natural world.

The review acknowledges the intrinsic value of nature, but points out that human beings allocate value to many “priceless” objects, such as ancient works of art.

If we were to assign value to the negative impacts of our activities in the same way that we do to positive outcomes, many projects advanced by governments and corporations as essential for economic growth would be shown to be unviable (think of the Medupi and Kusile power stations).

The review has interesting implications for “developing nations”, many of which hold the world’s most abundant biodiversity. Dasgupta points out that trade between rich and poor countries, which does not assign a value to this biodiversity, results in an unnoticed and perverse transfer of wealth from poor to rich nations.

Ultimately, however, the Dasgupta review recognises that “we each have to serve as judge and jury for our own actions”.

The most powerful recommendation of the review is for a global programme to introduce nature studies from the earliest years of education, and to maintain it as a core focus at all educational levels.

The review should be a wake-up call to universities and business schools to urgently reassess the curricula of all their finance-related qualifications, none of which at present contributes to reversing the unrelenting destruction of our natural world.

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