If Nature Had a Price, Would We Take Better Care of It?

By Lomus Pudasaini, Beyond Bretton Woods Summer Fellow

July 19, 2024

Over the past 50 years, humans have more than doubled our population, increased economic output twenty-fold and lifted 1 billion people out of extreme poverty (“Poverty and Shared Prosperity 2018”). As a result, people are healthier and better educated than ever, even as stark inequalities persist. However, it's important to note that these achievements are not solely due to human ingenuity; they also stem from extracting more from nature than ever before.

Over half of the world’s GDP is estimated to be moderately or highly dependent on nature and its services, exposing $58 trillion to material nature risk. The World Economic Forum (WEF) ranks biodiversity loss as the next decade's third-largest global risk. The global wildlife population has declined by 69% since 1970, with some regions facing a 94% decline (Almond et al. 2022). Over three-quarters of ice-free land has been significantly altered, and 85% of our wetlands have been lost (Global Supply Chain Report 2022). These alterations, which manifest as a loss in agricultural productivity or fish stocks, for instance, can affect the entire supply chain, causing an estimated $2-4.5 trillion in long-term economic damages annually.

While ESG initiatives based on Corporate Social Responsibility have taken the foreground, we are slowly realizing that preserving nature has become a core and strategic risk management issue for businesses and by extension the global community. And addressing nature-related risks is complex. Unlike climate risks, measured in CO2 emissions and have a clear global target of limiting warming to 1.5℃, nature-related risks lack a single unit of comparison or unified goal.

A shift in perspective is essential; we must start addressing the depletion of natural resources by viewing them as a stock. Managing natural capital in this way involves preserving and maintaining these assets over time, prioritizing long-term sustainability over immediate exploitation. A promising approach to address nature-related risks is to treat natural resources as a separate asset class, bringing nature right into the market. One example of this can be seen in the valuation of whales. Researchers have identified four key ecosystem services whales provide: carbon capture, phytoplankton enhancement, fisheries enhancement, and ecotourism. They have valued some of these whales at around $4 million (Chami et al. 2022). This valuation method aims to transform how people perceive natural resources, paving the way for innovative conservation and restoration strategies.  Ultimately, valuations could serve as a force to change regulatory frameworks: imposing economically appropriate and meaningful fines on those who damage or destroy protected natural resources.

The Philippines, with 40% of the world’s plastic waste, is at the apex of the Coral Triangle, home to tens of thousands of kilometers of coral reefs providing shelter, food, and reproduction grounds for fish (Ramos 2023). Under the 2022 Extended Producer Responsibility (EPR) Law, manufacturers must measure their annual plastic packaging footprint and meet specified recovery and diversion targets, starting with 20% by the end of 2023, and reaching 80% by 2028. Companies that fail to register their EPR programs or meet the targets face fines ranging from $85,000 to $340,000. However, studies have valued the reef’s annual total economic value ranging from $100 to $800 million (Tamayo et al. 2018). Considering nature as an asset class could bolster laws like these with levies based on the underlying values, narrowing the potential gaps between the valuation and appropriate fines. 

Nature risk is rightly in the spotlight, concerning both businesses and our planet. Using their political and economic might, citizens everywhere must demand that companies address physical, transitional, and systemic risks posed by nature's deterioration. By recognizing nature as an essential asset class, a global citizen movement can pave the way for innovative conservation strategies, transforming nature risk from a looming threat into an opportunity for sustainable growth and resilience.

Citations: 

Almond, R.E.A, M. Grooten, D. Juffe Bignoli, and T Peterson. 2022. “Living Planet Report 2022 – Building a Nature Positive Society.” WWF, Gland, Switzerland: WWF. 

Chami, Ralph, Thomas Cosimano, Connel Fullenkamp, Fabio Berzaghi, Sonia EspañolJiménez, Milton Marcondes, and Jose Palazzo. 2022. “The Value of Nature to Our Health and Economic Well-Being: A Framework with Application to Elephants and Whales.” In Economic Challenges for Europe After the Pandemic, edited by Luigi Paganetto, 117–62. Cham: Springer International Publishing. https://doi.org/10.1007/978-3-031-10302-5_7. 

“Poverty and Shared Prosperity 2018.” n.d. Text/HTML. World Bank. Accessed July 2, 2024. https://www.worldbank.org/en/publication/poverty-and-shared-prosperity2018. 

PricewaterhouseCoopers. 2023. “PwC Boosts Global Nature and Biodiversity Capabilities with New Centre for Nature Positive Business, as New Research Finds 55% of the World’s GDP - Equivalent to $58 Trillion - Is Exposed to Material Nature Risk without Immediate Action.” PwC. March 21, 2023. https://www.pwc.com/gx/en/news-room/press-releases/2023/pwcboosts-globalnature-and-biodiversity-capabilities.html. 

Ramos, Denise. 2023. “Plastic Pollution in the Philippines: Causes and Solutions.” Earth.Org. June 12, 2023. https://earth.org/philippines-plastic/. 

“Scoping out: Tracking Nature across the Supply Chain - CDP.” n.d. Accessed July 2, 2024. https://www.cdp.net/en/research/global-reports/scoping-out-trackingnature-across-the-supply-chain. 

Tamayo, Natasha Charmaine A., Jonathan A. Anticamara, and Lilibeth Acosta-Michlik. 2018. “National Estimates of Values of Philippine Reefs’ Ecosystem Services.” Ecological Economics 146 (April):633–44. https://doi.org/10.1016/j.ecolecon.2017.12.005.