A few weeks ago, I represented the Biodiversity and Ecosystem Services (BIO) Program at the first Natural Capital Summit in Stockholm. While the meeting’s attendants were few, they were strategically selected and the event is likely to have a significant impact on the future agenda of a community working to incorporate natural capital into development decisions. I can already see the implications some of the partnerships and proposed follow-up actions could have on Latin America and the Caribbean Region.
The Summit was convened by The Natural Capital Project, the Royal Swedish Academy of Sciences, and the Stockholm Resilience Centre with the support of the MAVA Foundation among others, and it brought together a group of corporate executives, representatives of the finance community and scientists. The idea of assembling experts from different ambits to discuss natural capital is not new, but the unique mix of case studies and the careful selection of ways ahead envisioned for scaling up certainly was.
For example, a representative from the Council of Ethics of the Norwegian Government Pension Fund gave a striking talk about the implementation of ethical standards in its pension fund. I was curious to learn how a financial institution worth $900 billion (several orders of magnitude larger than my own institution) was incorporating natural capital in its investment decisions. According to the representative the pension fund avoids investment in companies which are or will be complicit in unethical activities including conduct that leads to severe environmental damage, such as aggravated tropical deforestation. Companies can be excluded from the pension fund based on their conduct. In fact, the fund actually cross checks the environmental performance information companies detail in their annual reports with tools such as satellite imagery. The Council’s assessment and decision to put a company on the exclusion list are published, thus providing a compelling incentive for companies worldwide to align their conduct with sustainable practices.
Dow Chemical Company provided a fascinating case for the private sector. The company’s 2025 Sustainability Goals are set at US$1 billion (NPV) with projects that are good for business and ecosystems. Dow was able to construct a wetland wastewater treatment plant in Texas for just US$1.5 million, compared to US$40 million for a conventional plant, and it estimates the wetland’s value at US$200 million NPV.
From the public sector perspective, Chinese Academy of Sciences Professor Zhiyun Ouyang of provided an overview of China’s ecosystem services investments, which came to US$150 billion in natural capital restoration between 2000 and 2010. An estimated 20 million households receive subsidies to conserve ecosystem services, making China’s Payment for Ecosystem Services (PES) the largest in the world. Cognizant of the need to monitor the effectiveness of such large-scale natural capital policies, the country is developing a measure of Gross Ecosystem Product (GEP) or total economic value of ecosystem goods and services to be reported alongside GDP. China has zoned over 45 percent of the country for ecosystem conservation services by using the software InVEST (Integrated Valuation of Ecosystem Services and Tradeoffs) to map ecological features and overlay it with information on livelihoods. The results are then used to target locations for restoration activities that are most likely to yield the greatest benefits. For example, since air quality is one of China’s highest environmental priorities, there are zones to control soil erosion in order to reduce dust storms.
Inspired by these case studies, participants at the summit worked together to identify ‘next generation’ initiatives with promising outlooks for pioneering efforts linked to the United Nations Sustainable Development Goals, resilient cities and finance.
So what are some of the implications for Latin America and the Caribbean?
The summit is a harbinger of changes likely to come to the region as global finance institutions such as pension funds and commercial banks increasingly resort to environmental metrics to make transparent investment decisions. We may see entire business sectors such as agribusiness and hydropower mobilize together to set targets for incorporating natural capital approaches in their production processes, much like the mobilization of the palm oil industry spearheaded by the World Economic Forum a few years ago. And following in the footsteps of China, our countries will apply new measures of national wealth building on groundbreaking initiatives such as the World Bank WAVES Program and the UN Experimental Ecosystem Accounting Framework.
It is up to the natural capital community to set the pace.
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Title: by ©Quick Shot, Shutterstock
Text: Se van los bosques, by Christian Ostrosky ©CC BY-NC-ND 2.0,