Valuing Nature Through Multiple Lenses

    Stockholm (NordSIP) – NordSIP’s coverage of the implications of biodiversity and natural capital for institutional investors has been ramping up over recent months in anticipation of the moving target that is COP15.  We looked at the basic reasons investors should at least be aware of the problem and begin evaluating their biodiversity footprint.  Global awareness of the importance of nature to the world economy and its contribution to climate change mitigation and resilience has been steadily increasing, but the policymakers at COP15 will have their work cut out to build a suitable framework for investors to use in their decision making.  On July 11, 2022 the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) published the results of an exhaustive assessment of existing methods for valuing nature that will hopefully provide a welcome boost to the ongoing efforts of the various working groups struggling to prepare for December’s COP15.

    The IPBES, effectively the biodiversity equivalent of the Intergovernmental Panel on Climate Change (IPCC), was set up in 2012 and brings together representatives from 139 governments.  The new Assessment Report on the Diverse Values and Valuation of Nature will be published in full later this year, but in the meantime the IPBES have put together a summary for policymakers to get started on.

    The study brought together 82 experts from around the world and took four years to complete.  The core message from the IPBES is that economic policy and investment decisions are currently based on a very narrow set of values assigned to nature.  With a view to building a broader, more comprehensive valuation framework, the study examined more than 13,000 reference sources.  These included not only scientific papers but also local and indigenous sources that are often overlooked.  The aim was to develop a wide-ranging valuation framework that incorporates social, cultural, scientific and economic values.  This all-encompassing typology means that decision makers can simultaneously take the interests of multiple stakeholders into account when valuing natural capital.  The typology first looks at natural assets in terms of “living from,” a pragmatic anthropocentric perspective wherein livelihoods rely on natural resources that can be measured quantitatively.  The next level is “living in,” which assesses the less tangible health, cultural and recreational values to humans of natural assets.  The third level is more biocentric and termed “living with.”  This brings in the concept of stewardship of natural environments and habitats.  The fourth level in the typology is “living as,” assessing cultural and even spiritual values offered by natural assets.

    Ahead of the much-needed guidance on nature-based investing that is expected from COP15 in Montreal later this year, institutional investors looking to update their responsible investing policies would do well to review the findings of this latest high-level report.  The holistic approach that is presented appears to systematically include social and cultural aspects alongside the purely environmental, thus avoiding neglecting the “S” in ESG.  As IPBES Chair Ana María Hernández Salgar puts it, “biodiversity is being lost and nature’s contributions to people are being degraded faster now that at any other point in human history, this is largely because our current approach to political and economic decisions does not sufficiently account for the diversity of nature’s values.”

    Image courtesy of Konstantin Kolosov from Pixabay
    Richard Tyszkiewicz
    Richard Tyszkiewicz
    Richard has over 30 years’ experience in the international investment industry. He has worked closely with major Nordic investors on consultancy projects, focusing on the evaluation of external asset managers. While doing so, Richard built up a strong practical understanding of the challenges faced by institutional investors seeking to integrate ESG into their portfolios. Richard has an MA degree in Management and Spanish from St Andrews University, and sustainability qualifications from Cambridge University, PRI and the CFA Institute.

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