Integrating Nature into Economic Models

When we talk about capital, we tend to think only about financial

capital, about cash, financial assets, but we know that's not the only value on

which our economies depend. We know that every

aspect of every part of the economy is fundamentally dependent on

nature, as you highlighted. The air that we breathe, the, the water we drink,

the soil, the oceans that we need for the, the food that we need to

consume, the minerals that we need as inputs to technology

and to

infrastructure.

And without these forms of value, these forms of natural capital, we won't

have economies. They are the fundamental building blocks of our

economies.

But the ways, as you said, the ways in which we have, uh, grown

our economies, our models of economic development,

have been incredibly successful for global prosperity.

Um, but the unintended consequences of current

models of growth are

simply not sustainable on a finite planet.

The amount of resource that we are drawing into our economies,

Earth's resources, and the amount of pollution and waste

that we're pumping

out, whether that's through greenhouse gas

emissions, whether that's sewage into

our water, whether it's plastics into the ocean,

is beyond the Earth's

carrying capacity. And we know that that's leading, as you said, to very

significant direct impacts to society, but very

significant financial costs for the economy.

We can look at that, as you have, um, and calculate that at

a, at a macro level. But the way that that's showing up as

we're breaching these boundaries and breaching these limits and undermining

nature, is showing up in, in very practical ways that

are showing up for

financial risk for institutions.

Lack of water is leading to disruption of

operations of supply chains where water was needed as an essential

input for manufacturing or power production.

The degradation of soil is leading to reduced agricultural

yields. The decline of pollinator species

is also having an impact on

agriculture. So that's leading to direct financial

risks for,

uh, organizations, for businesses, and ultimately for investors.

And we've said, ultimately, the reason for this is at the moment,

the way that

decisions are made, uh, on an everyday level within businesses and

financial institutions is because we're looking only at financial

data,

financial metrics that are not factoring in nature.

Nature is treated within the economy as though it's unlimited and

predominantly as though it's free, and the risks and harms are simply

not costed in financial terms. They-- We can cost them at a macro

level. They're not costed into day-to-day

decision-making.

And the result is, as a consequence, we've put all of our

economies at fundamental risk. We can't do business on a dead

planet. If we're going to protect natural systems,

one of the

solutions is to bring nature onto the balance sheet, to bring

nature into the ways that decisions are made within business,

to allocate a value to it and to bring it into accounting and

financial mechanisms.