The largest capital market on earth

JAMES GRIFFITHS
Last updated 10:47 11/07/2013
James Griffiths
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JAMES GRIFFITHS: "We've been trading [earth's] assets for longer than we've understood the concept of money but we still haven't learned how to value it consistently."

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OPINION: What is the largest capital market on earth?

It's not NYSE or even all the stock markets of the world combined. It's not even the massive global debt markets.

No, the biggest capital market on earth is the Earth itself. We've been trading its assets for longer than we've understood the concept of money but we still haven't learned how to value it consistently.

Nonetheless, I think we all recognise that its worth much more than the $225 trillion in assets on all of the world's financial markets combined.

We currently try to manage our financial assets for growth, but natural capital assets are shrinking. The current rate of species extinction is 100 to 1000 times the normal background rate - a level not seen since the Earth's last major extinction event 66 million years ago. 

Over 40 per cent of the global population in 2050 will be living in river basins under severe water stress. There are an estimated 400 dead zones in our oceans, where excess nutrient pollution has depleted the oxygen necessary to support marine life, and we are over-fishing roughly 80 per cent of marine fisheries. Deforestation continues apace.

The ongoing degradation of critical ecosystems and the resulting loss of the Earth's biodiversity are compromising 'our' natural capital market.

This is much more than just an accounting entry. Nature provides essential benefits and services, not just in the resources that we extract and consume, such as minerals, water and air.

The soil in a river basin, for example, filters water and can clean it for consumption. But we degrade our rivers by filling them with industrial, agricultural and domestic waste, breaking down these natural processes, and forcing us to invest unnecessarily in infrastructure to redo nature's job.

At a global scale, we all benefit from the essential climate services provided to the world by the Artic summer sea ice - yet observations in 2012 again indicate that the Arctic is melting at an unprecedented rate.

Where ecosystem degradation reaches global scale there are no substitutes to be found. Indeed, what's now evident is that humanity is pushing the planet beyond its 'boundaries' - the limits that define the safe operating space for humanity. Crossing these boundaries could generate abrupt or irreversible environmental changes, and provide much less room for business to operate effectively. But respecting the boundaries reduces the risks to human society of crossing these thresholds, preserving the safe operating space for societies and the global economy.

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The global business community as a whole seems paralysed by environmental issues of this magnitude, despite the clear risks and opportunities. If more leaders start to think about the Earth in terms of natural capital, I think they'll come to understand the difference the private sector can and must play - New Zealand business included.

In Wellington, next week, the Valuing Nature conference will examine the natural capital challenges and opportunities facing New Zealand.

As someone who has watched New Zealand's export orientated industries develop from afar for the past decade, the following questions seem pertinent:

*  Tourism is a huge industry for New Zealand. Is the level of investment New Zealand makes in preserving and conserving its natural capital assets (forests, rivers, coastlines, wetlands etc) appropriate to the level of benefit generated by our international visitors? And, is it sufficient investment to manage these benefits in perpetuity and deliver on the "100% pure" promise?

* New Zealand is a highly efficient, internationally competitive exporter of food and fibre. What level of investment is the country making in managing the critical ecosystems that underpin this productivity - fresh water, erosion control, soil fertility and so on? Are we measuring, managing and mitigating the impacts of these key export sectors?

*  Globally, companies are building sustainability criteria into their value chains to manage risk and protect strong brand values including 3rd party assurance of suppliers management standards. Does New Zealand strive to be an internationally competitive supplier with independent verification of sustainability standards?  While we see some good progress with seafood and forest products sectors - is verified sustainability a core strategy for the broader and massive agribusiness and tourism sectors?

At the Valuing Nature conference we will be discussing these hard questions, and hopefully, at the least, ensuring that positive steps forwards are being taken. As Peter Bakker, the president of the World Business Council for Sustainable Development says, we're still struggling to fully recover from the 2008 global financial market crash and its ongoing collateral damage - but the natural capital market is bigger, and it is crashing too. And we simply cannot afford to ever let that happen.

- New Zealander James Griffiths is the managing director, natural capital for the World Business Council for Sustainable Development (WBCSD) based in Geneva.

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