Understanding Climate Risk

Science, policy and decision-making

Natural Capital Declaration

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The run up to Rio 20+ is well and truly on with the Planet Under Pressure Conference currently underway in London. There will be a declaration that carries on from the Copenhagen Declaration but the focus this time will be on solutions. And a good thing, too. A host of other declarations  are  also being prepared and signed.

One such is the Natural Capital Declaration:

The Natural Capital Declaration is a statement by the financial sector demonstrating our commitment at the Rio+20 Earth Summit to work towards integrating Natural Capital criteria into our financial products and services for the 21st century.

Through it we wish to acknowledge and re-affirm the importance of Natural Capital in maintaining a sustainable global economy, and call upon the private and public sectors to work together to create the conditions necessary to maintain and enhance Natural Capital as a critical economic, ecological and social asset.

Natural Capital comprises Earth’s natural assets (soil, air, water, flora and fauna), and the ecosystem services resulting from them, which make human life possible. Neither these services, nor the stock of Natural Capital that provides them, are adequately valued compared to social and financial capital. Despite being fundamental to our wellbeing, their daily use remains almost undetected within our economic system. Using Natural Capital this way is not sustainable.

The Natural Capital Declaration is the first of its kind to be only open to signature by CEOs of willing financial institutions – a measure intended to get top-level buy-in by banks, institutional investors and asset managers and (re-)insurance companies.

You can download the pdf version of the whole statement here.

This is an area I’ve been interested in since the 1980s when I was working in the area of indigenous flora and revegetation, trying to create a sustainable business model for landscape restoration. The aims have changed quite a bit since then. Restoration is not so much a wayback machine, as it is to promote dynamic ecosystems that are resilient in the face of global change. Fostering ecological processes and maintenance of genetic diversity are still the underpinning aims but the challenge is to allow nature to sort itself out in the presence of humans. This is not going to be simple.

The shame is that this is still an opt in process rather than the standard ethic that  one would opt out of in special circumstances (with appropriate offsets). So who has signed so far? Rabobank, NAB, Robeco, Banco Pichina, Fira, Caledonia, CIBanca, PAX World Mutual, Zevin Asset Management, Oppenheim, Vision Banco, Mutualista Pichincha and Althelia.

The Australian participant is NAB, the National Australia Bank. Will they be doing anything different? Will this distinguish them from their competitors in the way they do business and finance?

From the FAQs, this:

How should financial institutions account for natural capital?
Given the complexity of the financial sector, integrating natural capital differs between lenders, investors and insurers. In the lending business, natural capital can be integrated through Environmental and Social Risk Analysis, credit policies for clients in certain private sectors that are sensitive for the environment, due diligence and engagement. In investment, natural capital can be embedded through screening criteria, (proxy) voting during annual general meetings of portfolio companies, engagement and investment analysis. Within insurance, natural capital can be embedded by systematically considering it in risk management underwriting, product development and claims management.

 To be honest, I can think of ways to put in a whole heap of corporate systems that change very little. I’d like to see transparency, measurement and reporting. I’d like to see it make a difference.


Written by Roger Jones

March 28, 2012 at 10:41 pm

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