Prince Charles Backs Dasgupta Call To Put a Price on Nature
(Bloomberg) -- The Prince of Wales backed a U.K. government review that calls for an urgent overhaul of economic metrics so that they take account of the price of damaging natural ecosystems.
The review was authored by Partha Dasgupta, an economist who specializes in environmental research. In 600 pages, the University of Cambridge professor argues that decades of unprecedented economic growth came at the expense of the planet’s rich diversity, a trade-off that’s unsustainable as humans cannot survive without the natural world.
Dasgupta said humanity has collectively mismanaged its global portfolio of assets, meaning the demands on nature far exceed its capacity to supply the goods and services it relies on. While living standards are higher than ever, species are becoming extinct 100 to 1,000 times faster. Humanity would need the resources of 1.6 planet Earths to maintain our way of life in the future.
Speaking at the launch of the report on Tuesday, Prince Charles said he hoped the review would spur world leaders to adopt a target to protect at least 30% of earth’s land and oceans by 2030. Environmental campaigners are calling for a deal to be made at a global biodiversity summit hosted by the Chinese government in May.
“We must not merely account for shareholder profits but also corporate impacts, both on natural and human capital that are so crucial for our societies and economies to thrive,” he said.
The review was commissioned in 2019 by former Chancellor of the Exchequer Philip Hammond, who instructed Dasgupta to study the “economics of biodiversity.” Almost two years later, he concluded that governments must put an end to annual subsidies ranging from $4 trillion to $6 trillion that perpetuate harm to the environment. In contrast, he said, governments spend just $68 billion a year protecting biodiversity.
The review is the first time natural capital accounting -- the act of quantifying ecosystems and their losses -- has been discussed in detail by a mainstream economist with the support of the U.K. government.
Academics have spent decades attempting to put a price on nature. A widely-cited study in 1997 estimated that the global flow of the earth’s biosphere was valued at an average of $33 trillion per year -- far higher than the global gross domestic product of that era.
Dasgupta said assigning absolute monetary values to nature would be meaningless because life would simply cease to exist if it was destroyed. The Indian-British economist called on governments to find an alternative to GDP as a way of measuring wealth, warning it is “wholly unsuitable” for ensuring sustainable development. Instead, he said, governments should use a more inclusive measure of wealth that accounts for nature as an asset.
“Truly sustainable economic growth and development means recognizing that our long-term prosperity relies on re-balancing our demand of nature’s goods and services with its capacity to supply them,” he said. “It also means accounting fully for the impact of our interactions with nature across all levels of society. Covid-19 has shown us what can happen when we don’t do this.”
The rapid destruction of the planet’s biodiversity is now starting to capture the attention of fund managers. Where collapsing fish stocks, degraded forests and declining bee populations once seemed like far-removed concerns for financiers, many have come to realize that they pose a massive economic threat. More than half of the world’s total GDP is moderately or highly dependent on nature, with humans reliant on the planet’s natural resources for everything from food to medicine.
After several years trying to calculate their contribution to climate change and the portfolio implications of a warming planet, a number of money managers, banks and insurers in 2020 pledged to undertake similar efforts for biodiversity. A total of 37 firms including AXA Group and NN Investment Partners have now signed the Finance for Biodiversity Pledge, committing to contribute to the protection and restoration of biodiversity through their financing activities and investments.
Their greatest challenge will be measuring a given company’s impact on nature. Where climate impact calculations typically center on carbon emissions, biodiversity is orders of magnitude more complex since it covers the breadth of natural life and ecosystems.
Dasgupta’s report stresses the importance of figuring out the problem. U.K. Prime Minister Boris Johnson said the review showed “protecting and enhancing nature needs more than good intentions -- it requires concerted, coordinated action.”
©2021 Bloomberg L.P.