Nature and wealth — reinvesting finance [3/3]

See all sections of this piece: Part 1, Part 2, Part 3 (this piece), and Supporting material).

SOLUTION Part 2 — putting money back into nature

This component addresses the challenge of financing for sustaining nature, and what may be a naïve (but necessary?) re-consideration of the question ‘what is wealth’?

The relationship between natural and financial capital

Market-based systems dominate the global economy and have done so for 100s of years. Essentially, economic exploitation converts natural capital into manufactured capital, and behind this the accumulation of financial capital as wealth. The capitalist system incentivises and concentrates wealth; by reducing costs as far as possible, externalising the full costs of exploiting nature (meaning they are not accounted or paid for), and incentivising profit, at increasingly short term horizons. As a result biodiversity assets are not maintained for sustainable extraction, they are over-used, and their stocks are reduced.

The foundation of this solution is that the excessive extraction and conversion of nature, which is documented in both the biodiversity and the climate crises, can only be truly halted and reversed by re-investing wealth that has been over-extracted back into natural systems. Currently maintaining or restoring nature is viewed as a cost to businesses, while there is new traction in novel financial instruments (such as green/blue bonds) changing this perspective to one of investment.

But fundamentally, this could be viewed as as returning excessively-extracted financial capital back into natural capital.

What of conservation and restoration?

Direct actions on biodiversity, such as resource management, conservation and restoration, deal with the symptoms and outcomes of biodiversity decline, i.e. the conversion from natural to financial capital. In specific cases they may address direct drivers of decline; e.g. protected areas prevent use/extraction within their boundaries; managed use may protect species stocks, but tend to be developed from extraction and profit-maximizing perspectives; pollution control reduces pollutant levels or toxicity; all are limited by jurisdiction. But they almost never address the indirect drivers of decline — institutions and incentives/value systems, economic growth, population growth, etc (Box 1) — as these are considered beyond the mandate of biodiversity actors.

As such, while of great importance and power when done right, they represent bandaid solutions on the symptoms and outcomes of biodiversity decline. They do not begin to address the root causes, which are still increasing, as expressed in the concept of the Great Acceleration, as we enter the Anthropocene.

Excess extraction and consumption

The moves towards reducing direct pressures and drivers of biodiversity decline are many, and include root-solutions such as transforming to circular economy, renewable energies, sustainable food systems and more. However, these are still mainly direct-driver actions, from within the mandates of actors in these sectors.

Transforming economic practices and norms to achieve these is a challenge, also requiring root-cause, indirect driver change on institutions and values. One key root cause that needs attention is recognising the sources of the top drivers of nature decline (Box 2).

From population to consumption — becoming nature positive

The problem is not global population, as has been projected by science, communications and NGOs till recently. Instead, the global footprint of biodiversity decline is mostly driven by actors within the higher income/consuming brackets within and among countries. This is already being addressed by increased scholarship (e.g. Gupta et al. 2023, Rammelt et al. 2022, Hickel and colleagues, etc.).

A key lever is offered by combining two key principles:

• excess extraction is the problem, and the highest levels of extraction must be reduced; and
• given the direct relationship between extraction/consumption and wealth, reduction must focus on the highest consumption brackets that are driving over-extraction and consumption (see box 2).

Importantly, this is where the ‘least pain’ and justice principles are key. Actors in the top income percentiles have the greatest capacity to act, and feel the least pain from acting, compared to those in the ‘bottom’ deciles who have few assets they can rely on.

Making finance and wealth-generation nature positive and just

Importantly, this perspective enables fully addressing equity, across time scales:

a) the past: wealth accumulated in the highest income brackets is the product of historical transfer of natural capital into financial capital, so prioritising the return of this wealth into nature addresses inter-generational justice;

b) the present: to address current challenges, allocation of costs and responsibility to higher income nations/sectors to help nature provide for people today addresses intragenerational justice;

c) the future: rebuilding natural capital for future generations is an essential responsibility for current generations, particularly righting injustices embedded in a) and b) above, further addressing inter-generational justice.

Fortunately, the need for humanity to increase the total stock of natural capital is supported and reinforced by nature having inherent regenerative powers that can be nurtured and amplified through many approaches. There are costs associated with doing this, and the preceding arguments establish the just allocation of these costs to wealth accumulated through historical and contemporary degrading of nature into financial assets.

How much re-investment of financial into natural capital is needed?

The comparison of values and cost estimates between nature and manufactured assets such as buildings (Box 3) demonstrates the profound dissonance in the current market system. Current estimates of what is needed to finance conservation and restoration are far below both a) the estimates of damaging economic activities on nature, as well as b) finance devoted to iconic buildings around the world.

Much greater honesty and accuracy of cost-estimation is needed. To succeed in reinvesting financial capital into natural capital the real relationship(s) between nature and financial capital must be elaborated?

Transforming finance and value systems

This solution represents and embodies a fundamental shift in the value system driving markets, as investments, costs and remuneration would reflect the primary role of natural systems in supporting humanity, and acceptance of just access as a foundational principle.

Operationally, this shift in values would incentivise and promote transformation of direct drivers and actions (e.g. circular economy principles), reward actions that cap and reduce drivers of decline (ie. shifting the indirect drivers of economic/financial/institutional processes will automatically transform the direct drivers of biodiversity change to be consistent with nature thriving ie. Nature positive) and erase the gaps/barriers between what is committed to support nature and what is really needed (Box 3).

The 10:40:50 equity principle

This perspective also focuses on and enables application of the equity principle expressed as “10:40:50”. Current estimates of being able to live within planetary limits suggest that we should aim to live like the middle 40% of income earners (Box 4), as the two extremes are unjust:

• higher levels (10%) unfairly appropriate the lions share of the earth’s resources;
• lower levels (50%) face un-necessary hardships and injustice through inadequate benefits and wellbeing.

The principle requires enabling the lower 50% of income earners/countries to raise their average and minimum income levels to reach the middle 40%. And that this, and fairer/more sustainable access and use in the middle 40%, is paid for by repurposing or reinvesting wealth from the top 10% that have driven the declines that undermine the status of all on the planet.

The equity principle also logically applies within the top 10%, that action must be progressive — thus the top 1% and top 0.01% and so on bear greater responsibility through the conversion and accumulation of nature-to-finance capital that they have driven.

Equity, aid, charity and responsibility

This perspective makes the point explicitly that redistribution is not about aid, charity, or philanthropy. The givers are only able to give because of the unequal appropriation of wealth/capital they have achieved historically. This is about reversing/redressing historical and contemporary imbalance.

In ethical and policy framings, this perspective would establish progressive policies for support through the bottom 50% and lower echelons of the 40%, and progressive policies for taxation, investment and redistribution in the top 10%. Operationally, this perspective is about accounting for the true cost of business through all relevant mechanisms, e.g. polluter pays, producer responsibility, legal/juridical, and international frameworks; and supporting equity in policy contexts, such as common but differentiated responsibilities in climate policy, and reflecting national circumstances in biodiversity policy.

See all sections of this piece: Part 1, Part 2, Part 3, and Supporting material).

Primary sources

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Hickel J, O’Neill DW, Fanning AL, Zoomkawala H (2022b) National responsibility for ecological breakdown: a fair-shares assessment of resource use, 1970–2017. The Lancet Planetary Health 6:e342–e349. https://doi.org/10.1016/S2542-5196(22)00044-4

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