‘Nature is our home’: New UK report urges big economic rethink

Nations will have to rethink economic growth as a measure of success if they want to make good on pledges to halt the destruction of the natural world, according to a British government-backed report published on Tuesday.

With countries due to meet in China in May for a UN-led summit to agree on a new global biodiversity accord, studies have sought to underscore the financial benefits of preserving forests, oceans and other species-rich habitats.

The authors of the latest review, commissioned by the UK’s former Chancellor of the Exchequer Philip Hammond in March, 2019, hope its official status will lend extra weight to their calls to place ecosystems at the centre of economic decision-making.

“Nature is our home,” said Partha Dasgupta, an economist at the University of Cambridge who led the study. “Good economics demands we manage it better.”

British Prime Minister Boris Johnson, whose government hosts a climate change summit in November, welcomed the findings.

“This year is critical in determining whether we can stop and reverse the concerning trend of fast-declining biodiversity,” Johnson said. The review showed “protecting and enhancing nature needs more than good intentions – it requires concerted, coordinated action,” he added.

In a wide-ranging critique of conventional economics, the 602-page report urges policymakers to accept that all business activity is “embedded” within nature, and to begin to value ecosystems accordingly.

‘Wholly unsuitable’

But 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 gross domestic product (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 recognising that our long-term prosperity relies on rebalancing 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 report’s recommendations reflect a wider debate over whether GDP is an appropriate measure of success, or whether alternative measures could be used to reflect environmental degradation.

“GDP does not account for the depreciation of assets, including the natural environment,” the report says. “As our primary measure of economic success, it therefore encourages us to pursue unsustainable economic growth and development.”

Instead, the authors propose a concept of “inclusive wealth” that would reflect the health of a country’s assets – including its natural assets.

They also call for new ways of assessing the value of the many benefits that nature provides, from clean air and fertile soils to pollination, which would enable policymakers to better assess trade-offs.

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.

“We know in our hearts that we’re misusing the Earth’s resources,” Roger Gifford, the chair of the London-based Green Finance Institute, told the Reuters news agency. “The Dasgupta report is really key for helping us to begin the measurement process.”

Researchers welcomed the findings, saying it could help make the often “intangible” benefits of preserving nature clearer.

“The Dasgupta Review will be key in lifting the importance of biodiversity … in making this intangible into something tangible,” said Nicola Beaumont, an expert in ecosystem services at Plymouth Marine Laboratory.

Green fund managers

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 realise that they pose a huge 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 effect on nature. Where climate impact calculations typically centre 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.