Nature Has Economic Value That Needs To Be Valued

Nature can be thought of as having capital value. McKinsey & Company McKinsey & Company released a new report,  Valuin...

McKinsey & Company released a new report, Valuing Nature Conservation: A methodology for quantifying the benefits of protecting the planet’s natural capital.

The planet’s stock of natural assets is under threat by our changing climate and our wild destruction of habitats. This new research quantifies some of the costs and benefits of Nature and conservation, and identifies the potential of conservation to protect the climate, jobs, and health. It focuses not only on the importance of conservation but the value of it as well.

The report finds that expanding nature conservation could have measurable economic impacts, and makes a compelling case for investing in protecting natural capital. To reduce the erosion of natural capital, scientists and policy makers have called for the permanent conservation of at least 30% of the planet’s surface by 2030, nearly doubling nature conservation on land and in national waters. The figure below shows what that would look like for one of the scenarios.

Applying their methodology – outlining six alternative nature conservation scenarios and exploring the trade-offs – suggests that doubling nature conservation on land and in national waters by 2030 could have a measurable impact and could make a compelling case for investment.

Although the report inevitably underestimates the value of nature conservation, some obvious benefits include:

— Reduction in atmospheric CO2 by 0.9 gigatons to 2.6 gigatons annually through avoided deforestation and natural forest regrowth. This range is equal to 4 to 12 percent of the annual CO2 emissions reductions needed by 2030 to limit global warming to 1.5°C. Progress could, in turn, have a measurable impact on natural-capital stocks. For example, ocean warming threatens much of the world’s coral, placing today’s $36 billion reef-tourism industry at risk. Ocean warming is expected to reduce the global fish catch by about 8 percent by 2050. 

— Creation of approximately 400,000 to 650,000 jobs in conservation-management fields such as wildlife management and area infrastructure. Through adjacent nature-dependent markets, natural capital could also support local economic growth, generating or safeguarding on the order of $300 billion to $500 billion in GDP and 30 million jobs in ecotourism and sustainable fishing alone. 

— Lowering the risk of new zoonotic diseases, like Covid-19, emerging by slowing ecosystem fragmentation. Depending on the scenario, the average risk of a zoonotic-disease transmission event in prioritized areas could be up to 80% higher than in remaining areas of unprotected nature. Slowing ecosystem fragmentation in these prioritized areas could be particularly beneficial in the fight against pandemics. 

Doubling the amount of conserved land and national waters could require an additional operating expenditure of $20 billion to $45 billion a year, depending on the conservation scenario, but the economic benefits from ecotourism and sustainable fishing alone could outweigh these costs by at least three times.

But, in a capitalistic world, how do we assign a value to Nature? We have to do this since we value things like oil and steel and wood that, to obtain, take a heavy toll on Nature.

Maybe it’s better to think of balance sheets. Acting as the planet’s balance sheet, natural capital provides critical services and resilience. It supports water cycles and soil formation while protecting our communities from major storms, floods, fires, and desertification.

By absorbing CO2, it limits the pace of climate change. Biodiversity, a core component of natural capital, supports activities as wide-ranging as pharmaceutical innovation, ecotourism, and crop pollination. These are just a few of the numerous “co-benefits” that make nature so valuable. Yet the complexity of natural capital makes its benefits hard to quantify, leading many to overlook nature as an investment opportunity.

So the report, applies a methodology that can help quantify some of the costs and benefits of conserving natural capital.

As is the case with any far-reaching action, expanding the conservation of natural capital globally will require concerted action from various stakeholders including the private sector, national governments, and others.

– Private-sector organizations could expand efforts to understand the growing risks to supply chains and operating assets from the loss of natural capital. This could also help companies identify nature-conservation investments to help mitigate these risks.

– National governments could use this methodology to better understand the investment case for expanding nature conservation.

– Intergovernmental organizations can use analytics to identify conservation targets, support national governments in making conservation investment decisions, and promote international dialogue.

– Conservation practitioners and donors could use this approach to identify areas to invest in. By forming alliances, they can pool the expertise and funding required to build on this geospatial approach with detailed in-country feasibility assessments and implementation support. Effective alliances could go further to play the role of an “accelerator,” engaging a range of stakeholders to increase the number of conservation projects worldwide, while ensuring their implementation according to best practices along shortened timelines.

Therefore, a compelling argument has to be made so that key stakeholders understand the business case for protecting natural capital and the co-benefits conservation could have on society at large.

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Newsrust: Nature Has Economic Value That Needs To Be Valued
Nature Has Economic Value That Needs To Be Valued
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