Natural Capital

A 2021 review by Sir Partha Dasgupta of Cambridge University described nature as a “blind spot” in economic thinking. For example, destroying woodland to produce a shopping mall records the increase in produced capital, measured in terms of gross domestic product, but not the loss in carbon absorption, or increased soil erosion. “We have collectively allowed the natural assets on which we all depend to be depreciated off the books,” says the Financial Times. “Biodiversity is declining faster now than at any other time in history: a million animal and plant species are thought to be threatened with extinction.”

Will introducing the profit motive succeed in protecting natural resources where governments, industry, environmentalists and philanthropists have largely failed? What if we were to think of nature as a giant collection of tradable assets, from mangroves to whales?

What’s a whale worth?

According to the environmental consultancy Blue Green Future, the estimated value of a great whale is about $2.5m-$3m over its 60-year lifespan. This number is based on the value of carbon absorbed by the phytoplankton that the whale and its descendants help to produce by excreting “environmental gold dust” (whale poop is rich in iron, phosphorus and nitrogen, which phytoplankton need to grow), plus the estimated 33 tonnes of carbon dioxide sequestered in its body after death, along with revenues from whale-watching.

Investors would buy notes or bonds, with dividends paid out as carbon credits instead of cash. Some of the proceeds would then be used to restore the total number of great whales from their current population of more than a million to the estimated 4m-5m that swam the oceans before the advent of industrialized whaling.

What’s a rainforest worth?

According to the World Wildlife Fund, the abundance of wildlife in Latin America has fallen 94% since 1970. Valuation of the continent’s nature assets is therefore a matter of the utmost urgency.

Selva Vida Sin Fronteras, an NGO based in the Ecuadorian Amazon with satellite operations in the Netherlands, asked us to estimate the economic value of ecosystem services of a 55-hectare property in the Cuyabeno region of the Ecuadorian Amazon.

Our valuation was based on an assessment of 28 ecosystem services from the Ecosystem Services Valuation Database, which contains over 8,600 value records from over 1100 studies distributed across all biomes, ecosystem services and geographic regions.

As shown below, the 2023 value is estimated at almost $464,000. Assuming a 3% inflation rate and a 3% discount rate, the 50-year Net Present Value is estimated at $23m, rising to $46m over a 100-year timespan.

This work was conducted in collaboration with Jason Doedderlein, who holds an MBA from University of Colorado Boulder and trained in data science and machine learning at MIT.
We aim to publish a series of articles on this topic, co-authored by Giles Jackson, Martin Mulyadi, and Jason Doedderlein.
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