The Dasgupta Review: Making space for nature in the global portfolio

The Economics of Biodiversity

“If we care about our common future and the common future of our descendants, we should all in part be naturalists.”

These are the words of Professor Partha Dasgupta, introducing his landmark review of the Economics of Biodiversity, commissioned by the UK government.

To many, the message of the Review is groundbreaking. It emphasises that demand for natural resources has exceeded sustainable supply for decades, and that the under-pricing of nature in our economy represents a “massive collective failure to manage the global portfolio of all our assets.” Dasgupta highlights the shortcomings of using GDP (which ignores the degradation of natural capital) as a measure for wealth, and calls for the transformation of institutions in an effort to ensure that humanity’s demands on nature do not exceed its sustainable supply.

What is the Review recommending?

The Review sets out three areas where we might begin to address financially the deficit between what we demand of nature and what it is able to supply:

1. Ensuring the demands on nature do not exceed its sustainable supply. This involves expanding and improving the management of protected areas, increasing investment in nature-based solutions (restoring wetlands for example), and deploying policies that discourage damaging forms of production and consumption.
2. Adopting different metrics for economic success. The Review argues that it is critical to introduce natural capital into national accounting systems, moving away from GDP towards a more inclusive measure of wealth.
3. Transforming institutions and systems – particularly finance and education – to enable changes and sustain them for future generations. The Review emphasises the importance of empowering citizens to make informed choices and demand change, and that this can be achieved by embedding the natural world into educational curriculums from an early age.

What does this mean for economics?

The concept of putting a cost on nature is not a recent one. In 1997, Richard Costanza, in an influential paper in Nature, estimated the value of 17 ‘ecosystem services’ – essential services provided by nature – at around US$33 trillion per year. What is new is the gradual shift by mainstream economics towards an acknowledgement of this concept, and the increasing calls to address nature’s omission from the global portfolio of assets in a meaningful way.

What could this look like in practice?

A number of pioneering financial institutions have already begun to implement processes to acknowledge the intrinsic importance of biodiversity to humanity. Triodos Bank’s minimum standards for loans and investments currently exclude companies involved in deforestation, environmental pollution, and pesticide production. Not only that, but much of what the bank finances, such organic food and farming, aims to stimulate biodiversity, echoing the recommendations of the Dasgupta Review that restoration of nature plays an important part in maintaining the ecosystem services our economies rely on.

The work Triodos is involved in also speaks to Dasgupta’s recommendations around collaboration. “In order to measure and report on the financial sector’s impact on biodiversity, a common methodology is needed,” says CEO Peter Blom. “That is why we have supported the work of the Partnership Biodiversity Accounting Financials (PBAF). This early collaboration between several Dutch financial institutions aims to find common ground that will help formulate business strategies that have a positive impact on biodiversity.”

Triodos is one of 37 signatories of the Finance for Biodiversity Pledge, which encourages collaboration and knowledge-sharing amongst investors in order to assess impact and set targets on biodiversity. Rathbone Greenbank, a UK-based ethical, sustainable and impact investment services company, is a fellow signatory to the pledge. The business understands the importance of education and collaboration in underpinning the changes needed in the financial sector. Last Autumn, biodiversity was the theme for Greenbank’s 23rd annual Investor Day, with expert speakers from organisations including the Woodland Trust and Globalbalance invited to discuss the relationships and interdependencies between business and global biodiversity.

Such pioneers prove that making space for biodiversity in the financial sector is possible, offering real-world examples of how Dasgupta’s recommendations around adopting new metrics for economic success might be adopted in practice.

How has the Review been received?

The Dasgupta Review has had support from a number of eminent figures, including Sir David Attenborough, who called the Review ‘immensely important’. However, it has not been without criticism, primarily from those who have pointed out that putting a monetary value on nature represents all that is problematic about the capitalist system that got us into our current predicament. Guardian columnist George Monbiot argues against the Review’s “expectation that we can defend the living world through the mindset that’s destroying it.” He adds that “the notions that nature exists to serve us; that its value consists of the instrumental benefits we can extract; that this value can be measured in cash terms; and that what can’t be measured does not matter, have proved lethal to the rest of life on Earth.”

The way forward

Monbiot’s challenge is a valid one: capitalism got us to where we are now, so it’s natural to be sceptical about whether it can provide a solution. However, as economist Kate Raworth has previously conceded, to make change in our current economic model, “people need to speak the language of power – and that’s money.” Nevertheless, Raworth argues for the development of alternative model that allows us to “measure the wellbeing of people and planet in natural and social metrics, on the terms of life itself” – a concept she describes through her Doughnut of Social and Planetary Boundaries.

It’s clear that we still have a long way to go when it comes to meaningfully acknowledging the intrinsic value of nature. There’s no doubt though that the Dasgupta Review poses an important and timely challenge to mainstream economics; we can only hope that through its influence, more and more people come to think of themselves as naturalists.