How Investors Can Think About The Value of Nature

The benefits of natural ecosystem services unveiled

The value of nature is immeasurable, but framing nature as the basis for Natural Ecosystem Services concentrates our focus on the more tangible contributions nature provides the economy and society.

Ecosystem Services

In 2019, the OECD estimated that Natural Ecosystem Services contributed $125-140 trillion of value each year, which it noted was more than one and a half times the size of global GDP.

Source: World Economic Forum, World Bank as at 2022

The information shown above is for illustrative purposes only and is not intended to be, and should not be interpreted as, recommendations or advice. These Services are commonly categorised as:

Provisioning Services – resources which may be extracted from ecosystems;
Regulating Services – processes which regulate the operation of natural systems;
Cultural Services – less quantifiable services which support the development of culture such as architecture and recreation; and
Supporting Services – basic natural phenomena which underpin other services, such as photosynthesis.

For instance, forests are a crucial source of these Services. Accounting for more than 30% of the planet’s land, they offer Provisioning Services such as timber. They also provide Regulating Services such as carbon sequestration. Further, forests offer a range of Cultural Services and also remain a source of biodiversity.

Some Natural Services can be replaced with artificial processes, but in many cases it is simply not feasible.

Counting the cost

It is estimated that 75% of all land is materially altered and two-thirds is suffering the cumulative effects of human activity. The pace of degradation has been unprecedented – half of all forest lost in the last 10,000 years has been lost since 1900.
More than half of global GDP is deemed to be highly or moderately exposed to nature.
The World Bank estimates that “business as usual” would result in the loss of $90 – $225 billion of real GDP by 2030, depending on the extent of natural carbon capture services loss.

Change is coming

Aggravated by climate change, we are beginning to witness the impact of the degradation of natural ecosystems. Evidence of the physical risk associated with inaction is stimulating policy responses and stakeholders are increasingly assessing their dependency and impact on nature, representing an opportunity for current and future solutions.

Crucial progress with measurement and disclosures is also being made to enable corporates to quantify the value of nature to their business and integrate nature into decision making.

We may never be able to fully quantify the value of nature, but we are becoming aware of the cost of its loss. Progress may be slower than the science demands; but it is coming.