The value of everything

3rd August 2023

Placing a monetary value on nature remains controversial, with some arguing that it is impossible to price ecosystem services in a way that adequately protects and enhances biodiversity. Paula DiPerna tells Chris Seekings why that is not the case

Why do we value the dispensable production of goods in the trillions of dollars, but place no value on the indispensable natural world from which those goods are obtained?

That is the contradiction that renowned environmental strategist, speaker, world traveller and author Paula DiPerna untangles in her new book, Pricing the Priceless: The Financial Transformation to Value the Planet, Solve the Climate Crisis, and Protect Our Most Precious Assets.

In the book, she outlines examples from around the globe of pioneering financial innovations – controversial and paradoxical – that flip conventional ideas of how we value natural assets on their head.

As a special adviser to environmental disclosure platform CDP, DiPerna knows the language of big business, and is convinced that financial tools are vital to begin halting our destruction of nature.

You have travelled all over the world, authoring books and working on documentaries. How did you become interested in ‘pricing the priceless’?

I wanted to be a writer for as long as I can remember, and became a freelance journalist before volunteering to work on a book for Jacques Cousteau at the Cousteau Society, which changed my life. He was a charismatic global figure and, after travelling around the world with him, I realised that nature was extremely fragile. What triggered this focus on price was something that Cousteau said about an oil spill, which was the largest oil spill in American history. I told Cousteau how sad it was, and he said “what’s more sad is America taking its last oil out of the ground at today’s price and wasting it because it doesn’t have a real national energy plan”. Gradually, I began to see that if we didn’t stop thinking of nature as a free good, and didn’t think of this entire planet as a fundamental asset, we would definitely be headed for environmental disaster.

What are some of the best examples we have of pricing the natural world?

The number one right now is in the EU with its ‘cap and trade’ on emissions. It was a US invention, but we abandoned it in 1997, and the EU picked it up when they set up their EU ETs and that really gripped the problem by setting a price on carbon, because without that we have no chance of reaching any kind of climate balance. The UK is not far behind post-Brexit, and there’s something like 30 or so countries that have carbon markets in some form, but the EU really is the beacon on carbon pricing and pricing nature. Even so, most countries don’t have a balance sheet that shows nature as an asset.

You have written to Pope Francis to try to dispel his scepticism around carbon markets. What would you say to those who argue that carbon allowances are too generous and prices too low?

He didn’t like the general principle of offsetting, but every system has its quirks, and the difficulty we have with climate change is that it has become such a political football. So in order to get the cap and trade going in Europe, they had to give generous allocations – they over-allocated – so they could bring people to the table to show this is doable. You have to sweeten the pot to get people to the table and keep them there, but as time goes on, it is critical to become more stringent and the EU has tightened its caps and ratcheted down the availability of allowances. I believe that they’re doing as much as they can to establish carbon pricing as a viable tool.

What are some more novel examples of pricing the natural world that you have come across?

The Rhino Bond is a fantastic innovation. It is a kind of ‘pay for success model’, where you have private investors working with the World Bank, which underwrites the bond, private investors put up the money, and that generates cash that goes to wildlife protection services in South Africa. It values not only the rhinos themselves but also the role they play in biodiversity, tourism income and culture. If there’s a statistically measurable increase in the rhino population, then the bond is paid off and the investors can get their money back with the premium. It is a great example of science, policy and capital coming together. Another that I talk about in the book is the Forest Resilience Bond, which is a very good example of bringing diverse beneficiaries of a resilient forest together. That includes constituents, lumberjacks, biomass specialists, scientists, financial people etc.

A recent article in the Financial Times revealed that financial institutions do not understand the models they use to predict the economic cost of climate change and have been underestimating the risk of temperature rises. Why do you think that is?

It’s a confirmation of what I’ve been saying, that people don’t understand the risk because they can’t price it. They don’t see it on their books. Everything’s been out of alignment in terms of science, policy and capital, and until they get into alignment we will have a problem.

The only way to get those wheels turning together is to have some kind of pricing, because it’s like a currency that people can plan with. How is it possible that in a country such as the US, insurance companies can just abruptly stop insuring for fire in California? It must mean they have been underestimating the risks and that they’re really scared. In the absence of a price, it’s been guesswork.

Organisations are increasingly looking to report their risks and dependencies on nature through CDP, to which you serve as a special adviser. How can we be sure this is accurate?

There’s always going to be some level of greenwashing, and nature reporting is a new idea that’s not perfect. But have the past 100 years been perfect, with colonialism, the rapacious use of resources, and greenhouse gases rising without any penalty? We’ve done that experiment, and we need a new world, with really serious auditing and monitoring, which we shouldn’t expect to be perfect at the beginning. We are building a new structure of indispensable rules because we are in a hurry and don’t have the luxury of 30 years dancing on the head of a pin.

What would you say to those who argue that your confidence in financial innovations and ‘pricing the priceless’ will not deliver the radical reforms needed to halt the destruction of nature?

Profit-oriented capitalism has been a significant creator of cruelty and lack of justice worldwide through inequities of wealth distribution, no question about it, and I’m not an apologist for that. But we’ve done the experiment of revolution, and that didn’t work out too well in Russia or Cuba, so if we don’t price the priceless, how do you make capitalism more responsive to the crises we face? You don’t have to believe in the climate science to understand the importance of pricing, and the money’s out there. There’s trillions of dollars looking for a place to go. It’s like water – water will find a channel, and we have to channel capital to the right places, but I know it’s paradoxical. People say that nature is sacrosanct, and shouldn’t be priced, which is maybe where morality comes into it, but capitalism certainly hasn’t been largely governed by a moral compass.

The solutions you outline in your book are very high-level, and mainly targeted at thought leaders, business executives, investors, activists and entrepreneurs. Is there more that we should be doing at an individual level to protect nature, such as travelling less and recycling?

Part of me thinks they have become distractions because they haven’t got to the scale needed to make a significant contribution. It involves a lot of mental effort, and as long as it’s up to the individual, I think it has become a distraction. That being said, the first thing we can all do is think more about the value of the things we buy, and whether that money needs to be spent. Beyond that, we can look at the custodians of our money, so what is my bank doing? Where is my bank investing? Who is it loaning to? I’m also not ashamed to say that I am a believer in political activism, because people need to really hold their elected officials accountable.

Pricing the Priceless: The Financial Transformation to Value the Planet, Solve the Climate Crisis, and Protect Our Most Precious Assets is published by Wiley


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