June 22, 2012
A Giant Leap Forward, or Unsustainable Business as Usual?
by Robert Kropp
The Natural Capital Declaration, launched at Rio+20, aspires to properly value the environment in
financial transactions, but at least one nongovernmental organization argues that the pricing of
environmental assets is a fatally flawed solution.
The CEOs of 39 financial institutions—a group consisting of banks, investment funds, and insurance
companies—announced the launch of the Natural Capital Declaration at
the Rio+20 conference on
The Declaration is a voluntary initiative, and the
signatories aspire to build understanding and support the development of mechanisms to integrate
natural capital—defined as Earth's natural assets and ecosystem services—into financial
decision-making by the institutions; at present, the signatories state, "no methodology yet exists
to adequately report or account for Natural Capital in the global financial system."
signatories are emphatic, however, in calling on governments to require corporations to report on
their dependence and impact on natural capital. They also call for regulatory action to "discourage
business from eroding Natural Capital, while at the same time offering incentives to companies that
integrate, value and account for Natural Capital in their business model."
the Declaration, the signatories seek to "demonstrate our commitment to the eventual integration of
Natural Capital considerations into private sector reporting, accounting and decision-making, with
standardization of measurement and disclosure of Natural Capital use by the private sector."
Achim Steiner, Executive Director of the United
Nations Environment Program (UNEP), stated, "Factoring natural capital into the bottom line is
about bringing the real wealth of the planet from the invisible into the visible spectrum in order
to tip the balance from degradation towards sustainable management for communities, businesses, and
Signatories to the Declaration include Calvert Investments, PaxWorld Management, and Zevin Asset Management. Supporters include major sustainable
investment forums, as well as the Carbon Disclosure Project (CDP) and the Global Reporting
The first wave of signatories from the banking sector, however, does not
include a single institution headquartered in the US.
Underscoring the urgency of ending
the externalization of environmental costs, Joe Keefe, CEO of PaxWorld, states, "Over the next
decades, it will be necessary for market capitalism to undergo a Sustainability Revolution equal in
significance to the Industrial Revolution that ushered in the modern period. For this to happen,
our financial system must dramatically change, and I hope the Natural Capital Declaration can be a
catalyst for such change."
Not all key stakeholders are enthusiastic about the
Declaration. BankTrack, a respected
Netherlands-based nongovernmental organization (NGO) that engages with the financial sector to
encourage sound environmental and social practices, has publicly objected to the Declaration's
monetization of the environment.
In a statement, BankTrack harshly criticizes the
Declaration as "a false and disturbing response of the financial sector to the profound ecological
crises of today."
"It is based upon a fatally flawed understanding of the root causes of
these crises (imperfect valuation of 'Natural Capital and Ecosystem Services') and proposes an
equally flawed solution to them (proper pricing)," the statement continues.
Declaration as "a vaguely worded voluntary initiative with no immediate discernible impact on
everyday investment decisions," BankTrack instead proposes, "Rather than a Natural Capital
Declaration we need more Nature without Capital."
A true green economy, BankTrack argues,
would consist of "reversing the tide of commodification and financialization, reducing the role of
markets and the financial sector, acknowledging the limits of business versus other spheres of
life, and recognizing the collective responsibility of all people for, and strengthening the
democratic control over the worlds' ecological commons."
"We call upon the financial
sector to withdraw itself from where it has no rightful place," the statement concludes.
Not all NGOs committed to the environment agree with BankTrack, however. The Global Canopy Program (GCP), which seeks to "protect
tropical forests in a globalized economy that still values them more dead than alive," is one of
three conveners of the Declaration.
At the launch, Andrew Mitchell, Director of the GCP,
stated, "A tsunami of financial capital is flowing around the world and using up the natural
capital upon which our future wealth and security depends."
"It's time to put our account
with nature back in balance," Mitchell continued. "It's not about pricing nature, it's about saving
ourselves. The visible engagement of finance sector leaders in this process is a giant leap
On the other hand, a report issued by Friends of the Earth in advance of Rio+20 seems to share
BankTrack's concerns, albeit on an even larger scale.
"The UN has been working very
closely with big business in developing and promoting the concept of 'Green Economy' at the expense
of sustainable development," the report states. "Industry is increasingly seen as a solution to our
global environmental problems, ignoring the role of major corporations in creating the current