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Nature markets valued at $7 trillion: TNFM

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Nature markets have been valued at $7 trillion, making nature the world’s third largest economic operation, after the US and China. While questions remain as to how nature should be valued, the estimated value of nature is worth paying attention to.

  • Economic value of nature is $7 trillion in goods and services.
  • Existing markets are not set up to value nature and that needs to change if we are to address the twin crisis of climate and nature and biodiversity.
  • In the long term financial systems must evolve to value natural systems and services in order to prevent their treatment as externalities.

This is according to a new paper from the Taskforce on Nature Markets (TFNM) which presents a detailed taxonomy and economic sizing of nature markets in US$. These are  those markets that explicitly value and trade nature including voluntary carbon credits, conservation, soft commodities and nature-based solutions for carbon sequestration.

Government oversight and enforcement is required to prevent illegal and inequitable actions

The paper calls for robust governance of rapidly expanding nature markets to avoid greenwash, halt illegal markets and deliver nature positive and more equitable outcomes.

The research, produced for a forthcoming Taskforce Knowledge Partner paper – finds nature markets already produce and trade more than $7 trillion worth of goods and services annually, equivalent to 8.6% of global GDP.

More than half of this value comes from agricultural production alone. The study also finds that an estimated 1.2 billion hectares of privately owned asset value is estimated at $8.6 trillion, 85% of which is agricultural land.

The paper call this a ‘modest tip of the iceberg’ as increased awareness of nature’s vulnerability and value is going to scale up the development of products that quantify and protect the natural world.

“Nature markets are a bridge to a total shift in our economic system.” said Sandrine Dixon-Declève, Taskforce member, Co-President, Club of Rome and Chair, European Commission’s Economic and Societal Impacts from Research and Innovation Expert Group.

She continued: ““We need to start by placing a value on nature within our current financial and economic architecture but can’t stop at that. A real transition requires not only financing change through low carbon and nature-based solutions but changing our financial and economic systems to truly service people, planet and prosperity at the same time.”

The paper – Nature in an era of crises completes the first phase of the Taskforce on Nature Markets work in promoting equitable, nature-positive, and net zero outcomes for the world economy and nature.

The global economy is dependent on nature

The $95 trillion global economy depends 100% on nature and faces multiple climate and nature crises over the coming decades-including heatwaves, droughts, supply chain disruptions, and floods.

The paper  explains that if nature is explicitly valued and traded in nature markets, it creates an opportunity to deploy policy and market mechanisms that shape its value and the distribution of its economic benefits.

Nature markets are already booming in sectors from credit to commodities, and increased awareness of nature’s vulnerability and value is rapidly scaling up nature’s part in the economy. Human dependence on nature is moving from something that is invisible and under-valued to one that is explicitly recognised, valued, and traded.

Should nature be monetised or do we need a different approach

While the value placed on nature does make it possible to shift behaviours under the current financial system, a question remains as to whether this is the right approach.

The key question is about value and what we mean by that. If we are looking at the quantification of potential financial return, its possible to see this ‘marketisation’ of nature as a slipper slope, one that will eventually accelerate the exploitation of nature and natural capital.

If however this is part of a growing mind shift that demands that we look at the structure of our financial system in a different way, and explore what value means and how we need to recalculate the meaning of ‘return’ then it could be a useful contribution to the conversation. But what that conversation should include is an interrogation of the current structure of markets and the dominant neo-liberal capitalist paradigm. Growth for growth’s sake does not appear to be a helpful, or sustainable, model.

Protecting nature requires a shift in our understanding of the financial system

There is significant work to be done on the governance of nature, as even when companies and governments work to protect it, illegal actions continue and the results find their way into the supply chain.

“Working on the legal and illegal dimensions of nature markets is a powerful way to embed due diligence across business and finance and expose not just illegal deforestation, but also illegal mining, fishing, as well as illegal dumping and wildlife trafficking.” saidDr. Rhian-Mari Thomas, Taskforce member and Chief Executive, Green Finance Institute.

Most nature markets are not specifically designed to achieve sustainable economic prosperity and may actually be drivers of nature loss. The Taskforce argues that well-governed nature market scan channel investments towards economic assets that deliver equitable, nature positive outcomes, and away from those that do not.

If market scan be shaped to treat nature as a regenerative asset they could be a critical part of addressing the inextricable crises emerging at the finance-nature nexus.

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