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A NEW ECONOMY - Pricing Nature and Concepts


Markets depend on transparent and reliable information to function. What is true for investors on Wall Street is equally true for environmental market players trading in carbon, water quality, and biodiversity.

Unfortunately, obtaining information for these markets can sometimes be exceedingly difficult. In many ways they resemble the Wall Street of the 1800s – with information closely guarded by those who profit from it – rather than the stock markets of today. But markets grow and evolve, and they do so, in part, because of the transformative power of reliable and transparent information. Providing such information is the role of Ecosystem Marketplace.


Biodiversity offset - Biodiversity offsets are measurable conservation outcomes resulting from actions designed to compensate for significant residual adverse biodiversity impacts arising from project development after appropriate prevention and mitigation measures have been taken. The goal of biodiversity offsets is to achieve no net loss and preferably a net gain of biodiversity on the ground with respect to species composition, habitat structure and ecosystem function and people’s use and cultural values associated with biodiversity.

Compensation - in general, a recompense for some loss or service, and is something which constitutes an equivalent to make good the lack or variation of something else. It can involve something (such as money) given or received as payment or reparation (as for a service or loss or injury). Specifically, in terms of biodiversity, compensation involves measures to restore, create, enhance, or avoid loss or degradation of a community type, in order to compensate for residual impacts on it and / or its associated species. We use the term compensation fund to indicate a third-party mechanism that collects and administers fees from developers to offset their impacts to biodiversity. The money may go directly towards compensating biodiversity loss, or to more indirect biodiversity-related projects (i.e. funding protected area management, research).

Banking - indicates a system that allows restoration, establishment, enhancement and/or preservation of resources (e.g., wetlands, species, native vegetation) for the purpose of providing compensatory mitigation for impacts to biodiversity. In general, a banking system allows a bank owner to sell compensatory mitigation credits to developers whose obligation to provide compensatory mitigation is then transferred to the mitigation bank sponsor.


Incorporating Nature into Decision-Making in Madagascar

Today at the Rio+20 conference, several CI staff are participating in a side event called “Natural capital accounting: Why do we need it and how can we implement it?” Co-organized by the World Bank, the Brazilian Ministry of Environment and CI, this event examines how researchers can evaluate “natural capital” — the benefits and services provided to people by biodiversity and ecosystems — and incorporate it into economic decision-making. Here on the blog, CI’s Rosimeiry Portela describes some of her field research.


…. the Wealth Accounting and the Valuation of Ecosystem Services (WAVES), a World Bank-led partnership that aims to integrate natural capital into national accounting systems, with the ultimate goal of encouraging better and more efficient decision-making and planning. …


….This week at Rio+20, as global leaders recognize the need to move beyond GDP and express their commitment to green economies, the relevance and importance of natural capital accounting will be increasingly evident.


Artificial Intelligence for Ecosystem Services


The new landmark project “ForCES – Forest Certification for Ecosystem Services” looks at what changes to the FSC® system are needed over a four year period, 2011-2015, for FSC to become a global leader in the certification of ecosystem services.

FSC and partner organizations research, analyze, and field test innovative ways how to evaluate and reward the provision of critical ecosystem services, such as biodiversity conservation, watershed protection and carbon.


Population and consumption are at the heart of sustainable development and efforts to move the world towards the sustainable use of its natural resources. Both are politically and ethically sensitive, but it is essential that this does not lead to them being neglected by policy makers. The world needs to adopt a rational and evidence-based approach to addressing the issues raised by population growth and unsustainable consumption patterns, one that respects human rights and the legitimate aspirations of people and countries with low-income to improve their living standards and levels of well-being.


March-April 2012, Vol. 37, No. 2

The financialization of nature

The 2008 food and energy price bubbles were only the latest in a series of crises for major investors who had become accustomed to the high returns of the 1980s and 1990s. In a desperate quest to find and create new markets with high profit potential, investors, with hundreds of trillions of dollars on hand, are quickly changing the "ownership" of nature and how land is used around the world. In countries where Maryknoll works, the result has been higher and more volatile food and energy prices, increasing conflicts over land, displacement of families and a notable shift away from local decision-making around land use. This "financialization" of nature is an overwhelming reality that will frame many struggles in coming years.

Antonio Tricarico, coordinator of the Italian organization Campaign for World Bank Reform, explains the concept well: "We live in a time of finance capitalism, when trading money…is more profitable [than] trading goods and services… That is in short what people refer to often as 'financialization' of the economy… as more and more aspects of everyday life – from home ownership to pensions and schooling – are mediated through financial markets rather than just markets."

For more than three decades, international financial institutions have pressured governments to privatize the production and distribution of natural resources (mining, water delivery systems, energy utilities, etc.), but a more recent phenomenon is the growing encroachment of the financial sector in the ownership of the natural resources themselves.

While commodity markets have become the latest playground for large pools of money, Wall Street, with the aid of some governments, scientists and NGOs, is working to develop new markets to take advantage of impending shortages in a variety of natural resources.


Large institutional investors are increasingly buying farm land around the world as another good way "to balance their portfolio." They know that in the long term, land prices will certainly go up due to increasing population, and have begun to buy large tracts of land, especially in Africa, Latin America, Southeast Asia, and Eastern Europe. Over 80 million hectares (200 million acres) of land – twice the size of France – has been leased or sold in developing countries since 2001 at extremely low prices, mostly to international investors.

Pastoralists and smallholder farmers who have been in areas for many generations are often exiled from their lands that now "belong" to distant pension funds and university endowments who prefer to plant massive palm oil plantations or other crops for export. Many of the projects claim to aid displaced families but this often does not play out on the ground.


Hedge funds increasingly fund mining projects and coal companies. This has made campaigns against specific mines and mining companies more challenging as information on hedge funds is limited and their actions are difficult to influence. Big banks and financial institutions are buying up large quantities of storage units for industrial metals like aluminum and copper as well as gas and oil storage facilities. For example, Morgan Stanley chartered more oil tankers than Chevron in 2009, and Goldman Sachs is the largest owner of aluminum storage houses in the world.


….. Many national governments and international bodies see the pricing and selling of water on international markets as absolutely necessary. Different international forums are trying to agree on ways to place a monetary value on water in order to facilitate trade. Once water has a price it will be difficult, if not impossible, to avoid its eventual financialization.

"Carbon" and other virtual commodities

While growing speculation in physical commodities has had negative results, those markets are likely to be much more stable than newly-forming markets for carbon and other "virtual" commodity markets. In the case of carbon, there is no actual commodity to be bought and sold. As Tricarico puts it, "the commodity itself is a derivative – a bet on avoiding projected carbon emissions against a disputable baseline." There are so many ways for the carbon market to be gamed that it is hard to imagine it not being highly vulnerable to price bubbles and crashes. As early experiences with the REDD (reducing emissions from deforestation and forest degradation) market have shown, projects that displace thousands of families and plant massive "green deserts" of palm oil trees are considered to be positive and receive carbon credits to be sold on the market.

Unfortunately, carbon markets are only the first of many environment-centered markets that Wall Street would like to create. It is moving quickly to build markets to trade biodiversity and establish international frameworks to trade species, habitats and ecosystems.

….. National governments, international financial institutions like the IMF and World Bank, as well as international forums like the G20, European Union and UN are also important places to act to stop the laws that turn nature into commodities and establish markets to trade them. For example, the Economics of Ecosystems and Biodiversity (TEEB) study is a major initiative by the European Commission to price biodiversity and aid the creation of biodiversity markets.

Ample opportunities for North-South alliances and campaigns exist around these issues; in fact, it will be important to include the perspectives from both hemispheres in all efforts to make sure that contradictory campaigns are not created. In the end, the biggest struggles will be on the ground as communities fight to preserve their livelihoods.



June 18, 2012

Rio+20: Coke, Unilever, Other Giants Lead Natural Capital Initiative; Plus a Summit Business News Roundup

The Coca-Cola Company, Dow Chemical and Duke Energy are among 24 major companies that have agreed to develop a methodology to assign value to the world’s forests, freshwater and marine systems. The Corporate Eco Forum and The Nature Conservancy are leading the Valuing Natural Capital initiative, announced at the United Nations’ Rio+20 Earth Summit.

Committed firms also include Alcoa, CH2M Hill, Clorox, Darden, Dell, Disney, Ecolab, EKO Asset Management Partners, Enterprise, FEMSA, GM, Hanes, Kimberly-Clark, Lockheed-Martin, Marriott, Nike, Patagonia, TD Bank, Unilever, Weyerhaeuser and Xerox.

In the New Business Imperative: Valuing Natural Capital report, the organizations lay out a four-step framework for the methodology, which includes reducing risks caused by scarcities of natural resources; finding ways to cut costs while reducing impacts to ecosystems; enhancing brand and reputation and winning trust from customers who value sustainability leadership; and fueling revenue growth from products and services that don’t harm ecosystems.

The declaration was designed to complement other Rio+20 initiatives working to embed natural capital considerations across business, finance and national accounting systems. “Natural capital” is a term for the goods and services ecosystems provide, such as fresh water and food.

Leaders of 37 banks, investment funds and insurance companies agreed at the summit to take better stock of the unsustainable stress put on ecosystems by the economic activity they manage, and work towards integrating natural capital into their products and services.

The Natural Capital Declaration, created by the UN Environment Program Finance Initiative, Global Canopy Program and Center for Sustainable Studies of the Business Administration School of the Getulio Vargas Foundation, calls for financial institutions to incorporate natural capital considerations into the risk assessment procedures they undergo before making a loan, equity, bond or insurance products-related decision.

The declaration also calls for policymakers at Rio+ to begin crafting legislation and regulations that can encourage the development of financial products and services that take account of and sustain the Earth’s natural capital.


Leverage emerging “natural capital” markets such as water-quality trading, wetland banking and threatened species banking, and natural carbon sequestration.




Companies can position themselves for long-term success by working today to put a monetary value on what nature does for their businesses — and by calculating the costs of damage to healthy ecosystems. Doing so can improve business decision making by exposing significant costs and benefits that could seriously impact the bottom line but which traditional financial analyses usually miss. The first pilot project underpinning Dow Chemical’s innovative collaboration with The Nature Conservancy to improve the science and practice of valuing ecosystem services is already revealing these kinds of opportunities related to Dow’s Freeport, Texas site.

In addition, the valuation of “natural capital” makes financial disclosure more robust and gives companies the option of pursuing integrated reporting.

It’s becoming easier to obtain the data necessary for valuation. Companies are beginning to automate systems to monitor ecosystem impacts and natural resource usage and are using database dashboards that receive feeds from remote field sensors to enable real-time observation and comparison. This, in turn, facilitates reliable tracking of supply chains and certification chains.

In 2011, sport lifestyle company PUMA developed and implemented a first-of-its-kind “Environmental Profit & Loss Account” (E P&L) (which measures and places a monetary value on the use of ecosystem services across a company’s entire supply chain. The environmental impact for greenhouse gas emissions (GHG), water use, land use, air pollution and waste, generated through the operations and supply chain of PUMA was valued at Euro 145 million in 2010. The French multinational holding company PPR (parent to PUMA, Gucci, Stella McCartney and Yves Saint Laurent among others) announced plans in 2011 to implement a Group E P&L analysis across its Luxury and Sport & Lifestyle brands by 2015, citing the potential to identify “new opportunities across the supply chain to enhance the sustainability of PPR’s products” while improving efficiency and driving innovation. More info

“ By holistically addressing sustainability opportunities across our businesses, including understanding the value of services derived from forest ecosystems and identifying business offerings focused on natural resource management, we have been able to advance more revenue opportunities building on our core land and forest assets. ” Dan Fulton, President & CEO, Weyerhaeuser

Driving Sustainability for Additional Value with Forest Solutions and Ecosystem Services

Read more about Weyerhaeuser’s commitment to quantify 18 new ecosystem indicators and grow their ecosystem-based business lines through Weyerhaeuser Solutions.


……… establish markets, get meaningful initiatives to scale and raise the bar across industries.

Taken alone, one company’s effort to quantify their ecosystem dependencies or another’s investment in the restoration of a particular forest or watershed may seem to make a small dent in the massive challenges before us, but collectively, they are having a significant impact — fortifying key natural infrastructure, and ushering in a sea change in how industry views its relationship to the natural world.

For companies seeking credible expert partners, a legion of expert NGOs stand at the ready to help navigate the challenges of ecosystem valuation and investment.



“A lcoa’s sustainable water strategy will have enormous benefits for water systems connected to our operations and, to date, has resulted in significant capital cost and operating savings compared to conventional tank-based treatment systems – over the last eight years, we estimate savings of at least $50 million, with this only increasing when implemented across all appropriate Alcoa locations.” Kevin J. Anton, Chief Sustainability Officer, Alcoa

The Corporate Eco Forum (CEF) is an elite, invitation-only membership organization comprised of predominantly Fortune and Global 500 companies with combined revenues of over $3 trillion. CEF provides a year-round safe, neutral space for VP and C-level executives to exchange leading-edge insights and forge “next practices” in corporate sustainability.


3M, Air Products, Alcoa, American Express, ArcelorMittal, Bayer, Boeing, BP, Cargill, CA Technologies, CH2M Hill, Chevron, Cisco, The Clorox Company, Coca-Cola, Darden Restaurants, Dell, Deloitte, Dow Chemical, Duke Energy, Eastman Kodak, Ecolab, Enterprise Holdings, Ernst & Young, FedEx, Fidelity Investments, Ford Motor, Gamesa, GE, General Motors, Google, Grubb & Ellis, Hanesbrands, Hewlett-Packard, IBM, Ingersoll Rand, International Paper, Intuit, Johnson & Johnson, Kaiser Permanente, Kimberly- Clark, Kohl’s, KPMG, LANXESS, Lockheed Martin, Marriott, Microsoft, Motorola Solutions, News Corporation, Nike, Northrop Grumman, Oracle, PG&E, Procter & Gamble, Sabre, Sanmina-SCI, SAP, Siemens, Sony Pictures, SunGard, Sybase, Symantec, Tata Consultancy Services, Tiffany & Co., Timberland, TPG Capital, Transocean, Unilever, United Technologies, UPS, Veolia Water, The Walt Disney Company, Waste Management, Wells Fargo, Weyerhaeuser, Xerox.


Global model

ARIES will eventually include generalized global models for most ecosystem services to describe their provision, use, and spatial dynamics. Global models will be supported by corresponding pre-loaded global datasets (typically ranging from 1 degree2 to 1 km2 in spatial resolution).


We need to put systems in place that highlight, or prevent,

conceivable failures and allow us to quickly recover from

those that we cannot predict. We need this insight to help

manage our financial markets but also to tackle other

risks, such as pandemics, social instabilities, or criminal

networks. At the same time, policy-makers are currently

faced with major decisions of how to plan the general

infrastructure of services to cope with the demands

of the future, and what is more, to do so in a sustainable

manner. The same decisions are also posed to individuals

who wish to improve their own lives.

Thus now is the time to create a paradigm shift moving

from a focus on the system components and their

properties towards evaluating their interactions. These

interactions are often hard to measure but create

collective, emergent dynamics which are characteristic of

strongly coupled systems.

Planetary Nervous System

The Planetary Nervous System can be imagined as a global

sensor network, where ‘sensors’ include anything able to

provide static and dynamic data about socio-economic,

environmental or technological systems which measure

or sense the state and interactions of the components that

make up our world. Such an infrastructure will enable realtime

data mining - reality mining - using data from online

surveys, web and lab experiments and the semantic web

to provide aggregate information. FuturICT will closely

collaborate with Sandy Pentland’s team at MIT’s Media

Lab, to connect the sensors in today’s smartphones

(which comprise accelerometers, microphones, video

functions, compasses, GPS, and more). One goal is to

create better compasses than the gross national product

(GDP), considering social, environmental and health

factors. To encourage users to contribute data voluntarily,

incentives and micropayment systems must be devised

with privacy-respecting capabilities built into the datamining,

giving people control over their own data. This will

facilitate collective and self-awareness of the implications

of human decisions and actions. Two illustrative examples

for smart-phone-based collective sensing applications are

the open streetmap project and a collective earthquake

sensing and warning concept.

Living Earth Simulator

The Living Earth Simulator will enable the exploration of

future scenarios at different degrees of detail, integrating

heterogeneous data and models and employing

a variety of theoretical and modelling perspectives,

such as sophisticated agent-based simulations, multilevel

mathematical models, and new empirical and

experimental approaches. Ideas from complexity science

will be compared with graph theoretic approaches and

other techniques based on concepts from statistical

physics. Exploration will be supported via a ‘World of

Modelling’ – an open software platform, comparable

to an app-store, to which scientists and developers can

upload theoretically informed and empirically validated

modelling components that map parts of our real

world. This will require the development of interactive,

decentralised, scalable computing infrastructures,

coupled with access to huge amounts of data. Large-scale

simulations and hybrid modelling approaches will require

supercomputing capabilities that will be delivered by

several of Europe’s leading supercomputing centres.

Global Participatory Platform

The Global Participatory Platform will be an open

framework for citizens, businesses and organisations to

be able to share and explore data and simulations, and

debate the potential implications. It will democratise ‘big

data’, promoting responsible use of information systems

and opening up the modelling of complex systems to

non-experts. Next generation decision arenas for policymakers

will be developed to evaluate the consequences

of interventions, and then opened up and tuned to

the needs of the diverse stakeholders. This will enable

(1) software developers to add value, e.g. mobile apps

that exploit specific datasets or upload data; (2) develop

information visualisation tools for policy analysts

and researchers; (3) create semantic web services for

distributed processing (provide) tools to support and

learn from online debates. This participation will harness

and shape the emerging global, social computing

infrastructure to tackle various problems. In addition

it will equip different scales of collective agent to more

effectively sense their environments, interpret signals,

debate the assumptions and implications, and make

better informed, more collectively owned decisions.


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