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Could this ancient woodland be 'offset'? Or better still, transformed into a new asset class for speculative investment? Ashridge Forest, Hertfordshire, England in the late autumn. Photo: ukgardenphotos via Flickr.
Could this ancient woodland be 'offset'? Or better still, transformed into a new asset class for speculative investment? Ashridge Forest, Hertfordshire, England in the late autumn. Photo: ukgardenphotos via Flickr.
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Nature as an 'asset class' - the free market's final frontier?

Alex Scrivener

14th September 2014

Plans to create a market in nature itself are fraught with danger, writes Alex Scrivener. Biodiversity offsetting could allow the fate of our forests, rivers, meadows and wildlife species, and the people who depend on them, to be determined by the whims of multinational corporations and speculative investors.

The problem with this approach is that once you reduce the value of bee colonies, trees and Sumatran tigers to a dollar value, their protection stops being an essential duty of us as human beings.

It's the year 2024. You tune into the financial TV news bulletin to hear that the Iberian lynx has shot up past the $1,700 mark on the Natural Capital Exchange, and that the value of Sumatran tiger futures has collapsed.

While this may sound like a Blade Runner-esque dystopian fantasy, the prospect of derivative markets in biodiversity is closer than you might think. In fact, this 'financialisation' of nature is already with us in the form of species banking and biodiversity offsetting.

As a society, we've become accustomed to the privatisation and marketisation of almost everything. It started with large state-owned enterprises but it soon progressed to a point at which even the basic functions of government - policing, education, healthcare - are being contracted out to the likes of G4S, Pearson and Bupa.

Now there are increasing calls, both from business and from some parts of the conservation sector, for the reach of the market to extend to the realm of nature itself.

The dangers of 'valuing' - i.e. pricing - nature

Proponents of 'valuing nature' in this way argue that the 'services' nature provides are not factored into economic decisions because they are not priced.

The decision to destroy a forest and build a luxury residential development in its place assumes that the 'services' the forest provides, such as clean air and stopping soil erosion, are worth nothing.

Biodiversity offsetting, making dreams come true from Global Motion on Vimeo.

By placing a price tag on these 'ecosystem services', we can force decision-makers to see the value of nature and save the environment and the people who depend upon it. Or so the argument goes.

The problem with this approach is that once you reduce the value of bee colonies, trees and Sumatran tigers to a dollar value, their protection stops being an essential duty of us as human beings and starts being subject to cost-benefit analyses.

How many pandas is a five star hotel worth? How many acres of primary rainforest is it 'OK' to destroy to extract a tonne of silver?

Fantastical extrapolations?

At this point in the argument, those who argue in favour of ascribing financial value to natural capital often claim that this is a straw man argument.

They say they are not proposing to come up with a definitive 'price' for a particular species or natural phenomenon, but are merely suggesting that approximate values are used as policymaking tools. The threat of financial speculators betting on the price of Asian elephants, they assure us, is a mere fantasy.

Many of those who say this, especially those working for environmentalist organisations, really believe what they are saying. The reality, however, is that the process of the commodification of nature will not stop at levels deemed acceptable by WWF.

Take a look at the 'species banking' that is already taking place in the USA to see that we're already seeing the language of the financial sector being applied to endangered species.

Biodiversity offsetting? Or a licence to trash wildlife?

Biodiversity offsetting schemes, that allow companies to make up for destroying a priceless natural habitat in location A by planting a few trees or promising not to destroy location B, are growing in popularity.

While biodiversity offsetting doesn't overtly seek to 'price' nature, the principle that you can accurately measure the natural 'value' of something and compensate for it by doing something else is the same.

Indeed, the UK is a world leader in pioneering biodiversity offsetting. Despite warnings that it risks becoming a 'license to destroy', the government is launching pilot biodiversity offsetting projects in six counties.

The simplified methodology used in the UK offset schemes has been criticised by the chair of the UK Parliament's Environmental Audit Committee as a "20-minute box-ticking exercise".

The first casualty of biodiversity offsetting in the UK was Gosforth Park in Newcastle, a Site of Scientific Special Interest, parts of which are now going to become a housing estate because the developers successfully argued that they would offset the damage.

The new HS2 railway is also likely to use biodiversity offsetting as an excuse to route through 40 ancient woodland areas.

A new asset class for speculation

I am not highlighting these cases to suggest that development should never occur anywhere in case a single ant is affected.

But when decisions are made using a simplistic cost-benefit analysis in which the 'value' of ancient woodland can be 'offset' by a new tree plantation, rather than such decisions being made in consultation with local people and environmental experts, that is a cause of concern.

The piecemeal experiments currently being conducted here in the UK are only the beginning. The next step is to create globally tradable commodities from these natural resources.

The past few years have seen the rise of financial speculation in food commodity derivatives - corn and wheat are no longer just foodstuffs but 'asset classes', according to the banks and hedge funds speculating on food prices.

Only a hard fought campaign by the World Development Movement and others secured tougher regulation of food speculation in the EU. Bankers have already started talking about trading in water derivatives. Global markets in 'biodiversity credits' are a logical next step.

This takeover of nature by financial markets doesn't just concern pandas and tigers. The World Development Movement believes this trend poses a grave threat to communities as well as to rivers, forests and animals.

Food speculation has already caused dangerous spikes in the price of staples. In the future, livelihoods may be ruined by corporations that can justify polluting a river in Zambia because they've planted a few trees in Croydon.

Time to raise our voices

So with the risks of this approach to the natural world becoming ever clearer, why is there not more fuss?

The good news is that a wide range of groups have recognised the financialisation of nature as a threat. Voices of opposition range from campaign organisations like the World Development Movement and Friends of the Earth to research groups like the Corner House.

Grass roots campaigners are also waking up to the need to halt the march towards the financialisation of nature. A recent parody produced by Global Motion and the Nature Not for Sale campaign brilliantly highlights the absurdity of what is being proposed.

There is plenty we can do to voice our concerns over plans to ascribe a financial value to nature. The EU is currently holding a public consultation into biodiversity offsetting, and the Nature Not For Sale campaign is asking people to sign up to a response to the consultation.

We can also make sure our elected politicians know that we're concerned about the issue.

The time to stop nature becoming yet another realm of unregulated financial speculation is now. If we don't, the future of the Siberian tiger, and of people who rely upon rivers, forests and grasslands for their living, may indeed come to depend on what happens on the stock market.



Alex Scrivener is a campaigner at the World Development Movement, which is a member of the Nature Not For Sale campaign.

Take action: Sign a letter urging the European Commission to drop its plans for biodiversity offsetting.

Video: 'Biodiversity offsetting, making dreams come true'
from Global Motion.


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