Nature is not for sale

How the financialization of nature sets us on the wrong path

As the world faces a global biodiversity crisis where species are dying at 1,000 times the natural rate, it’s no surprise that conservation is high on the global agenda.

In recent years, a flurry of commitments from major investors and corporations have joined the call for bolstering conservation efforts, including the nearly 100 investors with assets totaling €14 trillion that have signed the Finance for Biodiversity pledge. 

At first glance, one might be relieved that the financial sector is finally turning its attention towards alleviating the biodiversity crisis they had a heavy hand in creating. (In 2019 alone, financial institutions around the world lent $2.6 trillion that was directly linked to ecosystem and wildlife destruction.) The solutions they are bringing forth to deal with this crisis, however, warrant more scrutiny.

The main mechanism proposed by many corporations and international organizations to address the biodiversity crisis is what’s being called “Nature-Based Solutions.” Although nature-based solutions have real promise as a climate solution, when used in the context of profit-driven investment they often lead to what’s called the financialization of nature. 

In the simplest terms, it’s giving nature (and all of the functions or benefits it provides) a price, so that it can be bought, sold, traded, and converted into financial mechanisms. This means, for example, being able to own, buy, and sell, a forest or even an individual tree, or speculate on a forest’s “ecosystem services,” such as its ability to provide oxygen or capture carbon. 

Major firms are getting behind this new idea of pursuing the financialization of nature. The Royal Bank of Canada calls biodiversity investment “the next frontier” of sustainability. This new agenda has the support of the United Nations Environment Program (UNEP), which has called for $484 billion USD in public and private capital to be mobilized for nature by 2030.

This would represent a large shift in the management of nature. Until now, ecosystem management and conservation have been primarily regulated by governments (and, more effectively, by the world’s Indigenous peoples). Financialization would seek to replace that government regulation with market-based mechanisms. 

Turning ecosystems into tradable assets for use by profit-driven investors can have a host of unintended consequences. The rise of “nature-based assets” is a result of a worldview in which ecosystems only have value if they yield a return on investment. This logic, in turn, is a result of the growing power of the financial sector in our society, a sector which operates by turning more and more things into assets that yield a predictable revenue stream and can then be bundled and sold. 

Let’s unpack what this financialization of nature would really look like in practice, and break down why it is not an appropriate pathway to protect environmental systems. 

Why Bring Nature into the Market in the First Place? 

It’s worth unpacking the argument behind this push. Why do its advocates believe that it is a viable solution to address the biodiversity crisis? 

Firms advocating for financializing nature argue one of the main reasons for the degradation of nature is that it is not appropriately valued economically. Unless we place a price on nature – assign it economic value – it will continue to be plundered. By making the invisible visible in economic terms, we can count the positive externalities (benefits) nature brings while measuring the negative externalities (harms) being done to it. 

In theory, this could mean that corporations that destroy nature would have to pay for the damage they cause by creating conservation projects somewhere else, replacing a system in which they destroy the environment more or less for free. In this new model, businesses would find new places to invest and grow their profits while conserving nature at the same time – a win-win situation. In some ways, it seems like a persuasive argument. But this trend – and the implications of this view – should have us deeply worried. 

There are several reasons for this. Firstly, putting the private sector in charge of managing ecosystems represents a clear conflict of interest. The primary function of a corporation in our economic system today is to return a profit to shareholders. As a result, all of these ‘investments’ into nature must eventually turn a profit. This leads to all kinds of innovative solutions: charging people, for example, to access sites that used to be freely available through ecotourism or national park systems, making them only accessible to those with the means to pay. It also conflicts with the fact that, in most cases, true conservation requires a reduction in overall economic activity to be effective, not an increase. 

Financialization also values nature only in relation to what services it provides for human beings. As such, it takes a highly reductionist view of these ‘ecosystem services.’ The more we know about the natural world, the more we realize that disaggregating a particular function – say, planting a lot of trees to increase the function of carbon sequestration – leads to negative outcomes because of how interconnected these systems are. 

The pricing mechanisms for nature-based solutions place relatively arbitrary prices on various “functions” in relation to their value to human beings. For example, the IMF recently valued one live whale at $2 million, based on their ability to sequester carbon dioxide, the value of whale tourism, and the nutrients they disperse during their lifetimes. But all of these functions are filtered through our human interests; what is the value of the whale to other species within its ecosystem, or inherently as a living being? Unbundling these “functions” and eventually trading them with one another, without regard for the intricate relationships in which they’re embedded, will undoubtedly wreak havoc on the ecosystems we’re trying to protect. 

The Problem of Regulation

Of course, in order for any of these solutions to be effective, there has to be a robust regulatory system behind it to make sure that companies aren’t just using nature-based solutions for greenwashing. What we’ve found with the solutions that have been implemented thus far, however, is that it simply hasn’t been possible to put one in place. 

Carbon offsets are perhaps one of the best-known examples of this. Even though carbon offsets were introduced decades ago (i.e. through REDD+ credits and other means), there remain significant methodological challenges with measuring and verifying carbon reductions. As recent investigations by The Guardian and Propublica demonstrate, there is a virtually infinite supply of essentially meaningless offsets that effectively give firms a license to pollute. Further, it has been impossible to achieve a price for carbon that is a genuine incentive for decarbonization. 

The issue is compounded when we start talking about ‘biodiversity credits,’ which the UN is now promoting. If a corporation wants to pursue an extractive project in one country, it can use biodiversity offsets to pursue an ‘equivalent’ conservation project in another country (often with disastrous results for the people living there, as we will see later). Then, because the harmful effects were ‘offset’ somewhere else, the company can use terms like ‘net-zero’ or ‘no-net loss’ to claim environmental responsibility and maintain the fundamental status quo. Not to mention that biodiversity is much harder to measure than something like carbon emissions as it requires a huge number of variables relating to ecosystem health to be considered. If regulators can’t get there with a simpler metric like carbon, it’s difficult to imagine how they’ll do it in the case of biodiversity.

Indigenous-Led Conservation and Environmental Justice 

The real kicker is that financializing nature often serves to displace the very people who are protecting ecosystems in the first place, primarily Indigenous and local communities.  Indigenous communities already steward 80% of the world’s biodiversity, and there is evidence that Indigenous stewardship of ecosystems is a more powerful conservation tool than government-protected areas. 

One study found, for example, that Indigenous-managed lands have consistently equal or better conservation outcomes than governmentally ‘protected’ areas across several countries. Another found that biodiversity loss is occurring more slowly on Indigenous-managed lands. The Food and Agriculture Organization of the UN (FAO) has found that strengthening land tenure rights for Indigenous peoples is a cost-effective way to reduce carbon emissions and protect biodiversity. 

Conservation finance for Indigenous-led projects can have enormously beneficial impacts. With a $120 million initial investment, the organization Coast Funds has helped prevent logging in three million hectares of the Great Bear Rainforest in Haida Gwaii while creating 1,200+ jobs. It is also possible to create high-integrity carbon offset projects with the leadership of Indigenous communities, such as the Great Bear Forest Carbon Project. 

But the financialization of nature often does the opposite. It frequently displaces Indigenous communities in the name of conservation itself. In Kenya, the Forest Service funded by the World Bank has been found to have beaten and threatened community members of the Sengwer people to acquire land for the offset industry. In the Republic of the Congo, the members of the Baka people have been beaten, tortured, and raped by guards of a conservation project supported by the UNDP, WWF, and large logging and palm oil companies. Examples such as these abound across the globe. By some estimates, more than 10 million people have been displaced globally by the creation of ‘protected lands’ where they traditionally lived and stewarded the ecosystem.

Image credit: Indybay

In Canada, a settler-colonial nation, this rings particularly true. According to the Indigenous Leadership Initiative, 90% of protected areas established in Canada over the past 20 years have been created as a result of Indigenous partnerships or leadership. Unfortunately, the Canadian government continues to actively cooperate in the violation of Indigenous sovereignty. As the Yellowhead Institute finds, 89% of land in Canada is designated as ‘Crown Land,’ a system of dispossession which unjustly gives the Canadian state control over Indigenous Traditional Territories. 76 percent of injunctions filed by corporations against First Nations are granted, while 81 percent of injunctions filed by First Nations against corporations are denied. Halting biodiversity loss will not come without challenging this oppressive system.

Therefore, at first glance, it might look like certain nature-based solutions projects offset carbon or increase rates of biodiversity on paper. But when this is done at the expense of justice – and by displacing those who were already managing the ecosystems effectively – we must ask who these projects are truly serving. 

A Crisis of Values

But the deeper, moral argument underpinning the push for financialization stems from how we view nature; it concerns what we value, what kind of world we want to live in, and what we believe are the causes of our climate crisis. Many Indigenous worldviews see nature as inseparable from humans; as living, sacred, and alive. A mutual, reciprocal, and respectful relationship with the land is paramount. In this view, nature has inherent value and deserves protection for its own right. As a result, tightening regulation of corporations’ ability to extract from nature and supporting Indigenous communities already doing this work by strengthening land rights would be the pathways forward. 

Often, what we’re dealing with when attempting to solve problems at an international level is not really a question of budget, efficiency, or feasibility. It’s a question of values. It’s a struggle between two visions for our future – visions that are often wholly incompatible with one another. 

In this case, we come up against two ways of relating to nature. In one, nature is seen as an economic asset, with instrumental value, to be managed in the service of human beings. In the other, nature is seen as inherently valuable, deserving of protection, and inseparable from human beings. More than anything, the debate about nature-based solutions is a tug-of-war between these two views – with vastly different power structures behind them. 

As Margaret Thatcher famously said, “Economics are the method; the object is to change the heart and soul.” The financialization of nature is not purely an economic proposition – it is also an attempt to change how we value and relate to nature. If successful, it will re-categorize nature as a commodity in peoples’ minds, stripping it of its inherent value and reducing it to discrete functions which can be bought and sold. 

Nature as the Next Frontier of Capitalism 

The other issue with handing the responsibility of protecting nature to the market stems from growth. The not-so-secret catch of our capitalist economy is that it must grow in perpetuity in order to avoid collapsing. That gets harder and harder to achieve on a finite planet, so companies must continually come up with innovative ways to extract more wealth from the planet. 

Financializing nature is a new frontier for this growth. Corporations have created a solution to a problem that doesn’t need a market solution because it is a way to create more wealth – while at the same time posting themselves as being environmentally conscious. For them, it is a win-win. For the rest of us, it’s not so clear. 

More insidiously, this expectation of nature to turn a profit leads to attempts to profiteer off of resources that will likely become more scarce – and thus more valuable – in the future. As journalist Fred Pearce has meticulously documented in his book The Land Grabbers, global investors (particularly private equity firms and hedge funds) are covertly driving a series of new land and water grabs, concentrated largely in the Global South, based on the reasoning that as resource scarcity worsens and geopolitical competition increases, the value of these commodities will rise exponentially. 

This trend is not just isolated to nature-based assets, however. In many domains of our society, including healthcare, education, housing, agriculture, and infrastructure, the power of financial institutions is growing at the same time as the public sphere is shrinking in size, undermining the ability of governments to implement non-market solutions. The growth of large asset managers means that ever more public services are marketized and turned into interest-bearing assets. The outsourcing of social services to the private sector is increasingly being pushed under the rubric of sustainable development, making it harder to detect as a problem. 

It’s very difficult, if not impossible, to actually decouple economic growth from ecological destruction (although this has long been the mantra of green growth advocates). If we continue to see the kind of economic growth necessary to maintain this system, it is coming at the expense of the earth in some form or another. Turning nature into an asset class will create all kinds of new, creative ways for companies to show their impact and ‘lower their emissions’ by planting trees or cordoning off a ‘protected’ area in another part of the world. But it will not shift us away from the extractive paradigm that brought us here. 

What financialization does is shift our attention from real solutions – tightening regulations to protect nature or supporting Indigenous communities to steward the land, for example – towards the further commodification of nature. The solution to the biodiversity crisis will not be found in more-or-less voluntary compensations or trades between companies while they extract more and more wealth from dwindling environmental systems. 

Economists and governments invoke the same sentiment in lamenting that “we do not value nature,” while ignoring that a very large sector of the population already does value nature  (to the extent that they are willing to put their lives on the line to protect it), and is already conserving it very effectively. It’s a particular subset of people that fails to value nature – and it’s the same subset that now wants to be at the helm of ‘re-valuing’ nature through the very mechanisms that devalued it in the first place: growth-oriented, neoliberal capitalism. 

The bottom line is that the financialization of nature will not stop ecological breakdown. Genuine solutions rely on decommodifying nature, not further commodifying it. This push towards financialization represents an attempt to further separate humans from nature and enclose more land away from common management into the hands of the private sector. 

But the financialization of nature is also not our only option. We exist in a time where there is a deep rift between humans and nature. One path covers up that rift at the surface, making it appear smaller while leaving it gaping and ever-expanding underneath. The other, while more difficult given the current power structures, actually attempts to close the gap, to bring us back into right relationship with the Earth. 

It’s time for a paradigm shift away from the corporate control of ever-increasing arenas of our lives, and towards a view of nature that values it inherently, rather than instrumentally. One that prioritizes Indigenous-led conservation as the pathway out of the biodiversity crisis. And one that is grounded in reality; that actually has a chance at creating a new world – one that we actually want to live in. These paradigm shifts are ours to bring forth – with our voices, our votes, and our mobilization. It’s up to us to decide which future we want to realize. 

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Our next article will focus on the potential of non-market solutions to address the biodiversity crisis, answering the question: if financialization of nature is not the solution, what is? 

1. To learn more about the trend of financialization and the pitfalls of green growth, we recommend the book The Value of a Whale by Adrienne Buller for a deep dive into the topic.

2. To visualize the global geography of ecological distributional conflicts, check out the Environmental Justice Atlas. This atlas provides a worldwide map of 3,804 conflicts related to resource extraction and is a great way to learn more. 

3. To keep up with conservation news, check out the news outlet Mongabay.