This is happening right now and it is big, big money. Come get you some.
First up as an introduction to this stuff for folks who are new to the concept, from Jacobin Magazine, August 25:
In January, the Biden administration launched an ambitious plan for a valuation of all the United States' natural resources. But the initiative, which aims to encourage environmentally responsible investment, is naive and confused.
In January, the Joe Biden administration released a national strategy to “develop statistics for environmental-economic decisions.” The aim of the new initiative is to measure and value the United States’ “natural assets” — broadly understood as the health and vitality of the country’s land, waterways, wildlife, and ecosystems — by deploying the concept of “natural capital.”
The rationale for the strategy is simple. From the perspective of some of the most common indicators of economic output, such as gross domestic product, the financial value of America’s natural assets remains invisible. According to the press release, if these crucial assets remain unaccounted for, the US government, private investors, and business owners will not be able to take into consideration the economic and environmental implications of their decisions. Accordingly, the government officials fear that exclusion of these assets “from the national balance sheet leads to erosion of current and future economic opportunities.”
The idea that large-scale investment in infrastructure required to avert the worst consequences of climate change could be ensured through an elaborate accounting trick is, at the very least, naive.Commentators have praised the Biden administration’s initiative for its ambition, particularly in its attempt to address the long-term impacts of human-driven climate change. Though wonkish and technocratic in outlook, natural capital accounting seeks to radically change the way the economy is understood by responding to the common criticism that the free-market economy discourages investment decisions which take into consideration long-term consequences.
As with Biden’s Inflation Reduction Act and CHIPS Act, the new accounting policy comes draped in the flag. Throughout the document can be found numerous references to the benefits the initiative would provide for specifically American families, businesses, and the economy. Government officials also predict that measuring the value of the United States’ natural resources will increase worker productivity, raise property values, derisk supply chains, and increase competitiveness in the private sector.
While the initiative is praiseworthy in ambition and scope, skepticism is difficult to avoid. The idea that large-scale investment in infrastructure required to avert the worst consequences of climate change can be ensured through an elaborate accounting trick is, at the very least, naive. Ultimately, such a proposal forestalls grappling with the question of whether relying entirely on the private sector places limits on meaningful and effective response to climate change.
Translating “Nature” for the Business-Minded
Even before the Biden administration, the US government has long compiled data examining the relationship between economic activity and environmental impact. The issue is that such data is so disparate and unorganized, it hardly serves as a useful resource to inform business risk-management and regulatory decision-making. Through the development of natural capital accounts, these statistics will “be better organized, standardized, and regularly updated,” providing a cohesive set of data to inform decision-making at the private, state, and federal levels. Additionally, such accounts put “nature in the language of economics and business,” supposedly encouraging more responsible investment decisions based on short- and long-term environmental implications.However, even as mounting evidence of corporate contributions to climate change becomes clearer and more readily accessible, major corporations continue environmentally destructive practices to secure profits. Some of the biggest utilities — including American Electric Power, FirstEnergy, and Southern Company — continue burning gas and coal to produce power, despite ample evidence that CO2 emissions are one of the major driving factors of climate change, and despite numerous sanctions imposed against them. While the administration’s strategy suggests that improving the quality of financial data may keep corporate misbehavior in check, the question remains unanswered as to how business accountability will be enforced.
Over the last decade, as the idea of natural capital accounting has gained traction, some academics have argued that adding a monetary value to ecosystem goods and services would better inform private businesses engaging in a cost-benefit analysis of their actions. For example, if an agricultural corporation is interested in purchasing several acres of forest on which to grow corn, the corporation would, according to the proponents of natural capital, not only have to consider the cost of the land itself, but the cost of the services that land provides — such as soil erosion management, clean air production, and storm barrier protection.
If the financial cost of purchasing and clearing this land outweighs the projected revenue generated by planting and selling agricultural produce, then the corporation might think twice about this business decision. In this sense, units of analysis which take into consideration the effects of climate change might have the capacity to inform progressive policy and business practices.
Corporatizing Ecosystems
Since Biden’s announcement, private equity firms have already sprung up with the aim of making investment decisions which consider the larger environmental effects of doing businesses. For instance, the Intrinsic Exchange Group (IEG), a private finance firm which seeks to make environmentally responsible investment decisions, has proposed the formation of Natural Asset Companies (NACs). NACs are private companies with the right to a particular tract of land and its accompanying ecosystem services.According to IEG, the process for forming NACs is as follows: Sites with “substantial ecosystem services or potential for ecosystem restoration” are identified and evaluated. The government would then license the rights to these ecosystem services to a NAC, which would be responsible for site management. Once the NAC is given these rights, it goes live with an initial public offering (IPO). As public investors purchase stocks, the NAC raises capital to fund natural asset management. And as net proceeds are necessarily allocated to natural asset management, surplus profits can be banked in the US government’s budget or sovereign wealth fund.
Theoretically, channeling net proceeds from a NAC’s IPO to natural asset management and restoration sounds promising. But land stewardship is difficult work — especially at the scale that such business models propose. There exists no clear indication as to where this body of laborers would come from or how they would be adequately compensated.
Laying Claim to Natural Assets: From Sea to Shining Sea
The US government is not merely concerned with measuring natural capital within its territorial borders; it is also interested in claiming and measuring natural capital in what it calls “disputed” regions. As Biden’s national strategy puts it, “One reason to do asset accounting is to assert a right over the flow of services from the asset.”....
....MUCH MORE
And from September 2022 a heads-up on what was just around the corner:
Big Money Financial Engineering: Saving The Planet By Securitizing EarthThis is happening right now and if you want in on the action you have to know the game is being played.
A couple posts from October 2021 set the stage:
- In Case You Missed It: "NYSE’s new investment vehicle—‘natural asset companies’—will tap into ESG fever"
- Using spatial finance for sustainable development
Which were followed by "What's The Ocean Worth: Putting A Price On Natural Assets"
And here's John Bellamy Foster, Editor of Monthly Review magazine and Professor at the University of Oregon being interviewed on this very topic.
From Monthly Review, July 12:
The capitalist solution to ‘save’ the planet: make it an asset class & sell it
John Bellamy Foster explains the ‘solution’ master-minded by global finance to resolve the imminent environmental crisis: create a multi-quadrillion dollars’ worth of assets on the back of everything nature does and expropriate it from the global commons to make a profit. Worse still: it is already happening.
LYNN FRIES: Hello and welcome. I’m Lynn Fries producer of Global Political Economy or GPEnewsdocs. Today’s guest is John Bellamy Foster.
He’ll be talking about the financialization of the earth as a new ecological regime. A regime where the rapid financialization of natureis promoting a Great Expropriation of the global commons and the dispossession of humanity on a scale that exceeds all previous human history. And which is accelerating the destruction of planetary ecosystems and of the earth as a safe home for humanity. All in the name of saving nature by turning it into a market.
Our guest’s Monthly Review articles: The Defense of Nature: Resisting the Financialization of the Earth and Nature as a Mode of Accumulation: Capitalism and the Financialization of the Earth detail this argument.
Joining us from Oregon, John Bellamy Foster is Professor of Sociology at the University of Oregon and Editor of Monthly Review. He has written widely on political economy and is a major scholar on environmental issues. He is author of numerous books including Marx’s Ecology: Materialism and Nature, The Great Financial Crisis: Causes and Consequences, The Ecological Rift: Capitalism’s War on the Earth. A forthcoming book, Capitalism in the Anthropocene: Ecological Ruin or Ecological Revolution, is coming soon from Monthly Review Press. Welcome, John.
JOHN BELLAMY FOSTER: Glad to be here.
FRIES: We will be talking about your thoughts on how the financialization of nature is capitalism’s most catastrophic regime to date, a new ecological regime. And I take it; you think this was at the heart of what came out of the 2021 UN Climate Change Conference negotiations in Glasgow.
FOSTER: Yeah. Ironically, during COP 26 in Glasgow everybody was watching that to sort of see, well, would governments and the powers that be take action to protect the earth. And the main thing that came out of Glasgow was actually these plans for the financial takeover of the earth, in the name of saving nature. The entire conservation sector globally has now bought into these policies of financialization.
This was really the main product of the Glasgow meetings all being done by capital with support of governments. But there is no public discussion anywhere of this. There is no country where this has been subjected to democratic processes or even conversations. There’s no dialogue on this.
Capital is just proceeding to buy up ecosystems services. To create structured financial vehicles where they’ll be able to control natural capital to accumulate on the basis of it. And to run natural services on this basis with the idea of accumulating wealth.
FRIES: Connect the dots from capital’s need for a new asset class around 2009, around the peak of the Great Financial Crisis, to the current trajectory of the financialization of nature as a new ecological regime.
FOSTER: The world went through a global financial crisis in 2007 to 2010. One of the problems in terms of financial instability, obviously, is that there are not enough underlying assets to support the financial expansion of the system, which is going on at extreme levels. So we’re piling up debt in relation to the world economy. But the debt doesn’t really have sufficient material foundations, revenue streams underlying it.
So capital is searching for new revenue streams. And after the 2007 to 2010 financial crisis, they started looking increasingly at ecosystem services (what we could call nature and nature’s services) as a basis, as a material basis for financialization.
So there’s this very rapid ongoing financialization of nature that is now occurring. Where natural services, ecosystem services, are being turned into forms of exchange value that can be the basis of financialization. All in the name of saving the global environment.
There was a big change that occurred in the fall of 2021, between September and November in the context of the UN climate negotiations, where three new initiatives were introduced or brought to the forefront.
One is the Glasgow Financial Alliance for Net Zero, which brings together all the big financial corporations. All the big banks and hedge funds and so on all came together combining let’s say $130 trillion in assets. These are all basically the Western banks and hedge funds. And they claimed that they were going to organize, to financialize nature in order to produce a net zero carbon economy globally.
The month before, the New York Stock Exchange together with the Intrinsic Exchange Group introduced a new asset class on the New York Stock Exchange called Natural Capital Assets. That really had to do with this process of creating structured financial vehicles to create revenue streams from ecosystem services. That could then be financialized and debt built upon them and so on. All in the name of again, saving nature.
And finally in the climate negotiations itself, they basically agreed on a plan for a world carbon trading mechanism that had been introduced in 2015 Paris Agreement but all the details hadn’t been worked out. So this established at least the basis for a global carbon trading mechanism, which would again, financialize nature.
This has resulted in a huge expansion just in the last few months of attempts to financialize the earth. To turn ecosystem services, really basic ecosystem services like photosynthesis and the production of oxygen in the environment and things like that into monetary asset exchange value that capital can own. Or at least maybe nation states will own and capital will essentially manage and this can turn into financial assets.
Essentially, corporations would own what nature does, not just owning land. The governments would still probably own the land but capital would own the services that nature provides. And would manage it for enormous amounts of money. This is big accumulation as the Intrinsic Exchange Group (IEG) said, in their view: if discounted over the century, ecosystem services are worth four quadrillion (or $4,000 trillion) dollars all for the taking.
FRIES: And we should also note these initiatives target the Global South. As you say basically because financial gains from the expropriation of the earth in the name of management of natural capital and offsets are the greatest in the Global South.
Your articles detail ways this targeting is done. For example, the 2021 Glasgow Alliance for Net Zero initiative declared up front that carbon-mitigation financing to be made available for developing countries comes with strings attached. So financing will depend on a developing country willingness to fully open their economies to global capital.
In the case of the agreed plan for carbon trading and in the designs to promote a world market in offsets, the $100 billion developed countries promised to direct to the Global South is subject to debt leverage by multinational monopoly-finance capital
So John, just to clarify what we are talking about here with the financialization of nature and accumulation of nature are you saying that, in general, this involves the creation of financial claims so titles over natural assets and ecosystems, environmental services of various kinds that can then be traded and leveraged? Is that basically what you mean by the financialization and accumulation of nature?
FOSTER: Finance is really based on the promotion of debt. And from one perspective, money itself is a debt. But finance is based on the promotion of debt. And that means liens on the future revenue streams from underlying assets. What the debts represent or what the creditors get is revenue streams into the future.
So essentially, it means you’re selling whatever nature provides or revenue streams well into the future. In a lot of these proposals, it’s selling off what nature would produce or the revenue that it would generate if it’s reduced to exchange value over the next century or two.
And it is very dangerous. If you look back to 2007- 2010, the Great Financial Crisis, the whole financial system was really in danger of collapsing. And the structural changes that occurred at that time, and this is related to economic stagnation, are really still there.
The financialization, the growth of the debt economy, is in many ways at a much more extreme level then it was in 2007. And we’re looking at other financial crises that could occur, another conceivable Great Financial Crisis. This is because we create these debt bubbles, which expand the economy, but eventually the bubble bursts. The consequences are there.
Our economies are growing slowly but we are also expanding the debt bubble at the same time. So we’re in this sort of stagnation/financialization trap.
Well then if you try to financialize the whole of nature and try to run ecosystem services under capitalist principles regulated by structured investment vehicles, you’re basically bringing nature into this financial bubble.
But it’s absurd. Because the laws of nature (and we can talk about the laws of nature as the scientific world does meaning the biogeochemical processes of the Earth System) do not operate like capitalist markets. And actually attempts to monetize nature and treat it as a financial asset, as an economic asset, a stream of income in which we can impose debts and this will create revenue according to the innate power of capital and at the same time save nature, it’s really a fairy tale.
I mean, it’s worse than a fairy tale. It’s a complete fetish of capital and nature.
John Maynard Keynes once said that we’re in trouble when the underlying productive economy becomes a bubble on the financial system. But we’re now creating a situation where the earth itself is going to be turned into a bubble on the financial system which itself is a speculative enterprise.
There’s a famous statement by a 19th century chartist, Dunning, in his book on the trade unions that Marx quotes in Volume One of Capital. Where Dunning says: that capital we’ll do such and such for a 12% rate of return. And it’ll do even more; it will transgress laws for say a 50% rate of return. But for a 300% rate of return, it will lie and destroy and it’s willing to sell off humanity and the earth itself. And he points to the slave trade.
And I think that’s what we’re in the situation of. The returns are so great that capital is really mesmerized by this notion that ecosystem services discounted and projected over this whole century are worth four quadrillion dollars [$4000 trillion]. And then they can go in and have a piece of this. The fact that this is so destructive is ignored....
....MUCH MORE
If your goal is to make yourself a trillionaire it's best to be playing in a quadrillion-dollar sandbox.
