“Why Impact Investors Must Come To Terms With the Biological Bottom Line”
© By Paul R. Ehrlich and M. C. Tobias
When Nicholas Stern released the Stern Review on the Economics of Climate Change (October 30, 2006) for the British government, it was already clear that global warming, resultant weather anomalies and the overall consequences of unheeded business-as-usual greenhouse gas emission syndromes represented a huge challenge for portfolio management that had unambiguously put governments on notice. Despite continuing havoc amongst the participating nations to the United Nations Framework Convention on Climate Change, it had become clear that they should prepare for accelerating depletion of every major life-support system, and the corresponding societal chaos and economic loss which would result from escalating global temperatures and their impacts on climatic patterns and thus on biodiversity. Climate disruption presented new, but sobering opportunities; epiphanies regarding the true capacity of taxation to collectively cap the shadow now cast upon every financial market worldwide (*1) and on the future of civilization itself. (*2)
More recently, in her essay for the e-journal, Greenmoney.com, “Building a Sustainable Global Economy,” Mindy Lubber, President of CERES, wrote, “This should alarm every investor looking for long-term value creation, because climate regulatory risks alone could cost investment funds $8 trillion by 2030, according to the international consultancy Mercer.” (*3)
While the SEC and several European investor groups have now awakened to the extent of mandating environmental audits at some level of stringency, requiring a degree of transparency that should shed light on the risks to investors of new weather patterns generated by new concentrations of GHGs (greenhouse gases). Meanwhile, biodiversity itself remains enmeshed in a seemingly impossible double-bind: there is simply no way as yet to accurately reflect true economic value of an individual, let along an entire species, or mosaic of interacting populations. All we know is that society is completely dependent on the mosaic of other organisms for its very existence.
In our book Hope on Earth: A Conversation (University of Chicago Press, May, 2014) we engaged in a discussion hinging upon the various ethical and pragmatic components of the one versus the many and of the future prospects of humanity. And we do it in a context not just of climate disruption, the loss of biodiversity, toxification of Earth, threats to health, poverty, racism, sexism, inequity and other factors the blight the human future. Do human responses to individual plights reflect in any way an approach to realistic valuations of those individuals to this generation and future generations? Is the proclivity for heavily discounting the future and turning a blind-eye to likely ecological catastrophe built-in to a narcissism that would subject future generations to every manner of havoc as long as people are able to consume to their heart’s content now. Is it in any way ethical for those of us in rich nations to disregard the consequences to others today, to say nothing of our own descendants?
This is but one crucial dilemma. Another is the notion that continual growth is necessary to a thriving economy. Yet, arithmetic, science and common sense alerts us to the perils of hypertrophy. The human population at current trends will most assuredly hit 9.5 billion, and quite possibly in excess of that U.N. median projection, unless catastrophe intervenes. Already, however, billions of humans live below the poverty line, more than 800 million are hungry, and as many as 2 billion more are micronutrient malnourished; whilst the human collective continues to not only discount but fully annihilate one species after another; many thousands of populations of sentient beings every day. There are no precise cost estimates for that degradation, though there have certainly been numerous attempts to value natural capital across a multiple of sectors. One assessment suggested global values of nature’s services at “2.1 to 4.8 trillion US dollars” annually. (*4)
That number was calculated in 2008. A very different analysis, in 1997, estimated the sum total of nature’s free services as being worth some $US 33 trillion each year. (*5) But these are very blurred estimates, lacking the ethical substrata with which we attempt to grapple in Hope on Earth.
For example, what is the value of a single critically endangered California condor, or Florida panther? We know from judicial guidance that the value of a person varies in courts of law from country to country, from hundreds of dollars to millions of dollars. The effort to save a few hundred California condors from extinction costs approximately $1.6 million per bird. In the case of the Florida panther, $4.9 million per cat. (*6)