The Natural Capital Declaration Highlights Sustainable Finance at Rio+20

The first commitment by financial institutions to place economic value on ecosystem services launches ahead of Rio+20

The United Nations Conference on Sustainable Development (UNCSD), the three-day conference also known as "Rio+20" to mark the 20th anniversary of the United Nations Earth Day, also held in Rio de Janeiro, starts on June 20.

The meeting, which brings together representatives from governments, academia and the private, non-profit and civil society sectors to develop the global sustainability agenda for the next decade, has been described by U.N. General-Secretary Ban Ki-Moon as "one of the most important global meetings on sustainable development in our time."

The delegates have their work cut out for them. Humanity has made little progress in making any significant reductions in greenhouse gas (GHG) emissions and shows little sign of moving off of a carbon-based economy to a low-carbon economy based on renewable energy in time to prevent what the International Energy Agency (IEA) called "irreversible climate change" by 2016.

PUTTING A DOLLAR FIGURE ON ECOSYSTEM HEALTH

One of the primary methods that has been proposed to help get the world on track is to attach an economic value to maintaining the health of the world's ecosystems. That's what drives the Natural Capital Declaration, an agreement by 37 chief executives of financial institutions around the world to incorporate this philosophy into their decision-making.

Co-convened by the United Nations Environment Programme Finance Initiative (UNEP FI), forest protection non-profit Global Canopy Programme (GCP) and the Brazilian educational institution Fundação Getulio Vargas (FGV), the NCD officially launched on June 16 in Rio in advance of Rio+20.

Andrew W. Mitchell, the founder and director of GCP says that the NCD document "for the first time commits financial institutions to take natural capital considerations into account in their future investment and lending decisions."

GOVERNMENTS CAN'T DO IT ALONE, PRIVATE SECTOR MUST HELP

Getting the financial world involved in saving the global environment is key, because governments alone will not be able to provide the financing required. In November, Ernst & Young reported that there will be likely be a $45 billion gap in climate change funding due to austerity measures in the euro zone.

"By launching the Natural Capital Declaration at Rio+20," said UNEP FI’s interim head Yuki Yasui, "our message to the summit’s negotiators and government delegations is that the financial sector is ready to take the next step on the path of smart and sustainable finance, and that it calls for policy-makers to put in place enabling conditions to facilitate this."

TALKING THE TALK, WALKING THE WALK

In tandem with the launch of the NCD, GCP will also launch a joint "Roadmap to Account for Nature" and hold a high-level event bringing together governments, corporations and the financial sector in a "Natural Capital Dialogue," a meeting supported by the UK Government and the World Bank.

So far, the following 37 financial institutions have signed the NCD:

- Althelia Ecosphere (United Kingdom)
- ASN Bank (Netherlands)
- Banca Monte dei Paschi di Siena (Italy)
- Banco Multiva (Mexico)
- Banco Pichincha (Ecuador)
- Banorte – Ixe (Mexico)
- Caisse des Dépôts (France)
- Caixa Econômica Federal (Brazil)
- Caledonia Wealth Management, Ltd. (United States)
- Calvert Investments (United States)
- CDC Climat (France)
- China Merchants Bank (China)
- CIBanco (Mexico)
- Cyrte Investments (Netherlands)
- Financiera Rural (Mexico)
- FIRA – Banco de Mexico (Mexico)
- Fundación Social (Colombia)
- Infraprev (Brazil)
- International Finance Corporation (United States)
- MN (Netherlands)
- Mongeral Aegon (Brazil)
- Mutualista Pichincha (Ecuador)
- National Australia Bank (Australia)
- Nedbank (South Africa)
- Oppenheim (Guernsey)
- PaxWorld Management (United States)
- Rabobank Group (Netherlands)
- Robeco (Netherlands)
- Shenzhen Development Bank (China)
- SNS Asset Management (Netherlands)
- Société Forestière (France)
- Sovereign (New Zealand)
- Standard Chartered (United Kingdom)
- Sumitomo Mitsui Trust Holding (Japan)
- UniCredit (Italy)
- Vision Banco (Paraguay)
- Zevin Asset Management (United States)

Penny Shepherd MBE, the chief executive of UK Sustainable Investment and Finance Association (UKSIF), announcing her organization's support of the NCD, said, "In the 20 years since the Earth Summit, sustainable investment and finance has moved from the margins to the mainstream."

Her statement may be a little premature. While making the connection between environmental health and sustainable finance has certainly been making headway since the early 1990s, there is still a long way to go before such thinking becomes mainstream.

Perhaps if the world's largest banks (i.e., the ones with the biggest market cap)—like Industrial & Commercial Bank of China ($241 billion), Wells Fargo & Co. ($161 billion), HSBC ($151 billion), Agricultural Bank of China ($142 billion) and JP Morgan Chase ($141 billion)—signed the Natural Capital Declaration, we might be able to say that. But for now, this is a welcome step in the right direction.

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NOTES

United Nations. What is Rio+20. November 22, 2011. Accessed June 15, 2012.
Andrew W. Mitchell, Global Canopy Programme. Email received June 15, 2012.
Ernst & Young. Eurozone crisis could lead to US$45 billion climate change funding gap. November 11, 2011. Accessed June 15, 2012
National Capital Declaration. National Capital Declaration website. Accessed June 15, 2012.
Natural Capital Declaration. Signatories. Accessed June 15, 2012
UKSIF. UKSIF champions key investor initiatives on "Road to Rio+20". April 24, 2012. Accessed June 15, 2012.
Relbanks.com. World Largest Banks 2012. January 20, 2012. Accessed June 15, 2012.

image: A Plovercrest in Campos do Jordão, São Paulo, Brazil, April 3, 2011. (credit: Dario Sanches, Wikimedia Commons)