Natural Capital concept becoming more mainstream

Last week, as part of Rio+20, a group of banks, investors, insurers and corporations joined with more than 50 countries to launch their own commitment to work towards integrating Natural Capital considerations into their financial products and services for the 21st century.

The commitment included acknowledgment and re-affirmation of the importance of Natural Capital in maintaining a sustainable global economy. The group proposed:

  1. Requiring companies to disclose the nature of their dependence and impact on Natural Capital through transparent qualitative and quantitative reporting.
  2. Using enforceable fiscal measures to discourage business from eroding Natural Capital, while at the same time offering incentives to companies that integrate, value and account for Natural Capital in their business model.
  3. Endorsing and implementing international agreements, including but not limited to, those agreed through the Convention on Biological Diversity.
  4. Setting an example through requiring public spending and procurement to report and eventually account for its use of Natural Capital.
Signatories committed themselves to:
  • Building an understanding of the impacts and dependencies of Natural Capital relevant to our operations, risk profiles, customer portfolios, supply chains and business opportunities;
  • Supporting the development of methodologies that can integrate Natural Capital considerations into the decision making process of all financial products and services – including in loans, investments and insurance policies. We recognize that given the diversity of the financial sector, embedding Natural Capital considerations will differ across asset classes and types of financial institutions. We therefore aim to build on work undertaken through other initiatives, such as the UN-backed Principles for Responsible Investment, the Equator Principles, the United Nations Environment Programme Finance Initiative (UNEP FI) Principles for Sustainable Insurance, and The Economics of Ecosystems and Biodiversity (TEEB), so that we can develop methodologies to:
    •  Apply a holistic approach to evaluating bonds and equities through the integration of Natural Capital considerations in environmental, social and governance (ESG) risk analysis in short, medium and long-term growth forecasts of investee companies;
    •  Systematically consider and value Natural Capital in the credit policies of specific sectors, including commodities, that may have a major impact on Natural Capital either directly or through the supply chain;
    •  Systematically consider and value Natural Capital in core insurance business strategies and operations including risk management, risk underwriting, product and service development, claims management, sales and marketing, and investment management;
  • Collaborating, when appropriate, with the International Integrated Reporting Committee and other stakeholders to build a global consensus around the development of Integrated Reporting, which includes Natural Capital as part of the wider definition of resources and relationships key to an organization’s success.
  • Working towards building a global consensus for the integration of Natural Capital into private sector accounting and decision-making; supporting, when appropriate, the related work of the TEEB for Business Coalition, and other stakeholders.

Signatories include 39 banks and financial institutions from around the world, including the US and the UK, but none from Canada, and 20 ngos, including IISD from Canada. Corporate supporters include Unilever , Puma, Dow Chemical and Mars Incorporated.

More information can be found at http://www.naturalcapitaldeclaration.org/

As part of its regular coverage of environmental initiatives, during the next few weeks GallonDaily will be highlighting some of the private sector and ngo sustainability initiatives announced during last weeks Rio+20 sustainable development summit.

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