value of nature.
In a world where ecology and economics seem to inhabit two very different realms, it is easy to forget that the words share a common root: the greek word oikos, meaning home or household. In translation, economics means “rules for the home,” ecology is “knowledge of the home,” and ecosystems are the systems that underpin the “functioning of our home”. There is wisdom in this etymology. Ecosystems are increasingly under stress from our economic systems, threatening the long-term ability of people and societies to survive and thrive on the planet. Add to this challenges such as growing consumption, increased human numbers, climate change, and accelerating natural resource scarcity, and you have a recipe for serious problems. For our planet to thrive, our economic systems need to be in tune with our ecosystems. We need to properly value the environmental assets and services found that nature provides. EKO is committed to making investments and providing consulting services that bring economic activity closer to recognizing the value of environmental assets and nature’s services.
Unfortunately, notwithstanding the words’ common ancestry, it now seems that the “rules for our home” have become desperately disconnected from both the “knowledge of our home” and the systems that make life on that home possible. As a result, ecosystems are increasingly under stress, threatening the long-term ability of people and societies to survive and thrive on the planet. Which brings us back to the common root of the various concepts: the world is looking for solutions based on the understanding that ecosystem preservation is a critical foundation for ongoing economic prosperity, rather than an impediment to economic growth.
Indeed, without functioning ecosystems and the many services they provide (such as clean air, clean water, pollination, healthy soils, and biodiversity) economic prosperity (let alone growth) is impossible. The truth is that natural systems have for eons been delivering essential services for free. Just imagine what would happen if electric utilities didn’t charge for their services. First, electricity would be overused (it already is), and secondly there wouldn’t be money to invest in the cables, technicians, and generators that make the provision of that service possible. That is exactly what is currently happening with the ecosystems that make up the world’s largest “public utility”.
In part, the problem is one of both values AND value. It is a problem of an economic system that gives greater value to forests once they are burned down and turned into soy fields than when they are left standing. Economists refer to this as a problem of “externalities”; the services of nature have for too long remained “external” to the economic system.
On a more positive note, existing and emergent markets for ecosystem services, together with smart investments in regenerating natural systems have the potential to address some of these global environmental challenges, while also enabling the continuation of global economic growth in a more ecologically sustainable manner. The recent successes of markets for carbon and other environmental commodities (e.g., SO2 and NO2) have demonstrated the potential of market-based solutions to internalize the costs of pollution, natural resource exploitation, and unsustainable development into our economic system. Similarly, profitable investments in projects and companies that restore and maintain natural systems have proven that it is possible to generate financial returns, while at the same time restoring the planet.
EKO is a business based on the premise that as natural resources (together with nature’s services) become increasingly scarce, tremendous value will be created via investment in the maintenance, creation, regeneration, and restoration of functioning ecosystems. In other words, as the world turns to market-based solutions to internalize environmental externalities, there will be various economic threats and opportunities. These changes will bring with them huge strategic opportunities for patient, ecologically-minded capital to profit from currently unrecognized environmental value. Just as importantly, the changes will play an important role in preserving the ecosystems needed for our future.