The Amazon rainforest is beautiful, mysterious and above all … very profitable. Indeed, this wild space could be valued at around $240 million by the biodiversity banking. The main idea behind Biodiversity banking is to assign a monetary value on ecosystem services, such as for example land protection. More than just emphasizing the valorization of Nature in general, it is also possible to go deeper and to put a value on animals themselves because, after all, the Desert turtle, the Bagicorne beetle or the Sand fly, to name a few, also have an intrinsic value. Nevertheless, as this value is not well-defined, they are a bit left out of the negotiations and most of the time killed or hunted. By setting a value to the biodiversity, biobanks consider Nature in terms of profits and losses such as in a classical accounting method, an approach that could bolster investments in nature’s protection by “working through the laws of the market”. Through this short article, we will have a glimpse at the functioning and at the main issues and controversies faced by these institutions.

Settlement of the Biobanks

1997 is the signing year of the famous Kyoto Protocol which initiates the principle of compensation of CO2 emissions through the financing of environmentally friendly projects. Nonetheless, the hint that financial markets could solve the extinction of species and the depletion of natural resources already emerged fifty years ago. In the United States, the deregulation of conservation laws started under the governments of Reagan and Bush Senior .

At this time, industrial and financial lobbies literally “jumped “on the opportunities and find themselves today balancing their ecological footprint by buying biodiversitycertificates.

This is, in short, the story of how biobanks, a new design of institutions specialized in living and natural assets, came to light. In a nutshell, biobanks (most of them being multinationals and subsidiaries of big banks) issue certificates in order to rescue jeopardized species. However, despite this highly altruistic goal, these institutions are controversial and their benevolence or legitimacy have been put in question many times. For example, Pablo Solon, former Bolivian Ambassador to the UN, strongly disagrees with these practices that he sees as „a license to kill nature.”

A « sand fly » share in your portfolio

tram2Put simply, Biobanks design ad hoc financial products (as for instance « orangutan » or « cactus » shares) in order to protect the natural ecosystems and their animal species. From 1991, just before the Earth Summit in Rio, these institutions offered their customers to invest in stocks generating value while preserving a specy in danger of extinction, such as the sand fly in California.

The mechanism can be explained as followed: Suppose a company wants to set up a factory in a natural area of California which is already owned by a biobank protecting the “sand” fly. The biobank will sell the company a couple of “fly” shares in order to compensate the company’s environmental impact by investing in the protection of the insect. These incentives can make sense at some points if you consider the diagram below and the fact that about 40% of the Habitat Destruction is one of the main causes of Animal Extinctions.

Of course, the lands where the species live are all listed on the biobank’s website and sold at very high prices to the firms. If these investments are quite controversial, this movement is supported by different NGO initiatives such as the ones from the WWF that decided to set up a partnership with Coca-Cola in order to support some highly costly funding campaigns. But is it a win-win deal? The debate still remains wide open.

Monetize to recognize

According to the environmental economist Pagan Sukhdev, the best way to protect endangered species and ecosystems is to assign a value to them in order to recognize and to protect them more efficiently.  For instance, in the US, bees are disappearing and farmers resort to companies that lease these precious bees in order to pollinate their fields.

According to Pavan Sukhdev, „Pollination by bees is invisible to the economy, but if we calculated its value, this would represent approximately $ 200 billion, says economist Sukhdev, or 8% of agricultural production in the world.”   

However, how do you assess the value of a shark or a forest?

This can be tricky because there is no benchmark, potential volatility and one may be tempted to choose to protect or to invest in the most valuable species.

Besides, some projects are dubious as a provocative documentary realized by Sandrine Feydel and Denis Delestrac, called “Banking nature”, showed. For example, Vale, one of the largest Brazilian mining companies, makes a living through highly polluting activities, while being listed on sustainable development indices as it mitigates its polluting impact by reforesting tens of thousands of hectares in the Amazon. In reality, according to several associations as Greenpeace, this green economy is an hoax because trees that are replanted are eucalyptus which deplete soil and transform the forest in a green desert while the company generates profit through the sale of its trees to produce biofuel…

Ethical issues

What is the main risk of green banking?  According to Markus Henn , economist and lawyer member of the World Economy, Ecology and Finance association, the main risk of green banking is the undervaluation of nature. By consciously undervaluing nature, “companies could destroy [it] cheaply” whereas nature is priceless just as human lives. Companies might just seek to find a low-cost and superficially acceptable solution to compensate for their damages on the environment, whereas the original vision of a green bank should be the preservation of nature and animal species per se.

On the other hand, though, people such as the environmental economist Pavan Sukhev support the direct monetization of nature as it would rapidly save some endangered locations such as The Borneo Island which already lost 2/3 of its area. 

In this context, the role of biobanks should clearly be analysed. Sustainability and the environment are paramount issue for the world in general. Is it relevant to give the protection of nature to banks and financial markets? According to some, this should rather be a responsibility of the United Nations . Can a carnivorous plant become vegetarian? Well, being veggie is trendy.

Source graph: Bio.mani

Photo credit: Michael Yuen; unedited;