This article was originally published on RFi Group.
“Ignoring or paying lip service to natural capital could be disastrous for banks writes Keith Rovers, partner at Minter Ellison.
On top of quantifying the impacts of climate risk on loan books, assets portfolios and insurances lines, banks will also need to assess ‘natural capital’ impacts of its own footprint and that of its customer base.
Basically, this means putting an asset value on nature or the natural capital used in the supply chain – and thus a monetary value on a business’s impact on the ecosystem, which will likely mean taking a hit to corporate earnings.
Last year, National Australia Bank chair Ken Henry identified the role of clean air and water, energy, soil health and biodiversity to the healthy ecosystems, which underpin prosperous economies and argued that these ‘services’ are not traded in a market or captured in any system-wide accounting framework and, as such, are invisible.
To compound matters, in some instances our ignorance of ecological processes has sometimes led us to label natural capital assets as liabilities. Accordingly, we needed to design accounting frameworks which make these ‘services’ or assets visible and properly price and account for them…”
Read on at: RFi Group.