Since I’m retired and can go to any old conference I want, I decided this would be the year to attend the Natural Capital conference, held in Edinburgh every two years. I’m not normally this smart, because it was a very good decision indeed. Day one of the two-day affair (followed by a further day of general brainstorming, apparently) was pretty solid, with strong opening and closing plenary sessions (particularly the closing talks from Richard Mattison from Trucost and Gretchen Daily from Stanford,) interspersed by three panel discussions of varying quality, one of which was a textbook case of how to do a panel discussion. So well done to the organizers.
My frame of reference here was the Resilience 2017 conference in Stockholm earlier this year, and the contrast is pretty robust. Where there was virtually no economics or finance at Resilience, today was packed with it, albeit at various levels, and of varying quality. But it’s a strong theme–the need to get to a more sensible economy that recognizes natural capital limits. And it’s clearly an increasingly popular topic, in the sense that we have 700 people from 60 countries here. Not bad for a concept that barely existed a decade ago.
Not that economics was discussed in great detail, in the sense that there were detailed proposals about how to modify the current economic system. Yet it’s clear that everyone believes this will be–in fact, is–necessary, and the real issue is figuring out how to get there from here. What there was, though, was serious discussion about a number of topics that all bear on the issue of integrating Natural Capital into economic and political policy-making.
There was also some serious recognition that while there has been some very good work done in this area, the concept still has yet to penetrate mainstream economics. This is a bit surprising, since what we’re talking about here, I think, is probably what natural resource economists used to talk about back when people did natural resource economics. We’re talking about how to use resources here, including resources that are now understood to be finite in any number of cases. There is a large economic literature here that has been largely ignored the past several decades as economics got more quant, and what this conference, and the work behind it, embodies is an attempt to get back to some of that world view.
This will be tough. Investors are largely unfamiliar with this, although one of the panels today included several money management firms discussion their approaches to incorporating natural capital (or what some of them thought was natural capital.) I made the point in one of the panels that it took two decades for investors to figure out that climate was an important issue, and that’s still not a universal proposition. Incorporating natural capital concerns into investment decision-making needs to take place considerably more rapidly–we don’t have two decades.
The panel discussions were mixed, which is pretty much par for the course. I should note that there are four parallel tracks throughout the conference, each focusing on a particular theme: Taking Nature in to Account, Impact through Innovation, Cities of Tomorrow, and Prosperous and Resilient Economies. These are the kind to blurby session headings that one would expect to find, but refreshingly the ones I attended actually did reflect the theme in question. Much thought went into all this, even if the execution wasn’t flawless.
The panel on Business Re-Imagined was a bit weird, since for most of the discussion we were presented with business as a stand-alone entity, and that “Business as usual is dead.” It was never really made clear what this meant, although everyone seemed in agreement on this point. It wasn’t until the close of the session that the issue of regulation was brought up (by someone in the audience, not by a panelist,) and it was welcome to hear Gregor Alexander of SSE stated that there were large issues that were simply beyond the capability of businesses, and that this really is, or should be, the role of the government. This was refreshing. Still, some discussion the role of governments and investors in changing how business operates would have been welcome. If “Business as Usual is Dead” really is the case, it will be because investors and governments push business as it currently operates in a new direction.
The best panel of the day was in the afternoon, with the potentially threatening title of “Tackling challenges head on.” As it turned out, this was an all female panel, although whether by design or not I couldn’t say. But it was a pleasure to see a series of knowledgeable and engaged panelists deal with the issue of what works in making good natural capital decisions. There were several gems here–Emily Benson (from the Green Economy coalition) pointing out that companies that lead in adopting natural capital assessments are those with the greatest risk; Georgina Mace (of University College London) discussing what works, and what generates complications, in her work with the UK government’s Natural Capital Committee; and Kate Schreckenberg’s (from the Ecosystem Services for Poverty Alleviation program) comment that natural resource interventions are rarely a win-win for all concerned, and disaggregating wealth impacts of such interventions for all population segments should be a requirement. This was a great panel, and I’d happily sit through it again.
There were a number of running themes to the day, and not the ones listed above, but rather comments that emerged time after time. The first was the issue of metrics, and the need for them. There is certainly a need for greater granulation in natural capital assessments. But it is also the case the metrics continue to proliferate–like ESG criteria, as someone pointed out. There is an emerging recognition that there needs to be greater standardization here. Secondly, there is an over-riding perception that not enough is being done. I couldn’t comment on whether or not this is true, but it’s obvious that a number of presenters and panelists, and many audience members, believe that the uptake of natural capital concerns continues to be too slow. My suggestion is to get Black Rock on board here–that would do wonders.
The third subtext, and apparently a major frustration, relates to the relation between natural capital and the “Green Economy.” As several speakers pointed out, you can’t really have a green economy without natural capital constraints. But perusing the green economy literature, or attending conferences on this topic, it is unusual find extensive consideration of natural capital concerns–the dominant meme here seems to be that if you handle carbon, that’s all you need to do to become “green.” I suspect this will change–everyone is one the same side here. But with all the trendiness of the green economy these days–something like 60 governments have expressed some level of interest in moving in this direction–it is understandable that there would be some frustration at green economy proposals that barely mention natural capital concerns.
More tomorrow. I should note in passing that another major difference between this conference and Resilience 2017 is the number of men in suits. At Stockholm, you could count these on one hand. Here, I was one of the few not in one. What this means is anyone’s guess.