What is it?

Broadly speaking, the valuation of nature refers to the values that people assign to various elements in nature and natural resources, which are then incorporated into their policy-making and decision-making.

A related term, “natural capital”, is defined by Conservation International as the sources of the services that nature provides, which include fresh water, flood control and forest products.

There are currently over 50 valuation methods and approaches - but there is a lack of comparability and comprehensiveness among them, and a large degree of subjectiveness.

Why does it matter?

Knowing the economic value of nature’s benefits makes its contributions to livelihoods and economies more visible, making for more informed decisions by both the public and private sectors, says Conservation International, a US-headquartered environmental non-profit organisation.

It helps governments account for nature’s role in the economy and human well-being, helping them understand the dependence of economic development on natural resources.

For businesses, quantifying that reliance can help them become more efficient, sustainable and better at managing risks in their supply chains.

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A recent global study by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) says the valuation of nature in political and economic decisions is both a key driver of the global biodiversity crisis and a vital opportunity to address it.

What role do investors play?

Nature can play a powerful role in providing solutions to climate change, but highly cost-effective solutions - like protecting, restoring and sustainably managing old-growth forests, mangroves and peatlands - receive less than 3 per cent of all global climate funding, says Conservation International.

Corporations have a responsibility to not only embrace environmentally and socially sustainable business practices, but also to invest in the conservation of the nature their business depends upon.

Their decision-making, however, is dependent upon the valuations they use.

Are current valuation methods inadequate?

Decisions are currently being made based on a narrow set of market values, says the IBPES study, titled The Assessment Report on the Diverse Values and Valuation of Nature (Assessment Report).

The current dominant global focus is on short-term profits and economic growth, often excluding the consideration of multiple values of nature in policy decisions. 

The Assessment Report, based on a 4-year methodological study by 82 top scientists and experts from around the world and approved by the 139 member states of the IPBES, draws on over 13,000 references.

It found that certain values of nature have been predominantly prioritised - particularly market-based instrumental values of nature, such as those associated with food produced intensively. These do not adequately reflect how changes in nature affect people’s quality of life; policymaking also tends to overlook the many non-market values associated with nature’s contributions to people, such as climate regulation and cultural identity.

It also found that only 2 per cent of the over-1,000 studies on nature valuation it reviewed had consulted stakeholders on valuation findings. Only 1 per cent involved stakeholders in every step of the process of valuing nature.

What is in short supply, said authors of the report, is the use of valuation methods to tackle power asymmetries among stakeholders, and to transparently embed the diverse values of nature into policymaking.

Is there a better way to value nature?

The Assessment Report claims to provide a novel and comprehensive typology of nature’s values, that highlights how different worldviews and knowledge systems influence the ways people interact with and value nature.

“(It) provides decision-makers with concrete tools and methods to better understand the values that individuals and communities hold about nature,” says Professor Patricia Balvanera, one of the authors of the report.

“For example, it highlights 5 iterative steps to design valuation to fit the needs of different decision-making contexts. The report also provides guidelines on how to enhance the quality of valuation by taking into account relevance, robustness and resource requirements of different valuation methods.”

The report also aims to provide guidance to policy- and decision-makers seeking to combine the different values measured by different valuation methods.

The study found that, while there is a plethora of valuation studies, the majority do not attempt to bring different values together - which runs counter to a primary objective of valuation, which is to allow different but compatible values to be comparable.

“Shifting decision-making towards the multiple values of nature is a really important part of the system-wide transformative change needed to address the current global biodiversity crisis,” Dr Balvanera said.