We Don't Value Nature

Early economic thinkers, including Adam Smith, saw nature only for what she (nature was always female in their writing) could provide—land for housing and food for eating. In their opinion, human endeavor added value to nature; it had no intrinsic value. Although these luminaries recognized that nature could perform “activities without human intervention,”1 since they could not measure the value of these activities, they did not focus on them. Instead, Smith and his fellow economists thought only of investing in the land to boost productivity and drive economic progress. This early thinking has informed both our understanding of how the economy works and, importantly, our relationship with nature.

The climate crisis has forced us to pay attention to nature. While our understanding may lag, as an investment theme, nature is only five years behind climate. Just as the Task Force on Climate-related Financial Disclosures (TCFD) and others helped to put climate front of mind, we believe nature will benefit from similar tailwinds, eventually becoming a core ESG consideration and a destination for institutional capital.

Although the nature crisis is inextricable from the climate crisis, it is separate. So, whether an investor can address nature-related issues in their existing climate program depends entirely on the scope of that climate program. Some LPs may opt to carve out a separate nature allocation altogether, while others may redefine their climate allocation to include nature. That investors can find nature opportunities in every asset class evinces the breadth and complexity of the issue.

Having helped general and limited partners alike better account for climate factors in their processes and portfolios, we know firsthand how hard the journey can be. We expect nature to be no different.

1 We would have called these activities carbon sequestration, water and air purification, and recreation, to name a few.