What does it mean to put a price tag on nature?

(translated and edited excerpt from a Mistra article in Swedish from seminar in Lund 9 April, Vad innebär det att sätta en prislapp på naturen? Mistras jubileumsseminarium i Lund – Mistra)

Translating the value of nature into economic terms presents both risks and opportunities. It makes the impacts, dependencies and risks associated with biodiversity for businesses visible but it also means treating nature and ecosystem services as market forces. At Mistra's 30-year anniversary seminar in Lund, Biodiversity and Climate - synergies and conflicts - were discussed.

Mistra's 30th anniversary has been marked, among other things, by a tour with the theme 'Transition in progress', aimed at bringing together research and social actors to discuss current environmental issues. The tour kicked off in February with a seminar on electrification and the transition in northern Sweden. In mid-March, the Gothenburg stop focused on a resource-efficient society, and in April and the Lund stop, the focus was on biodiversity.

Susanne Arvidsson, Programme Director of Mistra BIOPATH, aiming to integrate biodiversity as a natural part of all decisions in the financial system and business, sees a great need for increased knowledge of biodiversity, in politics as well as in business and among individuals, if this is to succeed. The need for knowledge is about dependence on and impacts on biodiversity, but also about the risks of biodiversity loss and the opportunities that integration into all decision-making can provide.

“This is not a 30-minute jog, this is a marathon. It requires effort. High on the wish list is to have applicable metrics, indicators and methods that capture the diversity of values that nature provides and that can be easily integrated into business and financial system decision-making," said Susanne Arvidsson.

Although, to start moving now, Susanne Arvidsson believes it is better to develop 'half-baked' metrics that can be implemented quickly by many actors and then improve and adapt them along the way, rather than striving to develop the perfect metrics, which can both take time and contribute to a lack of uptake.

Climate change is considered easier

Elin Larsson, Head of Business and Finance at WWF, points to one of the organisation's reports showing that most companies surveyed indicate that biodiversity loss threatens their business in some way and that they want to work more on the issue. At the same time, not all of them recognise that they have an impact and more than half lack concrete targets for their biodiversity work. According to Elin Larsson, the board's expertise in this area is crucial.

Catharina Belfrage Sahlstrand, Handelsbanken, industrial partner WP2 Mistra BIOPATH, Joakim Sandberg, Mistra Finbio, Elin Larsson WWF, Joakim Hamnmark, AP3.

Catharina Belfrage Sahlstrand, Head of Sustainability at Handelsbanken, shares the view that biodiversity is a hot and topical issue, while at the same time it is diffuse, and few feel responsible. She believes that there are shortcomings in the knowledge chain and that it is a question of maturity.

"The financial sector has come a long way in its work on climate change, probably because it feels more manageable, there are measures and figures to relate to. There is not the same shared understanding for biodiversity”.

Catharina Belfrage Sahlstrand believes in talking more about biodiversity as a business strategy issue, with risks versus opportunities, and putting it in the context of geopolitics and reputation. But it's still difficult to identify and analyse the impacts that happen further down the value chain. According to Elin Larsson, WWF is now working on a tool that will support companies in mapping the value chain backwards.

Price versus dignity

But is it only good to translate nature and its ecosystem services into figures and measurements? Joakim Sandberg, research director at Mistra FinBio and professor of practical philosophy at the University of Gothenburg, believes we need to consider what it means to put a price on nature.

“On the one hand, we need to emphasise the importance of biodiversity, and what we don't measure doesn't exist for capital owners and the financial market. On the other hand, it is impossible to put a price on nature. As Emanuel Kant wrote: In the realm of ends, everything has either a price or a dignity.  "We need to raise awareness of the effects and risks of pricing nature, for example, it can lead us to invest in nature when the market is doing well, while we withdraw investments in a recession," said Joakim Sandberg.

He compares the discussion to the paradox that what we seek most is hardest to find. "The more figures we set, the harder it is to realise what we are pricing and the greater the risk of missing the values we are not pricing. Not least because we don't even know all the values nature provides us with today and in the future.

Catharina Belfrage Sahlstrand agrees with the complexity, not least in a future perspective:
“What does it cost to never set foot in a forest or to never eat food - it is of course impossible to put a price on that. At the same time, we need to recognise the cost of doing nothing”.

Torbjörn Hamnmark, Head of Strategic Asset Allocation at AP3 and a member of Mistra's Asset Management committee, is also ambivalent about pricing nature. In one sense, he believes the value of nature needs to be translated into economic terms; on the other hand, he's concerned that this helps to simplify a complex problem.

"The risk is that we act as we have done so far - pumping in money to deal with a single crisis without solving the root of the problem.At the same time, I don't have confidence that we as individuals can solve this.Economists have always worked on how we allocate resources, and I think we have a lot of knowledge on how to solve this by dusting off old economics," says Torbjörn Hamnmark.

Alphabetic soup

According to Susanne Arvidsson, data collection, reporting systems, governance, investment, and valuation models are not developed to integrate biodiversity. There is a great need for value-relevant, reliable, and comparable information on risks, dependence, impacts and opportunities. Frameworks and directives such as the Taskforce on Nature-Related Financial Disclosures (TNFD), the Corporate Sustainability Reporting Directive (CSRD) and the EU taxonomy can seem like an alphabet soup, while forcing companies to address the issue.

Lena Sommestad, Chair of the Programme Board of Mistra FinBio, was part of the seminar audience. She pointed out that we live in a market-driven era, where all environmental decisions are about money and the market.

“I think this is a dangerous development. Financial incentives are one way of working, but regulation, education and discussions about values, price and responsibility are other ways. We need to capture the commitment to nature so that we do not end up in a direction