As Planetary CFO, I'd like to do the same with the assets under my notional stewardship. My saying will be - "only value the World Balance Sheet assets you want to protect or enhance". I know there are some people who are afraid that, once we value assets such as Natural Capital assets (eg forests, biodiversity and the ecosystems they are a part of) then that might make them attractive to someone to convert into cash for short-term gain, to the detriment of long-term benefit to human and non-human populations. However, I'm concerned that a lot of that is happening even now, in relation to assets which are not valued in anyone's Balance Sheet, let alone a World Balance Sheet ("WBS"). The opportunity we now have is to make those assets, especially the Global Commons, much more visible to global institutions, including financial ones, to raise awareness of the need to maintain sufficient assets to provide for the basic needs of human and non-human populations. One way to do this is to place a value on them. And one way to reduce the chances of those assets being converted unnecessarily is to choose an appropriate valuation method. In conventional accounting, most assets are valued at the lower of cost and realisable value. What if, instead, we value assets in the WBS at the discounted sum of all the future wellbeing impacts of the continuing ability of those assets to provide such wellbeing (eg the "ecosystem services"). Looking at them in that way, the value of converting that asset into cash (eg by chopping down all the trees in a forest and converting them into planks of wood) is much less than the value of maintaining a sustainable forest and only removing trees at a rate that is easily accommodated by the systems of renewal. Of course, a sensible discount rate is required to support this approach. Mathematically, the discount rate can't be zero because the resulting value would be infinite. However, a discount rate can be chosen that achieves our desired effect. But that's a topic for another day. This is the Planetary CFO signing off for now.
A few months ago, my dentist came out with a saying - "only brush the teeth you want to keep". It was a jokey way of delivering a serious message.
As Planetary CFO, I'd like to do the same with the assets under my notional stewardship. My saying will be - "only value the World Balance Sheet assets you want to protect or enhance". I know there are some people who are afraid that, once we value assets such as Natural Capital assets (eg forests, biodiversity and the ecosystems they are a part of) then that might make them attractive to someone to convert into cash for short-term gain, to the detriment of long-term benefit to human and non-human populations. However, I'm concerned that a lot of that is happening even now, in relation to assets which are not valued in anyone's Balance Sheet, let alone a World Balance Sheet ("WBS"). The opportunity we now have is to make those assets, especially the Global Commons, much more visible to global institutions, including financial ones, to raise awareness of the need to maintain sufficient assets to provide for the basic needs of human and non-human populations. One way to do this is to place a value on them. And one way to reduce the chances of those assets being converted unnecessarily is to choose an appropriate valuation method. In conventional accounting, most assets are valued at the lower of cost and realisable value. What if, instead, we value assets in the WBS at the discounted sum of all the future wellbeing impacts of the continuing ability of those assets to provide such wellbeing (eg the "ecosystem services"). Looking at them in that way, the value of converting that asset into cash (eg by chopping down all the trees in a forest and converting them into planks of wood) is much less than the value of maintaining a sustainable forest and only removing trees at a rate that is easily accommodated by the systems of renewal. Of course, a sensible discount rate is required to support this approach. Mathematically, the discount rate can't be zero because the resulting value would be infinite. However, a discount rate can be chosen that achieves our desired effect. But that's a topic for another day. This is the Planetary CFO signing off for now.
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As self-appointed Planetary CFO, one of my first tasks is to start to get my head round what should be in the World Balance Sheet. Here are some initial ideas. The overall idea is that we should record the commitment to provide sufficiently for the basic needs of a total global population of x billion. This is similar in some ways to pension trusts that hold financial assets sufficient to provide for the pension entitlements of its pensioners. In the World Balance Sheet, the assets need to be maintained in a way that provides for the basic needs of the populace of people, while at the same time doing it in a way that enables the people to live sustainably alongside a sufficiently large and biodiverse population of non-human species, while also recognising limits in other natural, chemical and geological systems of systems that represent One Planet Living in perpetuity.
Most of the text here is inspired by a blog post by Solitaire Townsend at Futerra.
I have just appointed myself Planetary CFO, currently an unpaid role. More details in my nutshell ideas. I hope to post news of my actions and views in further blog posts over the coming months. |
About the BloggerI'm David Calver - an Accountant with a passion for sustainability. Categories
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