One day, a land broker mentions an idea. How about granting a long-term lease to a company that values your property for the same reasons you do: long walks through tall grass, the calls of migrating birds, the way it keeps the air and water clean.
Such a company doesn’t yet exist. But the idea has gained traction among environmentalists, money managers and philanthropists who believe that nature won’t be adequately protected unless it is assigned a value in the market — whether or not that asset generates dividends through a monetizable use.
The concept almost hit the big time when the Securities and Exchange Commission was considering a proposal from the New York Stock Exchange to list these “natural asset companies” for public trading. But after a wave of fierce opposition from right-wing groups and Republican politicians, and even conservationists wary of Wall Street, in mid-January the exchange pulled the plug.
That doesn’t mean natural asset companies are going away; their proponents are working on prototypes in the private markets to build out the model. And even if this concept doesn’t take off, it’s part of a larger movement motivated by the belief that if natural riches are to be preserved, they must have a price.
Beyond Philanthropy
For decades, economists and scientists have worked to quantify the contributions of nature — a kind of production known as ecosystem services.
By traditional accounting methods, a forest has monetary value only when it has been cut into two-by-fours. If a forest not destined for the sawmill burns down, economic activity actually increases, because of the relief efforts required in the aftermath.
When you pull back the camera, though, forests help us in many more ways. Beyond sucking carbon out of the air, they hold the soil in place during heavy rains, and in dry times help it retain moisture by shading the ground and protecting winter snowpack, which helps keep reservoirs full for humans. Without the tree-covered Catskills, for example, New York City would have to invest much more in infrastructure to filter its water.
Natural capital accounting, which U.S. statistical agencies are developing as a sidebar to their measurements of gross domestic product, puts numbers on those services. To move those calculations beyond an academic exercise, they need to be factored into incentives.
The most common way to do that is the social cost of carbon: a price per ton of emissions that represents climate change’s burdens on humanity, such as natural disasters, disease and reduced labor productivity. That number is used to evaluate the costs and benefits of regulations. In some countries — notably not the United States, at least on the federal level — it is used to set taxes on emissions. Efforts to remove carbon can then generate credits, which trade on open markets and fluctuate with supply and demand.
But carbon is just the simplest way of putting a price on nature. For the other benefits — wildlife, ecotourism, protection from hurricanes and so on — the revenue model is less obvious.
That’s what Douglas Eger set out to address. He wanted to work for an environmental group after college, but on his conservative father’s advice he instead made a career in business, running companies in pharmaceuticals, tech and finance. With some of his newly built wealth, he bought a 7,000-acre tract northwest of New York City to preserve as open space.
He didn’t think philanthropy would be enough to stem the loss of nature — a seminal 2020 report found that more than $700 billion was needed annually to avert a collapse in biodiversity. Government wasn’t solving the problem. Socially responsible investing, while making progress, wasn’t reversing damage to critical habitats.
So in 2017, Mr. Eger founded the Intrinsic Exchange Group with the goal of incubating natural asset companies, NACs for short. Here’s how it works: A landowner, whether a farmer or a government entity, works with investors to create a NAC that licenses the rights to the ecosystem services the land produces. If the company is listed on an exchange, the proceeds from the public offering of shares would provide the landowner with a revenue stream and pay for enhancing natural benefits, like havens for threatened species or a revitalized farming operation that heals the land rather than leaching it dry.
If all goes according to plan, investments in the company would appreciate as environmental quality improves or demand for natural assets increases, yielding a return years down the road — not unlike art, or gold or even cryptocurrency.
“All of these things, if you think about it, are social agreements to a degree,” Mr. Eger said. “And the beauty of a financial system is between a willing buyer and seller, the underlying becomes true.”
In discussions with like-minded investors, he found an encouraging openness to the idea. The Rockefeller Foundation kicked in about $1.7 million to fund the effort, including a 45-page document on how to devise an “ecological performance report” for the land enrolled in a NAC. In 2021, Intrinsic announced its plan to list such companies on the New York Stock Exchange, along with a pilot project involving land in Costa Rica as well as support from the Inter-American Development Bank and major environmental groups. By the time they filed an application with the S.E.C. in late September, Mr. Eger was feeling confident.
That’s when the firestorm began.
The American Stewards of Liberty, a Texas-based group that campaigns against conservation measures and seeks to roll back federal protections for endangered species, picked up on the plan. Through both grass-roots organizing and high-level lobbying, they argued that natural asset companies were a Trojan horse for foreign governments and “global elites” to lock up large swaths of rural America, particularly public lands. The rule-making docket started to fill up with comments from critics charging that the concept was nothing but a Wall Street land grab.
A collection of 25 Republican attorneys general called it illegal and part of a “radical climate agenda.” On Jan. 11, in what may have been the final straw, the Republican chairman of the House Natural Resources Committee sent a letter demanding a slew of documents relating to the proposal. Less than a week later, the proposal was scratched.
by Lydia DePillis, NY Times | Read more:
Image: Alex Merto
[ed. Long overdue. The economic value of natural, unspoiled ecosystems and wilderness-related benefits are frequently downplayed or ignored but can be greater than the material products they produce (minerals, timber, water, wildlife, wetlands, etc.), because they extend over time. The value of animals themselves can be estimated using a process called contingent valuation.]
