Putting Mother Nature on the balance sheet

What's the financial value of a wetland that soaks up stormwater and maintains good water quality for a community? Or trees that offer shade to reduce urban heat and maintain good air quality? According to Canada's accounting rules, the answer is currently zero.

A new report co-authored by the Intact Centre on Climate Adaptation, KPMG and the Municipal Natural Assets Initiative is calling for Canada's financial system to recognize the financial value of natural assets to encourage investment and safeguard natural resilience.

Natural assets are critical to helping communities reduce the impacts of a changing climate such as flooding, extreme heat and drought, as well as removing carbon emissions. Wetlands, for example, are a natural carbon sink and a natural line of defence against floods in neighbouring communities, reducing the cost of flooding by up to 40 per cent. As a valuable asset for a community, why is nature not included on the balance sheet?

Taking action to protect nature and encourage investment

Doubling down on helping communities adapt to the extreme weather impacts of climate change is one of the pillars of our five-part climate strategy. We're investing heavily in nature-based solutions to protect Canadians and communities, as well as advocating for the Canadian government to take action. In a recent submission on Canada's National Adaptation Strategy, we called for government action to protect natural assets with investment in restoration, preventing destruction, and greater involvement and capital from the private sector.

Investing in nature-based solutions as a first line of defence

According to the report, the services that nature provides to Canadians and Canadian communities are not routinely valued in investment decisions, asset management or financial reporting. The report recommends three ways to accelerate investment in natural climate solutions:

• allow for the inclusion of natural assets in public sector financial statements;
• establish national guidelines and standards for identifying and valuing natural assets in Canada; and
  
• engage Canadian financial institutions in setting frameworks and metrics to measure the value of and return on investment in nature, as well as guide

  private sector investments to protect and restore natural assets.