The value of our natural assets

With the world in the throes of a climate and biodiversity crisis, nature is hanging in the balance. 

Strange then that we don't think of accounting for nature, and the invisible services it provides, on the collective balance sheet. We don't think of natural assets as having financial value, so we are not incentivized to manage them effectively or integrate them into our management strategies.

And yet, they are the most valuable infrastructure asset we have. 

Natural assets include forests, wetlands, coastal areas, and riparian areas — basically, any natural features that provide services we rely on, from stormwater management to flood risk reduction. But most governments and jurisdictions place zero value on these services, so their decisions don't account for natural services. As a result, little is done to prevent their degradation. 

Instead, most owners of public infrastructure focus on the built environment. 

"For a number of reasons, local governments, and public and private sector entities don't tend to understand nature, if they're thinking about it at all," says Roy Brooke, the executive director of the Natural Assets Initiative (NAI), which provides scientific, economic and municipal expertise to support and guide local governments in their efforts to identify, value and account for natural assets in their financial planning and asset management programs.

"They're thinking about it extremely narrowly, as green or recreational or social amenities—something that's nice to look at. That predisposes us to thinking about nature as a bit of a beauty contest. We pay attention to those assets that are attractive and ignore those that aren't."

But the reality is we're all a part of an ecosystem. Everyone is downstream of someone, and everyone essentially lives in a watershed. Throughout those watersheds, governments, businesses and other entities make decisions, big and small, which affect nature and natural assets. Without understanding the services nature provides and assigning them value, cumulative decisions over three, five or ten years eventually add up. Then communities are faced with addressing major problems like flooding, aquifer issues or wildfires.

"But then it's too late because you can't rebuild it," Brooke says. 

When she was the Environmental Commissioner of Ontario, Dianne Saxe pushed for more reliance on natural assets management (NAM). In her current role as a Toronto city councillor, the environmental lawyer continues to make a case for it.  

"[Natural assets] are important from every point of view – financially, to quality of life, to our ability to reduce climate chaos and to withstand what's coming. They're also important for the livability of the city and for mental health," she says.

But we take the natural world for granted, she says, assuming "it will continue to provide us with what we want no matter what we do to it." "We're going to learn the hard way that they should not be taken for granted."

According to Brooke, "Canada is always first to be second," and in the early days of NAI, he assumed other jurisdictions were already looking at natural asset management. But he realized that wasn't so after attending conferences with the World Bank and the European Commission. While plenty of cities and communities have green infrastructure projects, they have yet to explore the systemic management of natural assets seriously.

As it turns out, "we (in Canada) are miles ahead of the next person," he says. 

The small community of Gibsons, B.C., led the way, starting back in 2009. Using the Millennium Ecosystem Assessment, a study of global changes in ecosystems and their impact on humans, ecological accounting and modern asset management, the town changed its approach to looking at nature.

Since then, roughly 90 local governments nationwide have begun identifying and assigning value to their natural assets. However, these cases are still exceptional. According to Brooke, this is primarily due to the absence of a definitive policy directive in the country that emphasizes the accounting of nature and its wide range of services.

That's not to say there aren't existing policies that, for example, recognize wetlands as valuable and deserving protection. Ontario's regulation 588/17 requires municipalities to consider NAM, but isn't comprehensive. 

Also, according to our dominant worldview, nature is considered property, and that notion is codified in law, Brooke explains. "I have the legal freedom to do anything I want on my property. I can tarmac my entire place and nobody can say no."

We are left with a dysfunctional and siloed state with no legal oversight or comprehensive framework for managing natural assets. Municipalities focus on their interests without considering the benefits for others, while provincial governments have multiple ministries with distinct mandates, projects, data sets, and timelines. "Everyone's doing their own thing," Brooke says.

But a heavily disrupted climate, characterized by frequent emergencies, atmospheric rivers, and devastating wildfires wiping out communities, has people finally connecting the dots, he says. It's becoming evident that removing all green entities in new developments or building in floodplains is detrimental.

There is some evidence that communities are beginning to partner with others outside the boundaries of their respective jurisdictions. In 2017, 28 leaders from Manitoba, including chiefs from the Southern Chiefs' Organizations, mayors, and reeves from the Winnipeg Metropolitan Region, started collaborating with NAI to create a shared inventory of natural assets -- all part of their plans to reach 2050 climate goals. Colleen Sklar, the executive director of the region, calls it a pioneering effort that offers a valuable opportunity for collaboration in maintaining healthy ecosystems and honouring treaty relationships.

"Working from a different worldview and combining our perspective allowed us all to learn a lot from each other," she says. For example, leaders developed a much better understanding of how water moves over, under and through every community towards Hudson's Bay. 

"The inventory is a really good way to show how our communities are interconnected," Sklar says. "We have to look upstream and downstream and how we do things at all times. If we don't know where it is and we don't know what it is, we can't ever begin to protect it and we can't ever begin to restore it."

Canada has pledged to reach net-zero emissions by 2050 and reduce emissions by 40-45% below 2005 levels by 2030. However, Brooke argues that we need more than disconnected pilot projects to help us meet these targets. Achieving them will require thriving, interconnected biodiverse ecosystems and a big increase in nature-based solutions. 

He says public sector accounting rules need to be revamped to recognize natural assets as tangible capital assets.

Sabrina Spencer, an associate at Fasken Martineau DuMoulin in Vancouver, emphasizes that considering the economic values of natural assets and integrating them into municipal decisions requires a comprehensive and well-executed approach to lawmaking.

"Things are being funneled down to local governments when they don't really have the resources, funding or means to deal with them," Spencer says, noting that's opening them up to litigation.

"At what point do the scales tip such that local governments knew there were climate-related risks, and yet they didn't act to address flood preparations or secure water supplies? A lot of local governments notice these things are on the horizon, but they just don't have (what they need) to deal with it."

It's only a matter of time before British Columbia starts exploring regulatory and policy changes that acknowledge the role of natural assets in mitigating climate and legal risk, says Brooke —possibly in the next 18-24 months. 

Earlier this year, NAI released a legal primer for local governments on powers and obligations around protecting nature.

In Ontario, Saxe notes that as of July 1, 2023, municipalities must include non-core assets (natural and green infrastructure) in their asset management plan for the first time. However, municipal asset management only extends to what it controls: public land. 

"The really interesting legal questions come in how the public owners and private owners are going to interact given that private property owners feel entitled to just dump their stormwater onto the public lands and have the public deal with it. That, increasingly, is going to be something that doesn't work."

The intriguing legal questions will arise from the interaction between public and private owners, especially as private property owners "feel entitled to just dump their stormwater onto the public lands and have the public deal with it," Saxe adds.

She also points to moves in the Netherlands and the U.K., where space has been returned to rivers.

"Moving buildings away from rivers and floodplains and giving that space back to nature is essential for flood control, but also really good for the quality of life and mental health," she says. 

"But it does mean changes to legal title and changes as to who gets the benefits and the burdens of those properties. That's going to be a really big area of legal conflict for decades to come."