World Balance Sheet version 1
OK - here's a first stab at creating a template for the World Balance Sheet. A lot of numbers to be filled in before we'll know if it balances! The units of measure, by the way, are Billions of GSU - which stands for Global Sustainable Units, which I describe in this linked article.
Dieter Helm on Natural Capital
Great talk by Professor Dieter Helm at OUCE on 25th November. Optimistic that UK National Accounts will include a Balance Sheet incorporating Natural Capital, and in due course other countries will follow. The stated intent is ambitious - for this generation to leave the natural environment to the next one in at least as good a state (in aggregate) as it was when we arrived.
This is a start. There are even ways to address cross-border leakage, to prevent people just exporting the damage to other countries through supply chains.
And the techniques Professor Helm advocates will be helpful to me as Planetary CFO in building, country by country, the World Balance Sheet.
But, as a sustainabilitarian, I know that the 'no worse than we found it' ambition will need to be improved in due course. It is stabilisation but doesn't of itself provide a sustainable future. Stabilisation at current levels would shore up the declines, but what will eventually be needed is stabilisation at sustainable levels, in a global as well as local context.
I look forward to seeing the work of the next UK Natural Capital Committee.
I hope it will address these points, and that it will help demonstrate the value of a Balance Sheet approach to National Accounts. For more info about my views on World Balance Sheet, see my comments here.
Open letter to COP21 Paris Dec 2015
Climate Change is one of the most important challenges ever faced by humanity. It is by no means the only challenge in creating a sustainable future. But it is one that many people are already acting on. Renewable energy, circular economy, economic justice. These are all topics that are gaining traction and action. But the trajectory is still worrying – with annual carbon emissions to the atmosphere still huge, increasing the cumulative carbon with each year that passes. Cumulative carbon that is overwhelming the capacity of the carbon cycle to convert it into useful forms of carbon rather than damaging ones. Not only that, but it has the potential to trigger tipping points that result in the planet “switching” to a new equilibrium, with much higher carbon concentrations in the atmosphere and consequently even more extreme global warming than 2 degrees.
COP21 is not, as many people are saying, a unique opportunity. This is the continuation of a process. That process is the transition to a sustainable future for all peoples. COP21 is a chance to accelerate that transition. To increase the harmony, the cooperation, the compassion that builds the sort of future most people want to see happen. To reduce the chances of hitting those tipping points. To reduce the disruption, the suffering and the economic damage that many respected and credible experts predict will happen if global warming is allowed to rise above 2 degrees. I use the word “allowed” advisedly, because all of us, through shortage of concerted action, are allowing that future to unfold in front of us if we don’t do enough now to prevent it.
What is unique about COP21 is that it is designed to bring you all together – you who have the power and authority to make things happen. To make a binding agreement on limits to carbon emissions. To create, in effect, a carbon budget for the planet.
Climate Change is a global problem. It does not respect national boundaries. In seeking a global agreement, I (and millions like me – perhaps even billions) hope that you will be able to put the greater good of the whole of the world population above parochial national interests. Look to the long term. Think about how you would like to be remembered by the generations yet to come. Do you want to be remembered as having been part of the solution or part of the problem?
As Planetary CFO, I would urge you to use finance as a lever to effect the right kinds of change at global scale. Think of the financial mechanisms that work well in the particular country you lead, and look to implement those across the globe. Taxes that impact on consumption, emissions and environmental damage, welfare payments that provide safety nets to people who are struggling (but failing) to support themselves, welfare insurance that spreads the costs of those safety nets, subsidies that encourage investment in desirable industries and fines that encourage divestment from undesirable ones. These are all tried and tested methods in many countries. I challenge you to set a global carbon budget and to use this as the first of many unified global financial and economic mechanisms for creating a fair, compassionate and truly lasting legacy for future generations.
In 2011, it was estimated that the Natural Capital of the UK was about £1.5 trillion - about the same size as our national debt.
The following excerpt, from "Capitalism within planetary boundaries (2015)", sums up the nub of the argument for analysing Natural Capital, and I would argue that this needs to be done within a World Balance Sheet:
"The numbers being published as to the financial value of nature can certainly be contested. But the point is that nature is not worth nothing in economic terms. And simply put, this is why: despite hundreds of speeches, laws and good intentions, economic decisions still lead to the overall degradation of nature. Nature is regarded in mainstream economics as merely a set of resources to be converted into economic growth, failing to appreciate how value is often being lost, as vital ecosystem services are progressively degraded, with the costs arising from that appearing on nobody’s balance sheet."
Let's set out a challenge to everyone involved in housing to find ways of building homes that makes them affordable to the neediest, provides minimal ecological footprint on the planet, and reversible in the sense that the land can easily be returned to a healthy natural state after the building is no longer required. A key financial consideration is to make it so affordable that most people wouldn't even need a mortgage to fund it, and even if they needed funding, mortgage providers would be prepared to offer cheap mortgages on such buildings.
It's possible to take some inspiration from the LLamas development in Wales - link here (opens in new window). There, each plot holder has a 999 year lease and they are allowed to build on condition that the land be returned to its natural state at the end of the lease.
Welcome to my website
I'm Planetary CFO. CFO is short for Chief Financial Officer. I look at the whole of the planet, all its inhabitants, infrastructure, resources and ecosystems. I use the lens of finance to see what we can do together to create a sustainable future capable of supporting a peak human population of, say, 10 billion people while maintaining a healthy balance between us and other plants and animals.
The Planetary CFO - working towards a sustainable World Balance Sheet.