2050 Criteria: A Commodities Guide to Sustainable Investing

800px-combine_at_workA new "field guide" to global commodities is the latest entrant in the growing collection of sustainable investment tools and finance initiatives

"In biophysical terms, humanity has never been moving faster nor further from sustainability than it is now," warn Stanford biologists Paul Ehrlich and Gretchen Daily, and Paul Kareiva from the Nature Conservancy, in a paper published in the journal Nature's special Rio+20 issue in June.

And while their central message is a dire one indeed, the authors focus on three areas that, if properly addressed, can achieve sustainability: population, equity and natural capital. The last area is one in which investors and the financial sector can make a deep impact: Natural capital is the idea that all the goods and services that healthy ecosystems provide to mankind and the environment have an inherent and quantifiable economic value.

Some recent tools and initiatives demonstrate that progress is being made in the financial and investing sectors, such as the Natural Capital Declaration (a commitment by finance sector CEOs to integrate natural capital criteria into financial products and services), the Natural Capital Project's InVEST program (a decision-making program jointly created by Stanford University's Woods Institute for the Environment, University of Minnesota's Institute on the Environment, the Nature Conservancy and WWF that identifies conservation-based actions promising the greatest ROI), the Carbon Disclosure Project's Global 500 Report (an analysis of the state of low carbon growth among the 500 largest companies on the FTSE Global Equity Index Series) and Justmeans Insights (a data visualization tool that helps understand the environmental, social and governance impact of the private sector).

CRITERIA 2050: A TOOL FOR SUSTAINABLE COMMODITIES

And now, anyone interested in sustainable investing can access an excellent tool to help make sustainable investment decisions in commodities: The 2050 Criteria, a "field guide for investors" targeting the long term sustainability of ten high priority global commodity sectors. Created by the non-profit environmental group WWF and launched last month in Singapore, 2050 Criteria identifies responsible companies and projects in key industries dealing with at-risk global commodities across agriculture, forestry and fishing. If we do not up the sustainability factor significantly in these areas, a sustainable future will simply not be possible, and the year 2050 will be a very bad time for most living things.

"Current land, energy, water, and weather constraints are placing unprecedented pressure on humankind's ability to access its most basic goods—food, fuel, and fibre," said Richard Perkins, senior commodities adviser at WWF-UK. "These shocks are already posing severe challenges for industry, investors, and society."

SIMPLE MATH, FRIGHTENING CONSEQUENCES

WWF has warned that at the current, unsustainable rate of consumption, Earth requires 1.5 years to regenerate the renewable resources that humanity uses in a year. The math is simple: We are using more than the planet can provide. By the year 2050, when the human population is expected to reach a jaw-dropping 9 billion people, some predict a mass human die-off. This is on top of the ongoing "Sixth Extinction," the biggest biodiversity decline since the "Fifth Extinction," which exterminated the dinosaurs and 75 percent of all species some 65 million years ago. As Elizabeth Kolbert notes in an excellent 2009 essay about the Sixth Extinction in The New Yorker, "If current trends continue, by the end of this century as many as half of earth’s species will be gone."

It's clear that humanity must be much more careful with the Earth's limited resources and fragile ecosystems. It's also clear that the solutions provide opportunities for growth, particularly in equity—both in terms of social equality and economic resiliency. Having tools to make better investment decisions is a good sign, but we must use these tools to stem the devastation.

CALLING FINANCIAL SECTOR: SUCCESSFUL MODELS WANTED

As Daily put it: "We need to scale back destructive human impacts—but in terms of good ideas and models of success, we need to scale up."

"The financial sector has an important part to play in ensuring that soft commodity production conserves the environmental resources on which society's well-being depends and results in fair outcomes," said Perkins, noting that investors need help in understanding sectors that are most at risk. "There is no choice but to do so sustainably."

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NOTES

Paul R. Ehrlich, Peter M. Kareiva and Gretchen C. Daily. Securing natural capital and expanding equity to rescale civilization. Nature. June 7, 2012. Accessed October 13, 2012.
WWF. The 2050 Criteria: Guide to Responsible Investment in Agricultural, Forest, and Seafood Commodities. September 24, 2012. Accessed October 13, 2012.
BusinessGreen.com. WWF unveils guide to sustainable commodities investing. September 25, 2012. Accessed October 13, 2012.
Elizabeth Kolbert. The Sixth Extinction?. The New Yorker. May 25, 2009. Accessed October 14, 2012.
Max McClure. Stanford biologists call for humanity to 'scale itself back'. Stanford News Service. June 8, 2012. Accessed October 13, 2012.
Ibid., 3.

image: Combine in wheat field at work (credit: Dako99, Wikimedia Commons)

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