WATERLOO, Ontario, Oct. 05, 2022 (GLOBE NEWSWIRE) — New article calling for recognition of the financial value provided by natural assets, co-authored by the Intact Center on Climate Adaptation at the University of Waterloo, KPMG and the Municipal Natural Assets Initiative, advocates for an overhaul of accounting rules to preserve natural resilience.
The services that nature provides to Canadians are not systematically factored into investment decisions, asset management or financial reporting. As a result, economic decisions continue to lead to the degradation of natural assets, such as rivers, wetlands and forests. To tackle the twin crises of climate change and biodiversity loss, the United Nations is urging G20 countries (like Canada) to triple their investments in nature-based solutions by 2030.
“Wetlands, forests, salt marshes and grasslands are not just essential for biodiversity,” agrees Mike Pedersen, president of the Business Development Bank of Canada (BDC), corporate director and president of the Nature Conservancy. Canada. “They are our frontline allies in reducing the impacts of flooding and erosion, extreme heat and drought, and eliminating carbon emissions to slow climate change. The value of these services makes nature a strong economic driver – we need an accounting system that recognizes this reality.
COP27 is a key opportunity for Canada to strengthen its commitment to working with nature to reduce climate risks. “This is an opportunity not to be missed,” says Joanna Eyquem, executive director of Climate Resilient Infrastructure at the Intact Center at the University of Waterloo. “A national adaptation strategy that does not value essential services provided by nature would be fundamentally flawed.”
The good news, as the report documents, is that more than 90 local governments across Canada are taking matters into their own hands. These communities are already identifying and valuing natural assets that provide services to their citizens, such as the role of wetlands absorbing stormwater and maintaining good water quality, and the role of trees providing shade to reduce urban heat and maintain good air quality. The catch is that due to Canada’s accounting rules, the values identified by economists cannot currently be reflected in financial reports. The Canadian Public Sector Accounting Board and the International Public Sector Accounting Standards Board (IPSASB) have projects underway to find ways to address this shortcoming.
“For accountants, omitting natural assets means we completely miss out on a lot of the benefits, as well as the potential liabilities,” points out co-author Bailey Church, head of public sector accounting advisory services at KPMG Canada. “It’s actually huge, systematic surveillance.”
The report outlines three avenues that can be taken now to mainstream recognition of the role and financial value of the services provided by nature:
- Allow the inclusion of natural assets in public sector financial statements, as currently being considered by the Public Sector Accounting Board of Canada, which sets public sector accounting standards.
- Establish national guidelines and standards for identifying and valuing natural assets in Canada.
- Engage Canadian financial institutions and organizations in establishing frameworks and metrics that consider the value of nature, direct private sector investment toward protection and restoration opportunities, and measure return on investment in nature.
Internationally, countries – including the UK, South Africa and recently the US – have taken steps to value nature in their national accounting systems. With motivated local governments and a wealth of natural assets, this report shows that Canada can still be an agenda-maker, rather than an agenda-taker, in this space.
“Local governments in Canada are showing how understanding the value of nature’s services can guide action on the ground to effectively manage natural assets,” said co-author Roy Brooke, executive director of the Municipal Natural Assets Initiative. “At the end of the day, it’s the action that counts, not just the assignment of value.”
Currently, nature is effectively assigned a financial value of zero, with few incentives for effective management. This report argues that this must change if Canada is serious about investing in nature, the backbone of our economy.
Media Relations Manager
University of Waterloo
226-339-0894 | @uwaterloonews| uwaterloo.ca/news
Managing Director, Climate Resilient Infrastructure, Intact Center on Climate Adaptation
University of Waterloo
514-268-0873 | [email protected]
National Leader, Accounting Consulting for the Public Sector
613-212-3698| [email protected]
Municipal Natural Assets Initiative
250-896-3023 | [email protected]