Natural Capital is the stock of natural ecosystems, species, freshwater, land, minerals, and atmosphere that combine to sustain life on Earth. The Natural Capital Declaration is a finance-led initiative to account for and embed natural capital considerations within investment, banking, and loan decisions. It centers on four commitments: understanding impacts and dependencies on natural capital, embedding natural capital in financial products and services, working towards integrated reporting and disclosure, and integrating natural capital in accounting and decision making. The goal is to facilitate methodologies and standards to operationalize these commitments and create more sustainable finance sector practices.

1. Natural Capital
A finance sector perspective
Rosemary Bissett
Head of Sustainability Governance & Risk
20 September 2012

2. The context
Business
GDP Suppliers P&L & Customers
balance sheet
Natural Value Natural Value
Real Economic System Real Business System

3. What are we talking about?
Biodiversity Ecosystems Ecosystem Natural
Services Value
Natures Natural habitats Natural services Economic valuing of
‘living assets’ delivering the derived from the ecosystem services
(flora and fauna) adaptability to earth’s natural assets, and natural
sustain and extend on which human environment
natures systems beings are reliant.
•Diversity of plants, •Includes a •Support primary •Recognising the
animals, marine life combination of soil, production, nutrient contribution that
and other natural air, water, flora and cycling, soil formation Natural Capital has on
organisms. fauna, and climate e.g. •Provide feed, fresh economic
desert, forest, ocean, water, wood & fibre, sustainability and
grassland. fuel accounting for it
•Regulate air quality, within traditional
climate, flood, disease, business frameworks
water purification
Natural Capital

4. The issue
Some examples:
• Natural habitats and species are declining largely due to
human activity. 50% of the natural capital of the planet
created over the last 3.8 billion years has been used in
the last 50 years.
• Cultivated land now covers one quarter of the world’s
land – leading to massive loss of natural habitats and
associated ecosystem services.
• Demand for food to increase 70-80% by 2055.
A further 10-20% of grassland and forest will be
converted to agriculture by 2050.
• 35% of the global food production from plants benefits
from pollination - valued from $112 - $200b annually.
Wild bee populations are in decline.
(See notes for case study of a F&B company response)
• 5-20% of freshwater use exceeds long term sustainable
supply and 15-35% of natural irrigation is unsustainable.
• Unprecedented destruction of coastal habitats is
reducing protection against natural hazards such as
hurricanes and tsunamis.
Figures & information drawn from Millennium Ecosystem Assessment 2004, as published in UNEP FI Biodiversity and Ecosystem Services, A Financial Sector Briefing

5. The issue
Proposed safe operating space for
nine interconnected planetary
systems
Estimate of the current position for
each. The boundaries in three likely
to already be exceeded and
impacting economic growth and
human development
Source: ‘A safe operating space for humanity’ by Johan Rockstrom, Stockholm Resilience Centre, Stockholm University, Stockholm Environment Institute

6. An example: Haagen Daas
http://www.youtube.com/watch?v=Ijdx8bf8T5k

7. Natural Capital impact and dependency
Perceived levels
of natural capital
impact and
dependencies
vary across
different sectors

8. Why is a bank interested?
1. TEEB (The Economics of Ecosystems and Biodiversity) and many
other studies show the tremendous costs to society, businesses
and nations of ecosystem loss.
2. Natural capital underpins economic growth – and hence
secures growth of businesses that finance sector services through
debt, equity and insurance.
3. FI’s have considerable indirect ecological footprints through
customers and purchasing decisions
4. The nature of issue and our globalised economies favors
collective action.

9. Creating a solution:
The Natural Capital Declaration
• A finance-led initiative to account for and embed natural capital
within investment, banking and loan decisions.
• Sector-wide initiative – includes banks, asset managers,
institutional investors and (re)insurers.
• Developed by and for financial institutions over an 18-month
worldwide consultation process via 6 regional meetings.
• Signed at the CEO level to secure the highest level of commitment
highlighting the materiality of healthy natural capital for the industry.
• Strives to facilitate, and work towards, developing methodologies
and standards to operationalise the commitment in the
Declaration.

10. The Natural Capital Declaration
Centres on four key commitments:
1) understanding the impacts and dependencies of
natural capital, directly and through customers, by
financial institutions that can translate into material
risks or opportunities;
2) embed/integrate natural capital considerations in
financial products and services;
3) work towards a global consensus on integrated
reporting/disclosure; and
4) work towards a global consensus for the
integration of natural capital in private sector
accounting and decision making.

11. The NCD partners
Now signed by 39 Financial Institutions
Supported by 23 organisation
Convened by

12. NCD Signatories
* As of June 2012

13. NCD Supporters
* As of June 2012
13

14. Embedding Natural Value in FI’s
Investment Investment
Lending Investment
(manager) (owner)
• Environmental • Investment • Inclusion in • Consider NC in risk
and Social risk analysis (R&D) investment policies management
analysis underwriting,
• Best in class product
• Credit policies for development and
specific sectors • Exclusion of claims management
unacceptable NC
impacts • Work with clients
and partners to
• Proxy voting reduce NC risks
Engagement and disclosure
Access materiality of NC impacts across lines of products and services

15. NCD Roadmap
2012 2015 2018 2020
STEPS
OUTPUTS OUTPUTS OUTPUTS OUTPUTS
1. Set up governance Assessment framework
UNDERSTANDING on risks and Best practice case
structure and studies
NC DEPENDENCY secretariat opportunities related to
finance and NC
2. EMBEDDING NC NCD road map Decision criteria for
work plan, embedding NC into FI’s Mid term review on
IN FINANCIAL
schedule and products and services 4 steps output
PRODUCTS &
SERVICES budget
3. INTEGRATED Agreement on road NC friendly products and Comparable global Comparable global
REPORTING map with NCD services standard for NC standard for NC accounting
signatories accounting for FI for FI industry
Templates for NC industry drafted
reporting and disclosure Regulatory framework
recommendations mandating NC accounting
4. FINANCIAL Shadow price
ACCOUNTING accounting
Environment P&L’s
for FI’s
4 pilots in FIs 8 pilots in FI’s 30 FI pilots 130 FI pilots
(1 per step) (2 per step)

16. Links to other initiatives
ESG issues across TEEB for UN Global CBD
industry sectors Business Compact Principles Business for Biodiversity
UNEP FI Statement
ESG issues across
on Sustainable
the financial sector Development
Banking Investment Insurance
ESG issues by
Equator Principles Principles for Principles for
financial sub-sector (project finance)
ESG (various)
Responsible Investment Sustainable Insurance
ESG (various)
ESG (various)
Natural capital by
financial sub-sector
Natural Capital Declaration

17. What is NAB doing?
Making
External
Connections
Risk Embedding in Business
Building our Management Operational Change
understanding Decisions
Taking
leadership

18. Thank you