Biodiversity doesn't sell! At least that was the frustrated cry of at least one delegate at a conference of corporations, NGO's and financiers who met to explore innovations in biodiversity and business in New York last week.
At present, natural capital remains largely off balance sheet to all but the most innovative companies.
But all that may be about to change with the announcement of a ground breaking deal by a group of London based investors who aim to change the way the economy values the environment, by investing in rainforests as a global life support system and to fight climate change.
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The deal, announced by Canopy Capital at the world's first 'Biodiversity and Ecosystem Finance Conference', involves guaranteed payments over five years to the Iwokrama International Centre in Guyana in return for rights to the ecosystem services produced by a rainforest reserve two and a half times the size of London, which the Centre manages on behalf of the Commonwealth.
The funds will be used to provide livelihoods for the 7,000 indigenous people dependent of the reserve and to help support the conservation of the rainforest.
Canopy Capital aims to repackage the rights into novel financial instruments such as a forest backed bonds that will acquire value over time for investors.
Profits will be shared with up to 80 per cent of any upside going to the Iwokrama community.
London law firm Stevenson Harwood drew up the pioneering deal, defining the 'ecosystem services' of the reserve as the proven ability of rainforests to generate rainfall, cool the atmosphere, store carbon, moderate weather conditions and sustain biodiversity.
If it works, the project could create a new paradigm for maintaining life on earth by paying for it - and not just for bugs - but for all of us.
Guyana is no stranger to innovative action on rainforests. In1995 under the Iwokrama Act, its government gave 370,000 hectares in the heart of its pristine rainforests to the Commonwealth to pioneer new ways of sustainable forest management and to combat global warming.
In 2007 Guyana's President Bharrat Jagdeo, offered the rest to Britain, a country of about the same size, to help the world community mitigate climate change.
In return the president asked for economic help to develop new options to bring prosperity to his people without resorting to forest conversion. Testing such a model in Iwokrama could be a giant step on the way to making his idea come true.
Idealistic or visionary, Canopy Capital's move could change the way business values the environment by investing in the services nature provides to us for free today, but which the world may be forced to pay for tomorrow.
It strikes at the heart of a truism that the businesses community will grudgingly have to come to terms with in coming decades, that the global economy is a wholly owned subsidiary of the environment.
For generations our business forbears have sold us the idea that nature's resources can be plundered willy nilly for wealth creation.
In the future investors may have to reckon, are they creating wealth that's worth having?
The other day I asked one: if you have made your first billion, what's the point of the next? Mistily, he replied: 'It's to give my grand children the future I never had'. If, as a result, only the concrete jungle survives, smiles from siblings may be in short supply.
Because the coming clash between energy security, food security and environmental security seems increasingly just round the corner, investors like those behind Canopy Capital, are betting that increasingly scarce nature will no longer be priceless, but will eventually attract a real value in markets.
With sharply rising commodity prices and the growing drive for biofuels, pressure on land will intensify leading agribusiness to roll back the rainforests, the source of much cheap land.
The potentially disastrous resulting emissions, 18 per cent of the global total currently and more than the entire transport sector, are a price that the world cannot afford if it expects to win the fight against climate change.
Worse, deforestation will compromise the profitability of farmers in tropical forest nations hoping to expand their businesses and energy ministers hoping to increase their dependency on hydropower or biofuels, rather than oil.
Why? Because these industries all need rain. Rainforests produce it in vast quantities over huge intercontinental distances that science is only now beginning to quantify.
According to Dr Antonio Nobre, of Brazil's Institute for Research in the Amazon, the Amazon tree canopy releases 20bn tonnes of moisture each day into the atmosphere, seeds the sky with chemicals stimulating rain, and cools the land surface.
Build a utility to just evaporate the water and you would need energy equivalent to 50,000 of the world's largest hydro dams working on full power 24 hours - and forests do it for free!
If Google's services are worth $130bn, how come those of forests are nil?
Without a value standing up, rainforests are worth more dead than alive - so they fall. As Hylton Murray Philipson, one of Canopy Capital's director's says: "If we don't start paying the bill for these natural utilities, then its only a matter of time before we get cut off."
Meanwhile back at the conference, fledgling funds for nature with names like Verde Ventures and EKO Asset Management spoke with pride of forest farmers producing shade coffee for Starbucks or community eco-tourism potential for remote communities.
With what returns? Well, transformed lives, but to investors in one $10m fund, break even at best. But hey, don't knock it. This is hard!
Biodiversity businesses face a steep learning curve among communities who too often have experienced commerce as a con, are mystified by shares and face access to capital by canoe rather than computer.
Figuring out who should get paid and how is a major barrier in developing countries where good governance may be opaque at best and land titles have never been written down.
The conference revealed innovative ways to pay communities to maintain their land and protect biodiversity from auctioning hedgerows in Holland, to paying families a 'Bolsa Floresta' (forest conservation grant) in Amazonas State to maintain the ecosystem services their forests provide in return for signing a pledge to "make no smoke".
When Deutche Bank opened it's carbon desk buying credits at 0.3 cents a tonne, it sold them years later at $27. Valuing natural capital for the ecosystem services it provides may emerge as a similarly profitable opportunity for first movers.
This is not about paying countries to reduce their emissions from destroying their rainforests, but rather paying a fair return to those countries and their forest owning peoples who have chosen not to do so, for maintaining them.
And what should government's encourage markets to do? Pay to store a ton of 'dead carbon' underground captured from a power plant using coal, or pay to conserve a ton of 'living carbon' stored in a rainforest with all its co-benefits?
Well, we've got to do both because the problem to be solved is so big that there'll be room for everyone to get on board.
The difficulty of getting biodiversity onto the balance sheet is unlikely to see markets flooded anytime soon. But investing in rainforests for what they do for us? Well, I call that creating wealth that's worth having.
http://www.telegraph.co.uk/earth/main.jhtml?xml=/earth/2008/03/31/eacanopy131.xml
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