Footprint Network Blog
The joint project between the UN Environment Programme Finance Initiative (UNEP FI) and Global Footprint Network to assess the financial materiality of ecological risk was launched at the UN Foundation in Washington DC on 17 October 2011. Opening remarks from Paul Clements-Hunt (Head of UNEP FI) and Susan Burns (Senior Vice President of Global Footprint Network) showed a clear commitment from both organisations to this potentially ground breaking project. Richard Burrett, of Earth Capital Partners, also gave an inspiring presentation detailing not only the importance of this project but also how investors currently perceive the financial relevance of natural resources.
It is clear that the tightening constraints on resources and their potential impacts on national economies are not included within current financial analysis. Yet such factors are thought to have growing implications for the long-term credit risk of many government bonds, especially those with long-dated maturities.
A host of financial institutions were in attendance at the launch and participated in a stimulating discussion around the evidence base to show that ecological risks are becoming material for economies and how key ecological data can be linked to the financial and economic indicators. This project will endeavour to shine a light on such questions to explore the role of natural resource accounting in strengthening risk models for government bonds.
Global Footprint Network and UNEP FI would like to thank all those who participated in the launch event and invite any other institutions who are interested to join the project.
Humanity has reached a new milestone as we hit 7 billion. Never before have there been 7 billion people on planet earth, all at the same time. As we welcome the 7th billion global inhabitant, we also acknowledge the challenges we will face due to a burgeoning population explosion, resource depletion, food and water scarcity and overcrowded cities. This is especially true at a time when humanity as a whole is already using the planets regenerative capacity 50 percent faster than it can renew.
Although humanity’s total demand is unsustainable, this consumption is very unevenly distributed among the 7 billion people. A large portion of humanity does not have enough resources to secure even their most basic subsistence needs. This suffering is intolerable. It affects the rest of humanity, too, most visibly through conflict and instability.
Therefore, Global Footprint Network is mapping how much nature we have, how much we use, and who uses what. In a crowded, resource constrained world this information helps decision makers understand our present resource situation and find options for avoiding unpleasant consequences.
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As the world population hits 7 Billion, GrowthBuster’s bold new film will hold its world premiere in Washington DC on November 2, 2011. The film, Hooked on Growth, puts the modern “culture of growth”, as Dave Gardner, the film’s director coins it, under a microscope. Hooked on Growth, offers a look at the plethora of media messaging reinforcing the culture of growth. “We are at a point where we have to choose either a culture of growth or a culture of sustainability,” says Dave Gardner.
“The evidence available to us makes it clear the scale of the human enterprise has outgrown our planet,” says Gardner. “Yet we ignore that evidence, and we do so with wild abandon. GrowthBusters explores why.”
“A 200-year binge of rampant consumption, population and economic growth have led us to believe growth is the path to prosperity and fulfillment,” says Gardner. Chris Martenson, author of The Crash Course, remarks in the film, “We happen to have had growth and prosperity coincident for long enough that we’ve confused them….”
The film calls this a “cultural myth.” GrowthBusters lays much of the blame for the myth’s persistence on the news media. Society is therefore hit with a constant barrage of language and attitude that reinforces the myth and programs the next generation to buy into it. The film identifies another force reinforcing growth addiction as “growth-pushers.” Companies and individuals whose increased wealth depends on market growth, “maintaining the illusion that perpetual growth is possible and desirable,” Gardner states. GrowthBusters examines the beliefs and attitudes causing people to ignore evidence that perpetual growth is taking place.
“This could be the most important film ever made,” writes Paul Ehrlich, Author of The Population Bomb.
Gardner interviewed psychologists, physicists, ecologists, sociologists and economists to research and create GrowthBusters. It features interviews with experts like former World Bank senior economist Herman Daly and former presidential advisors Gus Speth and Robert Solow.
The film offers a hopeful perspective on a dour subject. It profiles “Growthbusters in Action,” groups and individuals pioneering new value systems and ways of life that don’t depend on growth.
After its world premiere November 2, groups and individuals will hold screenings of the film around the world.
Global Footprint Network is the standard setting body for the only Ecological Footprint standards in the world. The Ecological Footprint standards set forth quality criteria for Ecological Footprint studies of sub-national populations, organizations, and products. The goal of the Ecological Footprint Standards is to build consensus among practitioners regarding Ecological Footprint methodology, transparency, and communications. This consensus is important because it helps to establish a forum or a common platform for understanding and communicating about natural resource constraints. To that end, the Ecological Footprint Standards are used as a way of maintaining the scientific credibility and accuracy of Ecological Footprint studies, the policy relevance, and the consistency and appropriateness with which the method is applied and findings communicated.
Global Footprint Network’s Ecological Footprint Standards have been established through a committee-based process that incorporates input from our Partnership Network and Public Comment. The Global Footprint Network Standards Committee is starting the process to review and revise the Ecological Footprint Standards. Participation in the Committee and Procedures for the Committee are outlined in Global Footprint Network Committees Charter. The result of this process will be updates to the 2009 Ecological Footprint Standards to be released towards the end of 2012.
The original goal of the Ecological Footprint Standards is to increase the quality, reliability and consistency of Footprint assessments. As the Ecological Footprint is being adopted by a growing number of government agencies, organizations and communities as a measure of environmental performance, there is an even greater need for quality, consistency, and reliability. This review and revision process for the 2012 Ecological Footprint Standards is a way to maintain this goal of improving comparability.
In addition, as the Ecological Footprint methodology is applied in different circumstances by different practitioners, advances to the methodology and communications strategies are being made. Conducting a review and revision process every three years allows Global Footprint Network to stay on top of advances in Ecological Footprint science and application. By engaging with experts, our Partner Network, and public comment every three years, our Ecological Footprint Standards can allow for a dynamic process that encourages innovation and action.
Global Footprint Network is actively seeking input from our Partner Network and Public Comment
Your feedback is welcome during the entire process! Before the revised Standards are finalized in 2012, there will be two 60-day Public Review periods, one in March – May 2012 and the second in July – September 2012. These are your opportunities to provide more input as the draft develops.
UNEP FI project seeks framework for assessing government bonds
Could an abundance of natural wealth be a factor in positively influencing a country’s credit rating and the quality of its bonds? Could a resource-guzzling economy be cause for a downgrade?
The UN Environment Programme Finance Initiative (UNEP FI) in collaboration with Global Footprint Network and leading financial institutions will endeavor to shine a light on these questions with a groundbreaking project to explore the role of natural resource accounting in strengthening risk models for government bonds. The project seeks to incorporate how much natural wealth countries have – and how much they spend – into assessments of long-term credit risk.
Tightening constraints on resources and their potential impacts on national economies have been largely absent from financial analysis. Yet such factors are thought to have growing implications for the long-term credit risk of many government bonds, especially those with long-dated maturities.
“The global financial crisis has taught us more than anything that some of the core risks that affect the value of debt securities and derivatives can simply run ahead of our ability to understand them,” said Paul Clements-Hunt, Head of UNEP FI. “This is why we must deepen our understanding of the risks posed by climate change, water scarcity and the overuse of natural resources for securities. We should not be caught off-guard again. This project is one of the first that tries to quantitatively and systematically consider the linkages between the use of natural resources and its impact on a country’s core economic indicators that in turn influence the quality of its bonds.”
The bond project was launched yesterday at workshop at a side-event to the UNEP FI Global Roundtable, which is taking place in Washington D.C. this week. The Roundtable draws hundreds of leading financial experts along with high-level government officials seeking to address the link between financial stability and environmental sustainability.
The project has two aims: it will investigate the linkages between ecological risk and country-level risk in sovereign bonds, and develop a methodology to explore how credit rating agencies, investors and financial information providers can integrate ecological data into their respective models. In particular, the analysis will look at the risks to countries whose populations and/or industries require more resources than is domestically available and which are hence reliant on ecological services from abroad.
“As resource constraints tighten globally, countries that depend heavily on ecological services from other nations may find that their resource supply becomes insecure and unreliable. This has economic implications – in particular for countries that depend upon large amounts of ecological assets to power their key industries or to support their consumption patterns and lifestyles,” said Global Footprint Network President Mathis Wackernagel. “Meanwhile, those countries with reserves of valuable natural capital may find themselves in an advantageous position.”
The project will substantiate the business case for financial institutions and ratings agencies to include ecological criteria as a key component of financially material country credit risk analysis. Institutions will thus be enabled to work towards better inclusion of financially-material environmental, social and governance (ESG) issues in financial products and services.
Read the Investment & Pension Europe article: Forests into Fixed Income.