Financialisation of Nature

Tone Smith

Publication: Working/Discussion PaperWU Working Paper

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Abstract

The ‘financialisation of nature’ is related to a shift in environmental governance—from regulation to
marked-based approaches—involving strong state support to facilitate the establishment of
‘innovative financial instruments’ and markets related to nature. Although innovative finance got a
bad reputation after the 2008 financial crisis, they are strongly encouraged in the environmental
policy domain and supported by actors such as UNEP or the CBD. This paper explains the
theoretical underpinning and the process of establishing such financial instruments, focusing in
particular on offsetting and related ideas such as ‘net-zero’ calculations and ‘nature-based
solutions’. It explains how natural entities are converted into abstract units of equivalence to allow
the establishment of schemes for tradable ‘nature credits’ (supposedly) compensating damage
across time and space. The financialisation of nature is then analysed and critiqued with respect to
its lack of environmental effectiveness, its problematic socio-economic consequences and its
impact on human-nature relationships. Instead of dealing with the environmental problems at hand,
the conversion of nature into financial assets simply turns nature into objects of investment and
speculation, while simultaneously creating a potential for financial bubbles.
Original languageEnglish
Place of PublicationVienna
PublisherWU Vienna University of Economics and Business
Publication statusPublished - 2021

Publication series

NameSRE - Discussion Papers
No.08/2021

WU Working Paper Series

  • SRE - Discussion Papers

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