Translating ecological limits into metrics of risk.
By Anna Ritz
The Earth Security Initiative is bringing attention to the new investment agenda that is emerging around the notion of ecological limits. Among other things, argued founder Alejandro Litovsky at the recent SOCAP event in Malmö, the limited quantity of resources like water and fertile land present a series of risks to investors, as well as opportunities for creating long-term value.
Changing Perspectives: Risk and Resilience
This initiative aims to focus financial markets and political leaders on ecological limits as an issue of economic risk and national security. Over the last year the Earth Security Initiative has launched high-profile agendas on resources like the Amazon (Amazonia: The Focus on Risk) and fisheries (Fisheries: A Security System) that show why investors and policy makers must factor the risks of losing the resilience of these ecosystems.
At the same time, the Earth Security Initiative calls upon investors and businesses to allocate capital in ways that build the resilience of natural capital and human security. The ESI founder argued that this includes looking at real estate investments, agriculture, energy and forests from entirely new perspectives.
The argument resonates strongly with the state of the world: the depletion of natural resources threatens social welfare, economic prosperity and political stability.
One example is the exploitation of land commodities.
Food commodity prices are steadily on the rise with much of the planet’s arable land is already being cultivated. Investors acquire large areas of fertile land to produce biofuels or food commodity crops. Where land governance is weak, such extractive agro-industries cause social tensions by endangering the food and water security of local people. The extraordinary amounts of water needed for irrigation of large-scale agriculture strains resources for local water consumption and the irrigation by small farmers. Further, the extensive soil exploitation decreases its reproduction capacity and leads to fertility losses.
Therefore, the Earth Security Initiative is working on solutions that rely on information, including the recently launched Land Security Agenda, which focuses the challenge of ecological limits on the land and commodities investments agenda.
Systemic Change through Collaboration
“A challenge with the impact investing sector right now” said Litovsky in the interview, “is that many impact investors are concerned with building their pipeline with small projects and there is a resulting lack of bigger visions, and more ambitious investment projects."
Realizing new larger scale opportunities will require a collaborative approach between investors, scientists, businesses and communities. By providing a new vision, a supporting network of entrepreneurs in this space, and a way to interpret information on ecological trends, the Earth Security Initiative is acting as a smart intermediary between investors and new investment projects, with the purpose of helping them think on larger scales, on larger capital deployment schemes and on larger geographies.
According to the ESI, more transparent information about the status of natural resources will raise the awareness and profile of ecological limits in different investment markets. It will increase the incentive for investors to consider the status on ecological conditions in their portfolios, as well as helping entrepreneurs to develop a stronger business case to invest in ecological resilience.
Getting the Signals Right
In a time of decreasing natural resources and increasing profit seeking, we need to get signals right to get incentives right. Even more promising is Earth Security Initiative's effort that translates the signals of scarcity and limited carrying capacities of ecosystems into metrics of risk - making ecological limits operational in financial markets – and raising awareness of a third powerful narrative in a global political and economic sphere where money and power constitute the dominant systemic narratives: the value of ecological systems.
About Anna Ritz
Anna Ritz is a student of Philosophy, Politics and Economics at Witten/Herdecke University. Her research focuses on how institutional entrepreneurs challenge political and economic paradigms. She is also interested in strategies that combine development economics and social business strategies to empower entrepreneurs in developing countries. Besides her studies, Anna has been and still is organising various oikos projects, such as the Sustainability Innovative Speaker Series and the oikos Winter School 2011.
Prior to joining witten/Herdecke, Anna worked for a microfinance institution in Tanzania and supported by the German Ministry of Cooperation and Development, developed a program for the electrification of rural areas in cooperation with the Tanzanian Association for Renewable Energy. Her passion is to attend and organize conferences as well as to connect with purpose-driven people. She loves to collect and share extraordinary life stories and ideas from and with local people around the globe.