Canada is already feeling the impact of changing climate, much like the rest of the world. When a heat dome settled over British Columbia this summer, 570 people died. Last month, Hurricane Fiona wreaked havoc across the East Coast. While there may be no easy way out of this, some experts believe that adding financial value to natural assets may help in tackling climate change.
Roy Brooke, the executive director of the Municipal Natural Assets Initiative, which aims to make natural asset management a mainstream practice, said the first step in ensuring Canada has healthy biodiverse ecosystems is to recognize the value of nature in its financial and accounting systems because by doing so governments would be able to properly assess the conditions of natural assets like forests and wetlands.
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This means that by keeping a financial record of natural assets, if any of the trees in a forest, for example, get a disease, governments would be able to provide maintenance that would increase the quality of its resilience.
“We cannot address climate change without also addressing nature and biodiversity. We cannot reach any climate change targets. We cannot mitigate and we cannot adapt properly without also ensuring that we have healthy, connected, biodiverse ecosystems,” said Brooke.
According to Natural Resources Canada, an infographic states that “in 2020, natural resources, directly and indirectly, accounted for 15.5% of Canada’s nominal GDP,” with the biggest natural resource being energy.
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About 909 communities were also found to be “economically reliant on at least one natural resource sector.”
“Of those communities, 609 are either significantly or highly reliant on at least one of the natural resource sectors,” the government website says, with the resources being minerals and metals or forests.
Forests make up a huge portion of Canadian landscape, with Canada having nine per cent of the world’s forests, according to the government.
“Forests cover only 40 per cent of Canada’s land base,” the website states. “Depending on where you live in Canada, forests may cover over 80% of your region, such as in the Atlantic Maritime ecozone or only 3% of the Prairies.”
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In addition, Canada has “about 1.29 million square km of wetlands, covering 13% of Canada’s terrestrial area.”
“This is close to one quarter of the world’s remaining wetlands,” it states.
Brooke explains that if natural assets like rivers, wetlands, and forests were to have a financial value, the economic decisions taken by governments won’t end up leading to further degradation of nature.
“Nature provides us with services like flood risk reduction or stormwater management…but (right now) we are ascribing zero value to nature and all of the services that it provides,” said Brooke.
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For example, Brooke says a local government might build a mall on top of a wetland and not find out for 20 or 50 years that the natural asset was actually providing vital services that helped the environment.
Wetlands have been recognized to absorb large waves or floods and are also found to filter toxic substances, according to the government of Canada website, so losing such a natural asset would harm the environment, says Brooke.
“For the most part, local governments, for example, when they’re thinking about nature, they’re thinking about it pretty narrowly. They’re thinking about it mostly as kind of a social or recreational loan,” said Brooke.
“As a result, every hour of every day, we’re taking decisions, whether it’s the zoning of land, investment decisions, or asset management (we) don’t take nature and its services into account,” he added.
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Brooke was part of a study released on Oct. 5 calling for recognition of the financial value of natural assets, conducted by the University of Waterloo’s Intact Centre on Climate Adaptation, KPMG, and the Municipal Natural Assets Initiative ahead of the 2022 United Nations Climate Change Conference in November, which Canada will be a part of.
“Canada can be a leader in changing these rules and act now…And over the next number of months, there is a very clear choice,” he said.
“Are we going to start counting nature into our accounting frameworks, into our decision making? Or are we going to lean back on the status quo, which is evidently not working for any of us?”
Will this work on a practical level?
Brooke said in Canada’s current accounting handbook there is a specific prohibition against considering natural assets to be tangible capital assets, which is a key barrier.
“We have to lift that prohibition and then provide guidance or direction to the people who do the numbers in local governments and public institutions so that they can start to think about nature more accurately and more practically,” said Brooke.
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“From an accounting point of view, we’re at a bit of a crossroads here,” Brooke said, but added that the Public Sector Accounting Board, which establishes accounting standards, is “absolutely listening.”
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However, Brooke is worried that the rules won’t change fast enough.
“Will they change in the next few years, or will they change in 20 years when it’s too darn late?” he said.
Has there been any progress?
The report co-authored by Brooke states that since 2016, over 90 “local governments across Canada have been undertaking asset management-based approaches that recognize natural assets as infrastructure to be protected and managed for the long-term.”
The majority of these local governments are based in British Columbia and Ontario, where the making of inventories, modelling, valuing, and managing of natural assets are being overseen.
Like Brooke, Bailey Church, the National Leader of Public Sector Accounting Advisory for KPMG Canada and one of the co-authors of the report, says the problem lies in the pace of the process — it is “really slow.”
“It’s a time-consuming task…So the 90 municipalities cited, most are working with the Municipal Natural Assets Initiative and building out their inventories of practice. And there are a lot of varying degrees of progress. Some are extremely advanced, and others are in the very early days of it,” said Church.
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“You have to involve a lot of stakeholders in that whole process. And there are a lot of pressing issues, demanding resources, demanding attention. But the focus on this has shifted so much in the past 24 months…it’s very timely,” said Church.
The managing director of the Climate Resilient Infrastructure at the University of Waterloo, Joanna Eyquem, says what concerns her is that Canada doesn’t “have time when it comes to tackling climate change and biodiversity loss.”
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Eyquem says that’s eight years in the future, so there isn’t a lot of time to change the standards.
“We need to be moving forward maybe with interim guidance, but we want this to be mainstream practice,” she said.