Letter to the Editor: Investment banks and ecosystems services

The finishing touches to a prototype Global Ecosystems Model

Re: Investment banks and ecosystems services

We were intrigued to read your recent article Investment banks taking scant notice of ecosystems services’ economic impact in which you report on a study that found: “…while the investment bank economists broadly recognised that ESG issues were relevant to economic forecasts, a lack of client demand and modeling capability meant they were rarely considered.”

While there may be a lack of modeling capability within banks, there is considerable—and growing—ecosystem services modeling capability in the world.

For example, Microsoft Research—in collaboration with the United Nations Environmental Program’s World Conservation Monitoring Center—is putting the finishing touches on a prototype Global Ecosystems Model (GEM) which is called the Madingley Model. This model is being built to assist decision-makers to make sense of the various pressures to which ecosystems are subject, devise metrics to measure the impacts of these pressures, and develop strategies to mitigate these impacts.

More generally, the capacity to understand and model ecosystem services dynamics has been rapidly improving. A recent BSR report noted a robust and growing set of academic institutions, NGOs, UN agencies, and private-sector scientists who are developing models, tools, and approaches for assessing corporate impacts and dependencies on ecosystem services.These models could help to prioritize investments, based on far more accurate understanding of risk due to changing ecological systems and the cascading effects on people, businesses, and economies. The resulting maps of various management scenarios over time will be able to show both scarcities and elevated concerns that will emerge in the face of trade-offs and multiple user pressures on key resources, such as water, fibers, animal populations, and many other factors.

The opportunity is now for the financial services sector to engage with this growing domain of ecosystem services expertise in order to better understand business risk and opportunities.

One clear pathway forward is for investment banks to test analytical approaches and models of ecosystem services, in order to provide feedback on the growing number of prototypes and beta versions that have been released. This engagement could lead to the co-creation of refined ecosystem services models that fit well within financial decision-making and improve decision-making.

In sum, ecosystem services analytical capability and models exist. They real question is why financial services companies are not using them to make more well-informed decisions about the ecosystem impacts and risks of their investments?

Lucas Joppa Microsoft Research
Sissel Waage BSR