Valuing Natural Capital: Applying the Natural Capital Protocol – YES BANK

Foreword by Rana Kapoor, Managing Director & CEO YES BANK, Chairman Yes Global Institute.

“Natural Capital is the irreplaceable thread that weaves life, culture, economies and lays the foundation for any civilization to grow and prosper. Traditionally, natural assets and ecosystem services have served as the bed rock for industrial growth but have often been undervalued. The overuse of natural resources is already causing disruptions with dire consequences for humanity.

The world has taken cognizance of the situation and landmark developments in the form of Paris Agreement and 2030 Agenda for Sustainable Development underpins importance of conservation of the limited natural resources for future generations. It is important to realize direct correlation between natural capital conservation and a nation’s economic growth, as economy boosting sectors such as agriculture, fishery, healthcare, energy, transport & tourism, not only depend on nature but also have the ability to impact nature positively or negatively.

Industrial growth is critical for sustenance, especially in India where the Government’s mandate is to meet more than a billion aspirations by making India a manufacturing hub. While conservation of natural capital has conventionally been the responsibility of the Government, the private sector needs to play a larger role by integrating quantitative, qualitative or monetary valuation of natural capital. Such a valuation can provide the real value of natural resources consumed and its associated impact on a company’s balance sheet.

To my mind, financial institutions being the backbone of the economy, have a crucial role to play in accelerating transition towards a sustainable economy by being mindful of their discretion to allocate capital. Integration of environmental and social risks with credit risks and recalibration of the loan pricing to reflect these risks in the cost of the capital is the current need. Environmental/Climate Stress Testing of lending portfolios can help Banks safeguard themselves from natural capital risks.

‘Valuing Natural Capital: Applying the Natural Capital Protocol’ report, provides key insights on the impact and dependencies accompanying the food and beverages sector through a case study. The report focusses on arriving at the real value of water, a key material issue for the beverages sector, which was found to be 18 times the current industrial water rate in an Indian province. The real value of water incorporates societal and environmental costs. The analysis demonstrates the potential impact of natural capital valuation on a company’s balance sheet thereby establishing a business case.

I am confident that this report will provide important insights for policy makers, industry, communities and all relevant stakeholders to suitably and rapidly enhance natural capital integration using their true value…”