Natural Capital Forum

Conservation efforts across the globe are in urgent need of sustainable financing. The challenge to meet this need is difficult but surmountable. The growing recognition of natural capital, the increasing availability of innovative financing instruments, and the expansion of climate-oriented funds means that there are now a greater number of financing alternatives for countries like Sri Lanka that do not have the fiscal capacity to sustain conservation efforts through traditional budgetary sources. At the Centre for a Smart Future, we are looking at some of these instruments and mechanisms specifically to identify their applicability to Sri Lanka, and learning lessons on how they can be deployed sensibly and sustainably. It’s vital that domestic economic and governance considerations are borne in mind when choosing these instruments and mechanisms for use in Sri Lanka, and government, development partners, policy think tanks, and environmental specialists should be engaged inclusively to get the best outcome for the country.

Ecological conservation sites cannot operate without proper financial planning and management. In Sri Lanka, sites are operational, however, can stand to benefit greatly from revisiting theoretical and practical considerations of planning and management. Moreover, unlocking innovative financial solutions is only possible once conservation and financing stakeholders are on the same page regarding the issues, objectives, and outcomes of conservation. While financiers may be aware of the opportunity, the lack of awareness and knowledge on science-based conservation metrics too limits the attention given to this space. The Centre for a Smart Future is partnering with the Blue Resources Trust on a research and advocacy project to advance innovating financing for sustainable marine conservation in Sri Lanka, under a project funded by the Oceans 5 consortium.

There is increasing global pressure for economies to extend their investments in climate action due to the added and ever-increasing pressure on the environment. Various sovereign financing instruments linked to nature, like Debt for nature swaps (DFNS), provides developing economies under severe macroeconomic and public financial strain the opportunity to increase climate action and environmental outcomes, while taking new steps to tackle sovereign debt issues. There has been rising interest in debt for nature swaps in the recent years, especially in the post-pandemic era with increase in instances of sovereign debt crises in developing countries and emerging markets. With the help of various multilateral institutions, there has been an increase in traction and reports of debt for nature swap negotiations in process and of such deals that have already taken place. DFNS provide countries a means of tackling sovereign debt issues, and strengthen public finances, while simultaneously making investments in conservation and improving environment outcomes. As this paper notes, governments and country stakeholders must prepare their technical knowledge, and institutional and legal frameworks when embarking on instruments such as these for the first time. In Sri Lanka, some of these have already begun and are ongoing. Our paper argues that stakeholder collaboration in both the economics, finance, and public financial management fraternity as well as the environmental science, conservation and sustainability fraternity is key to ensuring that the right pathways are chosen, and good governance is embedded.

A few weeks ago, I saw Greta Thunberg live at the launch of the The Climate Book and something that stuck with me, amongst others, was when she said “we are never going back to normal again because 'normal' was already a crisis.” The idea of GDP as a sole measure of how ‘successful’ a nation is, is one such example of a deep-rooted idea that is considered ‘normal’ which has led to growth at the expense of natural resources and human well-being. Moving beyond GDP and focusing on the idea of ‘green growth’ could unlock a host of new opportunities such as job creation, restoration of natural capital, and increased climate adaptation. Policymakers and politicians should explore alternatives of GDP as Sri Lanka forges forward from the biggest economic crisis in its independent history by placing value in what society really envisions as a good life

The debate on whether biodiversity should be economically valued remains highly polarized and a more nuanced contextual approach is required. This method is essential for successful conservation as it calls for integration of biodiversity-related data in policy making and decisions. However, there are barriers to operationalizing this and economic metaphors such as ‘natural capital’ and ‘ecosystem services’ are yet to enter mainstream economic and political decision-making. Although the approach needs to be developed further, it is on a promising step towards striking a balance between environmental, social and economic objectives.

Earlier this year, Sri Lanka’s census and statistics department released a new version of the country’s Gross Domestic Product (GDP) calculation. The existing National Accounts had been ‘rebased’ from the year 2010 to the year 2015. In explaining the re-basing, the department noted that “a number of improvements” to GDP compilation was done, the first item on the list was ‘Inclusion of generated value addition from the reclaimed land of Colombo Port city project’. The fact that the creation of an 269 hectare artificial land parcel attached to the capital, with sand extracted from nature, materially changed the country’s GDP base was startling. It triggered within us, again, a growing discontent we have felt for a while on how we think about economic growth and an unease with how we assess progress. For some years now, stemming from a love for the natural world, interest in biodiversity, and enthusiasm for photography, we had begun to think about critical issues with our current approach to economic growth. Particularly, there was little appreciation for the value of nature - for instance the emerging agenda of the valuation of natural capital.

In mid-January 2022, the Centre for a Smart Future - under its 'Natural Capital Forum' initiative - collaborated with the Climate Disclosure Standards Board in the UK and the Colombo Stock Exchange to bring new accounting and analytical tools to Sri Lankan corporates. With practice facilitation and outreach by CSF to the CDSB, Sri Lankan listed and unlisted companies were able to learn about new accounting, reporting and disclosure standards relating to climate risks, for the first time in the country. The Colombo Stock Exchange(CSE) organized the training programme, which saw participation of nearly 200 participants. The programme was supported by the UN Sustainable Stock Exchanges Initiative(SSE)

Sri Lanka's President announced a policy directive of moving to 100% organic farming this year, and an immediate ban on importing any chemical fertilisers and agro-chemicals. Since the announcement, there has been a fervent debate on the decision, ranging from fears around food security and impacts on exports, to a celebration of the potential to create a unique value for the country. In our first video interview in the 'Smarter Sustainability' series agriculture economist Chatura Rodrigo discusses how to manage the transition better, implications for farmers, and gaps in the policymaking process.

In this interview in the 'Economics x Environment' series of Smart Future Forum (SFF), Nishan Perera - Sri Lanka's leading marine ecologist, an avid diver and underwater photographer - shares some vital insights  on. Nishan is a marine ecologist with an interest in coral reef ecology and Marine Protected Area management. He is a co-founder of Blue Resources Trust, a Sri Lankan marine research organization, where he currently heads the coral reef programme.  His recent work has included research on impacts of climate change on coral reefs, small scale fisheries management and supporting Marine Protected Area management in Sri Lanka. He has previously worked with IUCN, Project Seahorse and the Sustainable Fisheries Partnership.