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EARTH IPO - Can we value the planet as an appreciating asset?

 

27 January 2014 | by Joss Tantram

 

“I conceive that the great part of the miseries of mankind are brought upon them by false estimates they have made of the value of things.”
Benjamin Franklin

 

Introduction

The Earth Initial Public Offering is a creative thought experiment designed to explore perhaps the most fundamental challenge of our age – the ability of the financial system to view our home planet as an asset for investment, rather than a resource for exploitation.

Current economic models consistently collide with the physical limits of the Earth - our ecosystem. They rely upon drawing down natural capital rather than working with ‘revenue’ – the sustainable flow of natural resources. This represents a threat to global human wellbeing and to future value creation, both human and economic.

The Earth Initial Public Offering will explore the challenges by asking two fundamental questions.

The EPO is seeking to answer the questions:
Is the Earth a good investment?
Could investors value the Earth as a going concern?

 

Why an IPO for the Earth?

An Initial Public Offering (IPO) is a mechanism, used within financial markets, as a means to value a commercial entity prior to its public listing. As an integral aspect of this process, investors assess and value the assets, capabilities, liabilities, competencies, market potential and growth capacity of the company in question.

The Earth IPO seeks to apply this process to a more fundamental and more important entity – our home planet. It is an imaginative way of using existing tools and techniques to push beyond the strengths and weaknesses of the current financial system and to drive innovation in how we might prioritise investment in the Earth’s capacity to thrive and support us in the long term.


Common enterprise

If the Earth was an enterprise it would have:

  • A clear understanding of its assets, capabilities, liabilities, market and growth potential.
  • A strategy.
  • Metrics to assess progress.

Given these elements, it would then be valued accordingly.

The Earth IPO allows us to explore some of the key inadequacies of current economics and markets by developing the concept of common enterprise with shared strategic goals. These would provide the basis to value behaviors in the context of their likelihood of supporting or undermining the goals.

 

Markets with meaning

It is entirely in capitalism’s (enlightened) self-interest to adequately value the productivity, utility and vitality of natural systems as the basis for life support and a healthy population. In fact, it is a prerequisite to future global economic expansion. Failure to achieve this would represent a constraint on future trade – not to mention a failure in social and developmental terms.

To achieve a sustainable future, finance and markets must be able to:

  • Appreciate and value the Earth’s productive capacity as the basis of all human value.
  • Develop the means to compound rather than discount future value.
  • Prioritise and positively value technologies/processes capable of functioning within the planet’s physical operating parameters.
  • Consider life as an asset.
  • Balance the consequences of common and private ownership – such that one does not intrinsically undermine the other. 

In the long term, private interest must become indistinguishable from the common interest to be sustainable in all senses.

 

Strategic goals

The Earth IPO proposes simple yet comprehensive strategic goals for planetary management; designed to expand the Earth’s vitality (capacity to provide ecosystem services) in order to accommodate anticipated population increases and support vastly increased markets.
The Earth should plan to deliver, by 2050:

  • Healthy and thriving ecosystems
  • A population of 9 billion healthy thriving people.

Assessing behavior against these strategic goals would allow sustainable decisions and behaviors to be inherently valued and prioritised rather than considered as an afterthought.

 

Valuing a sustainable future?

The Earth IPO is a creative exercise to drive innovative approaches to valuing the natural productive capacity of the Earth. It seeks to identify and demonstrate the common interests of investors, policy makers and citizens to invest in the Earth’s ability to provide the continuing revenues that support life – breathable air, drinkable water, food and shelter.

The Earth IPO seeks to make the case that it is better to do business on a living, thriving planet than a bankrupted, broken and declining one.

 

Further reading

We have developed a range of material presenting and exploring these ideas, see:

http://www.terrafiniti.com/blog/a-valuable-property-how-might-value-home-planet/
http://www.terrafiniti.com/earth-public-offering.html
http://www.slideshare.net/Terrafiniti/terrafiniti-an-ipo-for-the-earth-is-the-earth-an-appreciating-asset-salzburg-global-seminar-25-june-2013

Please also see our wider writing on the nature and challenges of aligning economics with sustainable value: http://www.terrafiniti.com/blog/category/big-ideas/value/

 

About the Earth IPO

The Earth Public Offering (EPO) concept has been developed by Terrafiniti LLP and forms part of Terrafiniti’s sustainability R&D initiative - Towards 9 Billion.

We are actively seeking relationships with entrepreneurial and visionary organisations, investors and thinkers who share our passion for positive change towards a sustainable world.

To discuss the EPO and our ideas for developing the project please contact: Joss Tantram (Partner, Corporate Sustainability) +44 (0) 1483 531 766
.