How do you financialize and extract monetary value from nature, without extracting resources from it (directly, at least)? The NYSE has an idea:
Natural Asset Companies (NACs) are fundamentally different than traditional companies because they are chartered to protect, restore, and grow the natural assets under their management to foster healthy ecosystems.
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By taking a NAC public through an IPO, the market transaction will succeed in converting the long-understood – but to-date unpriced – value of nature into financial capital. This monetization event will generate the funding needed to manage, restore, and grow healthy ecosystems around the world and bring us closer to achieving a truly sustainable, circular economy.
There are several types of NACs proposed by Intrinsic Exchange, including natural areas, working areas, and hybrid areas. Of these, natural areas are the most interesting simply because they are the hardest to imagine successfully financializing.
One difficulty anyone attempting to "price" the value of ecosystem services is that by their very they are hard or impossible to enclose in order to extract rents. In economics terms, they are non-excludable goods. You can't prevent someone from taking advantage of the oxygen generation capacity of a forest, for example; nor can you withhold floodwater mitigation from downstream communities if they won't pay you to protect your beavers without also destroying your own asset.
So where does the value of a NAC come from, given that there is no expectation of a monetary rent that can pay a dividend? My guess: speculation about the price of the asset in the future.
This wouldn't be a problem in and of itself if the process of creating a NAC were able generate capital for ecosystem preservation where none were otherwise available. However, given that without an ongoing economic return the value of a NAC is based purely on its market price (and that financial securities are basically baseball cards), it may be at risk of price manipulation and hostile takeover by entities seeking to use the NAC's underlying land assets for intensive resource extraction.
Without some form of safeguards against these kinds of takeovers, a NAC is a tempting target.
It's also not hard to imagine other, more cynical applications of NACs. For example, consider a major logging company with substantial landholdings dedicated to timber production. It might be possible for this company to create a wholly-owned NAC whose underlying assets are extant forestry plantations. Listing this company on the NYSE would allow the company to generate a capital infusion immediately, and years later, when the forests have matured, to liquidate the company again for its assets — effectively "double-dipping" with a side of greenwashing.
Interestingly, conservatives are also opposed to the formation of NACs and their acceptance into public exchanges. They have different reasons, of course — they're worried that a NAC might actually work as intended, preventing resource extraction for the areas under the NAC's purview.
"The SEC's proposed rule creating natural asset companies will not only upend the accepted standards of value by which businesses are judged, it would pave the way for ESG fanatics to remake the American landscape. NACs would lock away vital resources that have underwritten America's prosperity, sacrificing them on the altar of climate alarmism," Derek Kreifels, the CEO of the State Financial Officers Foundation, told FOX Business.
It's a bad-faith argument on the face of it. Private property rights in the United States already have commodified resource extraction, and the owner of those extraction rights can already decide whether or not to exercise them. Whether that owner is a NAC or not has no bearing on this. What it does influence is the financialization of that underlying asset, and through public listing on a securities exchange, the possibility of hostile takeover.
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