HALIFAX – A climate change think tank, the University of Waterloo's Intact Centre on Climate Adaptation, has introduced a guide aimed at helping municipalities assign specific dollar values to natural assets, such as wetlands and coastal dunes. This guide, titled “Getting Nature into Financial Reporting,” was published on Wednesday and seeks to equip municipal planners with the financial data needed to advocate for the preservation of these natural resources.
Lead author Joanna Eyquem emphasized the importance of assigning monetary values to natural assets, as she believes “money talks.” In her email, she stated, “Nature does not have a voice in economic decisions when it is not laid out in dollars.” Eyquem highlighted a troubling statistic, indicating that Canada has lost more than 70 percent of its wetlands, with densely populated areas seeing losses of up to 98 percent.
The guide emphasizes that natural features like forests and wetlands, which have not been officially acquired by local governments, are generally absent from municipal balance sheets. This gap exists due to the lack of common accounting standards for the valuation of such assets, as there hasn’t been guidance from the national body that sets accounting standards for the public sector.
Nevertheless, around 150 Canadian communities are already recognizing, valuing, and managing natural assets, and are documenting these in separate ledgers outside of their balance sheets. The guide encourages other municipalities to adopt similar practices, offering resources to facilitate this process.
The accounting methodologies being developed focus on the “services provided” by various natural features, including lakes, rivers, wetlands, coastal marshes, soils, forests, fields, and dunes. By placing a financial value on these natural assets, municipalities can better understand the economic benefits they confer.
Additionally, the guide presents draft accounting standards that municipalities can utilize to initiate their valuation processes. Mike Kennedy, the chief financial officer in Rossland, British Columbia, shared that his municipality is already calculating dollar values for its natural asset inventory. His team has assessed the value of woodlands surrounding a human-built reservoir, considering their role in preventing erosion and mitigating flooding, as well as their recreational use. The annual “services” value for the forested areas in Rossland is currently estimated at $26 million, while wetlands are valued around $2.8 million annually.
Kennedy acknowledged the challenges of this task, noting that the valuation of land is influenced by its specific location. He provided a hypothetical situation whereby a development proposal to build on wetlands could be critically evaluated by assigning a dollar value to the water purification services these wetlands provide, allowing a comparison to the costs associated with constructing or expanding water filtration facilities.
The guide introduces specific terminology that Eyquem hopes will become mainstream in accounting practices. Terms such as “ecosystem goods and services,” which encompass products obtained from ecosystems like food and water, and “regulation and maintenance services,” which refer to functions like water purification and temperature regulation, are vital to the understanding of natural assets’ contributions.
Comprehensive steps for evaluating natural assets are detailed within the guide, along with resources for financial officers to find methodologies for assessing the condition of these assets, identifying the services they provide, and converting these into monetary values.
Jillian Prosser, a climate adaptation specialist for the City of Calgary, noted that her team has been working on natural asset valuations for the past six years. The insights gained from their annual financial disclosures have prompted the city to develop plans for reinforcing and maintaining its identified woodlands and waterways. Prosser remarked that the city is beginning to integrate these valuations into broader corporate asset management planning.
During an interview conducted in Ralph Klein Park, described as a municipal asset that aids in absorbing and treating stormwater runoff from an industrial area, Prosser expressed confidence in the value of these assessments. “We think that by including that value, we can better understand the services that they provide to us and recognize how important it is to invest in these areas,” she stated.
