Natural capital and ecosystem services – implications for economic and financial modelling in the US
Economic and financial policy makers are increasingly grappling with the understanding that the economy and the environment are deeply intertwined. There is growing acceptance that decision-making processes will need to better integrate this understanding and capture the complexities of economic-environmental interactions. This has become a pressing challenge as governments face the need to sustain economies in the face of climate change and eroded environments.
In January 2023, the US Biden Administration released a National Strategy to Develop Statistics for Environmental-Economic Decisions to better understand, frame and account for the relationship between the environment and the US economy. In September 2023, the Network for Greening the Financial System (NGFS), made up of 127 central banks and financial supervisors, released a technical conceptual framework to guide action by central banks and financial supervisors as they recognise that environmental degradation, and the actions taken to prevent it or restore ecosystems, poses financial risks. Concepts such as “ecosystem services”, “natural capital” and “natural assets” are being factored into economic and financial modelling, and the risks that flow from the decline of ecosystems – sometimes referred to as “nature-risks” or “environmental risks” are becoming subjects of analysis. How are these complex relationships being modelled? What are some of the challenges of capturing these elements in economic and financial modelling? What are the implications for policy?
Dr Elizabeth Kiser is a Visiting Professor at the LSE, working on a variety of research and analytical assessments related to natural capital and ecosystem services, nature-related risks, and implications for economic modelling. She is part of the Nature Taskforce of the Network for Greening the Financial System (NGFS), which has just issued the conceptual framework on Nature-related Financial Risks. Further, she works with colleagues at the Federal Reserve and the US National Atmospheric and Oceanic Administration (NOAA) on the applications for natural capital and ecosystem services to economic measurement and modelling. Join us as she presents her work and perspectives on this, in conversation with Ben Filewod, Assistant Professorial Research Fellow in Conservation Finance and Elena Almeida, Senior Policy Fellow at the Grantham Research Institute.
Dr Elizabeth Kiser works at the senior executive level at the Federal Reserve Board, with more than 25 years of experience in organizational design, policy analysis, and research in financial stability, banking structure and competition, and economic and financial risks arising from climate change. She earned a Ph.D. and Master’s degrees in economics from the University of Wisconsin-Madison, and a B.A. in economics and German from the University of North Carolina-Chapel Hill. Elizabeth has been a key member of the NGFS Task Force on Nature-Related Risks since it was launched in 2022, and has participated in the core drafting team for the conceptual framework in 2023.
Dr Ben Filewod is an Assistant Professorial Research Fellow at the LSE Grantham Research Institute, with interests in markets for nature, economic development in forest landscapes, and applications of big geospatial data and machine learning in green finance. He holds Ph.D. (forest economics) and M.Sc. (forest ecology) degrees from the University of Toronto, and a B.A. (hons) in Environment and Development from McGill. Ben has extensive experience in the Canadian forest sector, including three years spent as the climate change lead for the Forest Products Association of Canada.
Elena Almeida is a Senior Policy Fellow at the LSE Grantham Research Institute, specialising in nature-related financial risks and central banking. Prior to joining LSE, Elena spent several years in various policy roles, including with the Central Bank of Malaysia, the UK Foreign, Commonwealth and Development Office, and the Bank of England. She led the NGFS-INSPIRE Study Group to explore linkages between biodiversity loss and financial stability, from the perspective of central banks and supervisors, and co-authored the group’s “Central Banking and Supervision in the Biosphere: An agenda for action on biodiversity loss, financial risk and system stability” report. Elena holds degrees in Economics from the University of Sussex and International Management from the London School of Economics and Political Science.
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