Environmental financialization: what could go wrong?

The authors examine the 'financialization of nature,' arguing that securitizing ecosystem services creates incentives to maximize a narrow set of commodifiable outputs at the expense of overall ecosystem health. They contend that the fungibility required for financial markets ignores the complex, location-specific nature of ecosystems. While they identify limited exceptions—such as tradable permits for widely-dispersed gases (e.g., CO2 and SOx) and socially responsible investing (SRI) for already-managed lands—they warn that most environmental credits and offsets fail to protect biodiversity or ensure genuine additionality.

• The authors argue that the process of securitizing ecosystem services leads to the simplification and degradation of ecosystems by creating incentives to maximize the output of commodifiable services while neglecting broader ecosystem functions and non-commodifiable services.
• Financial assets require fungibility—the ability to be comparable and exchangeable—which contradicts the inherent complexity and non-exchangeable nature of ecosystems, making such assets unsuitable for conservation.
• The authors identify a narrow exception where tradable permits can help protect ecosystem function: when they constrain a non-specific pressure on ecosystems, such as permits for widely-dispersed gases like sulfur oxides (SOx) and carbon dioxide (CO2).
• Socially responsible investing (SRI) is viewed as a partial exception that can mitigate harm to ecosystems already under production, but it is not considered a viable method for protecting broader ecosystem function due to its reliance on rule-based 'mechanical objectivity' and standardized indicators.
• The paper contends that ecosystem-based credits and offsets, such as biodiversity credits or REDD+, are problematic because they reduce complex, location-specific ecosystems to a single service and often fail to prove 'additionality'.
• The authors argue that the Clean Development Mechanism (CDM) and similar credit systems are structurally biased, as buyers, sellers, and certifiers have economic incentives to overestimate emission reductions.
• The authors suggest that while ecosystem valuation can be a useful communicative tool to highlight the importance of nature in monetary terms, it should be reserved for high-level numbers rather than explicit policy guidance to avoid the risks of appropriation and commodification.

APA

Kemp-Benedict, E., & Kartha, S. (2019). Environmental financialization: what could go wrong? Stockholm Environment Institute. https://www.sei.org/wp-content/uploads/2019/03/kemp-benedictkartha872.pdf

Chicago

Kemp-Benedict, Eric, and Sivan Kartha. Environmental financialization: what could go wrong? Stockholm Environment Institute, 2019. https://www.sei.org/wp-content/uploads/2019/03/kemp-benedictkartha872.pdf.

Wikipedia

{{cite report |last1=Kemp-Benedict |first1=Eric |last2=Kartha |first2=Sivan |title=Environmental financialization: what could go wrong? |publisher=Stockholm Environment Institute |date=19 March 2019 |url=https://www.sei.org/wp-content/uploads/2019/03/kemp-benedictkartha872.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kempbenedict2019environmental, author = {Kemp-Benedict, Eric and Kartha, Sivan}, title = {{Environmental financialization: what could go wrong?}}, institution = {Stockholm Environment Institute}, year = {2019}, month = mar, url = {https://www.sei.org/wp-content/uploads/2019/03/kemp-benedictkartha872.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }