Canada’s wealth of natural capital (such as forests, wetlands, rivers, lakes, and grasslands) need to be better factored into economic decision making given the critical benefits to our economy and society they provide, argues Peter van Dijk.
As he outlines in this new intelligence memo for the C.D. Howe Institute, most natural assets in Canada are owned on behalf of Canadians by governments and public sector entities. This means that accounting for them only turns up in financial statements when they are purchased or capital is spent to repair or restore them.
This dramatically understates the actual value of these assets, he argues. Not effectively valuing these assets could lead to their degradation — a problem when in addition to maintaining biodiversity, these assets are essential as effective tools to mitigate climate change through carbon sequestration and storage, and in the ways they reduce physical climate risks such as flooding.
While many forward-thinking local governments have increasingly started to value and incorporate natural assets into their long-term asset management planning alongside built assets, more can be done.
Specifically, van Dijk highlights that their recognition in the financial statements of public sector entities is expressly excluded under the current standards issued by the Public Sector Accounting Board of CPA Canada. This prohibition should be removed, he recommends.
“The urgency to address this issue now is significant because leaving these assets outside the accounting framework leaves them hidden when they are at their greatest risk.”
