Despite many people’s desire, including ourselves, to have a world free of fossil fuels, it simply is not possible and will not be for several generations. This is why the carbon markets exist, to offset what we can’t eliminate. Unfortunately, extraction and use of nature is the same way. Nature has to be utilized. It is how we use it and regenerate it that matters.
We see a world that is regenerative and circular at the core. In order to do this, regeneration will be needed in every aspect of our systems. Regenerative finance will help solve this but an asset and offset economy will also be needed.
Similar to the carbon markets we predict both compliance and voluntary markets for nature (natural capital). These markets will provide natural and ecological assets which can be used on balance sheets for:
- natural capital accounting
- nature offsets and crediting
- social and brand assets
At the heart of the natural asset and offset economy will be nature accounting and natural capital accounts. We call them Ecological Assets aka ecocredits. Ecocredits can be bought, sold, traded, leased, staked or burned. Basin will create, source and facilitate the purchase/sale and leasing/staking of natural capital and ecological assets, all derived from real estate.
Again, don’t soley take our word for it. Investopedia updated their Natural Capital definition in June 2022. Key points of the definition:
Natural capital is the inventory of natural resources held by or claimed by a company. Natural capital holdings will be listed on a firm's balance sheet as it is a type of asset. Natural capital typically must be certified before a derivative contract, like a futures or forward contract, can be written on it. Natural capital must also be managed on a company’s financial statements which requires natural capital accounting.
Everything Basin is creating is based on ecological and natural capital asset creation, cash flow and store of value all derived from real estate (nature). We are building and connecting the infrastructure needed for natural capital markets including the storytelling around it.
Basin will mint and sell ecological assets and units of account but is asserts that perpetual stewardship of ecosystems aka Nature Streaming is more important and impactful. This also fits into the business use case of year by year by year and real estate investment.
As discussed in the carbon section, a credit of something only gets us so far and is very onerous to create, track, market and sell.
An offset gets keeps us at a stand still:
What we need is a model that pays people to restore, regenerate and conserve nature and ecosystems year by year.
It would be great if there was demand for a unit of pollination or a unit of biodiversity. There will be markets at some point, similar to demand for a gallon of clean water or a tonne of carbon, but even with market demand a "unit of nature" is a challenge. Above and beyond quantifying the spatial and intrinsic value, the unit problem is temporal.
With the exception of restoration (additional), if you buy a unit of nature how is that unit accounted for over time?
i.e a stand of trees (forest) may live for ~70 years so fractionalize those 70 years? What if the trees grow slowly or die? Or with pollination, how long do bees live? What happens if they move their hive? This is spatial temporal. Sure, there are ways to MRV this, but that gets messy when put in units. A unit today is not that same as a unit tomorrow. And in most cases those units are non-fungible.
The pay for practice, rather than pay for unit, is perpetual. Pay people to steward ecosystems and equip ecosystems, species and properties with endowments. Units can still be used for accounting purposes to measure the stocks and the flows but really what we are after is the cycle: the cycle of nature, the water cycle, the carbon cycle.
It is flow based, like a stream. Or $STRMS for that matter.
Just like water, nature itself if fluid. It changes, moves, constantly in flux, death and decay. It stops for a bit, stocks and then flows. Most natural capital accounting is working in this direction and how to account for stocks and flows.
Nature accounting frameworks (Ecometrics, Accounting for Nature, NAC/IEG), UN System of Environmental-Economic Accounting (SEEA) and TFND (Natural Capital Protocol) are all working on units of account. Like it or not, it seems the best unit of account is the dollar. Equate pollination services or a wetlands to a dollar value and all of a sudden we can all speak the same language around the value of nature.
The issue is the math around the dollar value of the ecosystem services. Until the world can sort that out we have a problem. In the meantime, we can start to account for nature. Whether that be on the Regen Ledger or with $BASIN $STREAMS, if we measure and account for this value the world begins to change and we are prepared for the future. Establish the baseline, track the changes over time and account for the differences.
The basinStack is built around these leading natural capital accounting frameworks, regardless of which one “wins” or if something new comes along, the basinStack is built on the core aspects of each and can be adapted to what the market demands.
Research around PES shows that bundling is more effective than stacking. This is due to quantification of the units in the stack but also the lack of demand for the layers in the stack. It is also due to the complex nature (no pun intended) of natural ecosystems and the spatial temporal challenges of MRV.
The basinStack is built to allow for bundling or stacking. We can sell, lease or stream layers (i.e. biodiversity, water quality, recreation, carbon etc) or we can sell, lease or stream the stack itself aka the basinBundle as a holistic unit of ecosystem and societal health.
The basinStack also facilitates "common-place" or "common-interest" strategies around the "where and what" of value.
{% hint style="info" %} $STREAMS will most likely be the holistic unit of ecosystem and societal health. We would love your comments and/or participation. {% endhint %}
While it is still early days in the Natural Capital markets, the Basin Natural Capital revenue models have three purchase/subscription options, all are combo of assets, products and services. Buyers and users of natural capital can:
- buy credits individually; per credit or in bulk
- short term subscription to the credits, PR and content from a place or interest over 12-36 months
- lease or own an entire property for 10-20 years for full carbon and natural capital rights using the climate.lease
The price/cost goes down moving from 1 to 3 based length of commitment which also decreases price risk and increases the hedge for the buyer/user.
{% hint style="warning" %} The above is subject to change as we are in deep prototyping and iteration. Join us for the most current info or to co-create. {% endhint %}