The Biden administration continues to double down on implementing environmental, social, and governance (ESG) principles across the whole government. 

The latest recommendation comes from the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA), which is responsible for reviewing and analyzing all Executive Branch regulations. The agency recently issued the first-ever guidance to account for “ecosystem services” in benefit-cost analysis pertaining to regulations and government investments (i.e. spending). 

The guidance document defines “ecosystem services” as “contributions to human welfare from the environment or ecosystems”—or market/non-market goods and services derived from natural resources or the environment. These are more simply defined as things that nature provides to us—i.e. timber, pollinators, forests, and wetlands—without a supposed cost. 

Ecosystem services, the paper explains, are closely related to natural assets (natural capital)—viewed as “durable physical or biological elements of nature” that endure and add to “current or future economic production, human enjoyment, or other services people value.” There are differences, however. The former (ecosystem services) are “flows of goods and services” from stock (natural assets) “that influence human welfare.” 

This effort stems from President Biden’s Executive Order 14072, “Strengthening the Nation’s Forests, Communities, and Local Economies,” issued in April 2022 to deploy “nature-based solutions to tackle climate change and enhance resilience.”  

Section 4(b) called on the OMB Director to value natural assets and ecosystem/environmental services in regulatory decisions from President Biden’s Day-One (January 20th, 2021) memorandum to “modernize” regulatory review.”

Due to an environmental (E) score’s flawed application and methodology, ESG proponents have tried to save face by touting natural assets and ecosystem services. Supporters argue protecting nature is on par with reducing emissions. But this strategy might prove even more unsuccessful for them. 

At the November 2022 COP15 Biodiversity Summit in Montreal, Canada, over 200 nations committed to mandatory biodiversity-impact reporting that stipulates richer nations subsidizing poorer ones to the tune of $500 billion annually, for instance.

As the Wall Street Journal warned, however, biodiversity-impact reporting is even more challenging to document than carbon emissions due to the former having more “varied and complex” metrics over the latter. It might even be more nebulous given “widespread uncertainty about what to measure and how to measure it,” another WSJ report explained.

I explained the concerns regarding this global biodiversity agreement here at IWF and how it relates to the Biden administration’s 30-by-30 initiative: 

The Kunming-Montreal Global Biodiversity Framework will require a “whole of government” and “whole of society” approach to conserve 30% of “waters” and 30% of “lands” by 2030. 

What’s the catch? Wealthier nations will be on the hook for poorer countries to meet these goals.

Participating nations will be required to give $20 billion annually to poor nations by 2025. When 2030 is reached, countries are expected to hand over $30 billion annually to developing countries.

Employing a “whole of government” approach to protect the environment—coupled with using ESG principles to force behaviors—will not bolster the environment but leave it worse off and reward bad actors. 

A better way is promoting true conservation that empowers individuals and market forces to get involved and maintain economic prosperity.

To learn more about ecosystem services and natural assets, go HERE.