OPINION:
In August 2021, the World Economic Forum penned an article stating “valuing natural capital is key to the future of investment.” In it, the WEF stated that “the best way to predict the future is to create it.” The article makes the case that the “linear economic system (take-make-use-throw)” needs to be replaced. WEF looked to “disrupt[] or replac[e] the linear economy.”
Just two years later, the WEF’s plan appears to be set in motion in the United States. And, as predicted, the system would threaten the current economy and upend current securities foundations and principles.
The New York Stock Exchange (NYSE) has proposed a rule for the Securities and Exchange Commission (SEC) to promulgate that would create an entirely new type of company. These “Natural Asset Companies” (NAC) would have the “primary purpose is to actively manage, maintain, restore … and grow the value of natural assets and their production of ecosystem services.” Examples of ecosystem services under the proposed Rule would be “air, water supply, flood protection, productive soils … climate stability, habitat for wildlife, among others….” These NACs would be prohibited from using the lands in “unsustainable” ways, such as mining.
What is unique about this proposal is that these companies would be attempting to monetize natural assets. The air we breathe and the water we drink would be controlled and monetized by these companies. The challenge in this is how to determine value, especially to garner investments, of non-tangible natural resources that have traditionally never been owned by anyone.
Under the proposed Rule, these “assets” would be measured in a novel way. To measure value, the proposed Rule states that “NAC’s activities are not well captured solely by traditional financial reporting standards.” Thus, the proposed Rule intentionally abandons generally accepted accounting principles, which govern all other forms of securities, and instead creates a new framework, which is overseen by a newly created company called Intrinsic Exchange Group (IEG). IEG conveniently counts the NYSE as an investor.
It is this company, which has red flags all over the place, that will determine the value of “natural assets.” The methodology has no history. The company cannot be viewed as reliable.
Indeed, NACs have to be viewed as vehicles for fraud. “Investors” would place money into a company that produces nothing other than to control assets that are already in existence naturally. In reality, this has all the hallmarks of a social welfare non-profit but is organized as a for-profit company. The system is designed to prevent uses of land that involve oil, mining, or otherwise producing tangible assets. All these familiar uses just happen to be practices that environmentalists do not like. This is antithetical to the purpose of the SEC, which itself states is “designed to prevent fraudulent and manipulative acts and practices.”
The proposal also obviously weakens our economic security. The proposed Rule states that “NACs are expected to license…from sovereign nations or private landowners.” Therefore, United States properties and private property alike are subject to these provisions. Once the company has secured the land, it controls the land’s use. There is nothing to prevent foreign threats or interest groups from investing in the companies and then controlling the People’s land.
NACs are not needed, and they certainly don’t merit special rules to govern them. True for-profit businesses don’t need special rules to justify their existence. Traditional securities laws, using tried and true methods and standards that have been in existence for decades, should govern NACs. If these companies cannot prove their value under these traditional methods, they should not be permitted.
The proposal would be comical were its consequences not so dire. The American people rely on farmland to feed our teeming cities, water to consume and run industrial processes, precious and critical minerals to manufacture technological innovations, and affordable energy to sustain our way of life. The Proposal would allow a handful of entities focused on a social purpose to dupe investors into funding the acquisition of these vital assets and withdraw them from the public sphere. While this may enrich the promoters of the NACs and make others feel that they are contributing to “sustainable living,” in reality, it will only harm the American way of life while inflicting harm on the investing public.
• Justin Bis is the Director of the Financial Fairness Alliance. He has held senior government roles, including at the White House and the U.S. Department of Energy, where he assisted with recruiting top-level governmental leaders responsible for regulating the U.S. financial and energy markets.
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