ISF report: Canadian wetlands providing hundreds of billions in natural services

A new report by the Institute for Sustainable Finance at Smith School of Business Queen’s University estimates that wetlands in Canada provide natural services worth approximately $225-billion annually, an amount equivalent to around 10% of Canada’s GDP.

Nature’s value to humans is immense. Our economy and even our existence depend on the health of the environment around us. However, we have limited knowledge and experience applying economic estimates to nature. ISF's work seeks to further develop this promising field.

“This study sheds light on just a fraction of the value of natural assets in Canada that we haven’t previously accounted for,” said ISF Director of Research Ryan Riordan. “Business and finance should be taking note and starting to assess their own dependence on nature and the risks they face from degraded nature and biodiversity.”

Wetlands are considered the world’s second-most valuable biosphere after coral reefs. Canada is fortunate to have vast wetlands but they have been disappearing quickly, often converted to farmland and urban development with little thought to the natural services they provide. This can include flood prevention, protection from soil erosion, wildfire suppression, irrigation for crops, habitat for valuable species, and public recreation.

For this report, ISF’s research focused on two natural services by wetlands that can be measured using “directly observable market prices”: water filtration and carbon sequestration.  

Value of water filtration services: Wetlands are excellent at filtering out pollutants before they reach lakes and rivers, something that is costly to do with man-made technology. Calculating the average of estimates for value provided per hectare per year, and using existing low-resolution satellite mapping for an estimate of wetlands coverage, we can find an aggregate value of roughly $201.8-billion (CAD 2023) each year for water filtration services of wetlands in Canada.

Value of carbon sequestration services: Wetlands can also act as carbon sinks, which mitigates global warming. Using accepted measures of the social cost of carbon and the net carbon sequestration capacity of Canadian wetlands, the researchers estimate an annual Canada-wide value of wetlands’ carbon sequestration services of roughly $21.8-billion.

These estimates offer a good idea of the scale of the value of this natural asset, but uncertainty remains given there is a range of estimates for wetlands’ value and current mapping of ecosystem coverage and location lacks precision. Even so, it seems Canada’s wetlands most likely provide hundreds of billions of dollars in value for these two services alone. 

Investing in nature-positive outcomes: Maintaining the integrity of intact wetlands and restoring degraded ones requires significant capital output. However, investing in conservation and restoration also presents many potential benefits including improved asset quality, portfolio diversification, long-term returns from asset value appreciation, alleviated future resource scarcity and regulatory change risks, access to tax benefits, and lower costs. 

Building on this initial research, a vital next step will be to develop more accurate estimates of total coverage of wetlands and other beneficial ecosystems, combined with thorough evaluations of their derived services. This will be a major area of focus for ISF.

“What’s exciting is we have an opportunity to hone these valuation methods and develop more detailed maps of coverage of different kinds of ecosystems across the county,” said ISF Research Associate, William Hamilton. “So, ISF and other researchers will be able to do a deeper dive on critical ecosystems and their natural services anywhere in Canada, particularly those under threat from development. We hope this will create opportunities to invest in their preservation.” 

The authors conclude that until we can establish the economic contribution of Canada’s natural spaces such as wetlands, hundreds of billions of dollars in value could be wiped out without properly accounting for it, leaving us all much poorer. 

Download the full report: “The Wealth of Wetlands: Measuring the Economic Value of Two Critical Ecosystem Services in Canada.”

Taskforce on Nature-related Financial Disclosures

Along with CPA Canada, ISF is co-convenor of the Canadian consultation group for the Taskforce for Nature-related Financial Disclosures (TNFD). TNFD’s recommendations and guidance give companies the tools they need to assess their dependence on nature and their impact on the environment, and opportunities for investing in nature-positive outcomes. Learn more about how your organization can get involved with ISF’s TNFD resources page, here.

About the Institute for Sustainable Finance

ISF was launched in 2019 as a Canadian-specific centre of expertise and collaboration for advancing sustainable finance. Housed at Smith School of Business at Queen’s University, ISF is independent and non-partisan. It focuses on developing research, education, and collaborations among academia, business and government that will improve Canada’s capacity for sustainable finance as the shift to a low-carbon economy occurs. ISF’s work is generously supported by Ivey Foundation (inaugural supporter), McConnell Foundation, McCall MacBain Foundation, Chisholm Thomson Family Foundation, Smith School of Business, Queen’s University, and Founding Contributors BMO, CIBC, RBC, Scotiabank and TD Bank Group. For more information, visit isfcanada.org.

Media contact

David Watson
Associate Director, Communications, Institute for Sustainable Finance
david.watson@queensu.ca
C: 613.796.3605