Brian DePratto is an economist at TD Bank. His work focuses on the Canadian economy and environmental issues. Brian sits on the advisory group of the City of Toronto and TAF project, TransformTO. We asked Brian about the idea of natural capital and the economic opportunities of low-carbon actions. This is the second interview in our TransformTO Talks interview series with multi-sectoral experts.
TAF: Can you tell us a bit about your work and interests? How did you become involved in the economy and the environment?
Brian: The idea of what economists call externalities has been around for a long time. It’s the idea that the costs of your actions, or the actions of a corporation that can have impacts on people and the environment are not taken into account. For example, a factory that produces pollution causes health and climate change impacts but there’s no real price on that. That’s called an unpriced externality. But the reality is that everyone is paying that price. That’s how I became interested in natural capital, which is really a system trying to bring those externalities into the decision-making framework. It’s really about looking at how nature and society interacts, and making sure that we are actually properly valuing all the resources that nature is providing to us.
TAF: TransformTO is looking at different low-carbon solutions to help Toronto reduce GHGs 80% by 2050, but we’re also looking for solutions that have synergies with public health, social equity, and the economy. When we analyze different low-carbon opportunities for the future, what are some of the economic impacts that we can measure?
Brian: Some of the impacts are indirect. For example, if you can have a better building design or better city design that results in healthier citizens, we are avoiding an increase in healthcare costs. Another example is the study we did on urban forests. The urban forest cleans our air, improves property values, and reduces sewage management costs, among other benefits. We all receive these benefits, and though we don’t pay for them, they have a value. This value is what we call natural capital, and we find that when you take it into account, cities, businesses, and individuals start making better decisions. To understand the potential economic impacts we need to broaden the discussion, and that’s something we should be doing with the TransformTO project.
TAF: What role can financial institutions play in advancing low-carbon solutions? What are they doing now and what could they do more of?
Brian: I think the biggest role for financial institutions is more of a supporter and advocate – we’re not the ones building infrastructure but we’re in a unique situation, and have an obligation to advocate for better ways of thinking about things, for a complete and total economic value rather than just the dollars and cents type of view. Advocacy for a financial institution can take many forms. In my case, it is largely through research reports that make the case for thinking about how both positive and negative externalities can be brought into economic and business discussions. TD is also a significant supporter of on the ground environmental efforts through our Friends of the Environment Foundation and our work with and support of conservancy groups. I think that’s where the financial industry can make the biggest impact, particularly in the Toronto context.
TAF: What policies are needed, or what can governments do to enable more economic opportunities in the environmental sector?
Brian: One way to price externalities is a tax, so we have seen forward movement on that in some provinces like Ontario, and more recently at the national level as well. When you start putting a dollar value on things – dollars aren’t everything but certainly that’s a good way to get peoples’ attention – that’s what economics show is really the best way to change behaviour.
TAF: Is there one piece of advice you’d like to offer about how to make TransformTO a success?
Brian: As an economist I never want to say exactly how something will look, but I’m excited to see what evolves, where the opportunities arise – we know there will be these opportunities for innovation in terms of urban design and new types of employment in the city, so I’m excited to see the framework that comes out of TransformTO and how that begins to shape the city over the years.