Shark Species Valuation Reports: The Why and How
Why do we need Valuation Reports?
The most important reason for the reports is that we wanted to express the true value of sharks, incorporating sectors of the economy that have been ignored, despite the fact that they are hugely profitable because of sharks, and in some cases wouldn’t even exist without them. Sharks support livelihoods and careers for a wide range of people from recreation and research to art and commerce. Best of all, sharks live a long time. Most species can make money for 20, 30 or even 40 years.
We all know how important sharks are for the health of our oceans. The sad truth is that when agencies and decision-makers talk about sharks, the animals are only seen as a resource that should be fished in order to maximize the utilization of the species. What is truly amazing is how much money sharks can make when we look at non-extractive industries. If we really cannot protect sharks because of their crucial role in the ecosystem, then let’s do it because live sharks have massive income earning power, now and in the future. As long as we don’t overfish them.
It is our hope that these reports will lead to substantial changes in how we talk about sharks, as a fact-based argument that will call into question how anyone can justify killing sharks for sport? Or fishing them to be sold as low-quality meat? And to call on our policymakers to consider all the stakeholders more equally than they have in the past. The years of fishing and hunting being the sole masters of wildlife management decisions are over.
The reports also show that they are big players in our economy, the entertainment industry, and tourism operators for example, that benefit greatly from sharks, and therefore should be more invested in advocating for the protection of sharks. May it be through funding or messaging or by having a presence during policy discussions.
How can we more accurately determine the value of a species?
By doing what we already know. Resource valuations for products and markets have been a standard element in investment markets, and more recently this has also been applied to the value of individual species. Each report is an analysis that is generated by using a combination of recognized environmental, financial, and statistical techniques that are widely accepted and used in the academic and banking sectors. Looking at one species in one area provides more accurate data than trying to put a value on sharks in general. Because the conditions, shark population numbers, and stakeholders are different in every location.
How can we be sure the reports are accurate and relevant?
The reports have been generated by financial experts at Endangered Wildlife OÜ. They specialize in the valuation of biodiversity and environmental footprint calculations. The Endangered Wildlife OÜ biodiversity valuation methodology is based on well-established techniques. The methodology Whitepaper, which was published in September 2021, has been requested and reviewed around 500 times by a wide array of professionals. These include professors, government advisors, development banks, international organizations, and various industry and sector specialists. The data collected comes from and can be referenced to the most current published, peer-reviewed scientific papers, from statistical departments and commonly used financial algorithms, and has been reviewed and commented on by experts specific to the region and the different shark species. Read more about the development of these methods below in the section called “Value in Valuing Biodiversity”.
Endangered Wildlife OÜ is an award-winning ESG SaaS company that is contributing toward solving the climate crisis by developing the Biodiversity Valuator, a disruptive solution that allows users to calculate and understand the financial value of their impact through biodiversity. The company has been nominated for the Earthshot Prize 2022. This is a prestigious honor and international recognition for the work that they are doing. Prince William, Duke of Cambridge, and David Attenborough launched the Earthshot Prize in 2020.
The components of a report
AESTHETIC VALUE is traditionally defined as the value created by biodiversity through the beauty and quality of life created by the species and environment. It is calculated as the willingness to pay, i.e., the maximum price a person is willing to pay to see the species, plus a virtual willingness to pay, i.e., the price a person is willing to pay for a product related to the species on e-commerce platforms.
CARBON VALUE is defined as the value of the CO2e removed from the atmosphere by a particular species at the time of the valuation and the expected CO2e to be removed in the future. It is known for a fact that sharks do play a role in the Blue Carbon ecosystem from two perspectives:
1. As apex predators, sharks help to control the herbivorous populations, which prevents them from overgrazing the seagrass meadows, and sharks exert indirect control over pelagic consumers. This is crucial as seagrass, Phyto, and zooplankton all play a vital role in carbon sequestration.
2. Approximately 10-15% of a shark’s body is carbon. Their carcasses act as a natural carbon sink and, if left in the ocean, they sink to the ocean floor and the carbon is ultimately sequestered into the sediment.
While it is understood that sharks contribute to solving the planet’s carbon threat, there is a lack of scientific evidence that can justify their actual impact in terms of carbon value. Therefore, most shark valuation reports will not include this value, unfortunately.
ECONOMIC VALUE is defined as the value that is created by biodiversity through their contribution directly to the economy, taking into consideration up to 28 different economic sectors, the largest being recreation, tourism, and the entertainment industry. Entertainment, social media, and gaming numbers are only applied in the reports if the value can be directly attributed to the species in that particular region.
Some interesting facts: We all know how big the movie Jaws was. It broke box office records for years. But that was only the beginning of the film and TV success story of sharks. The Sharknado franchise has grossed over $4.5 billion. Millions are invested, paid and made every year during Shark Week (Discovery Channel) and Shark Fest (National Geographic Channel). This income will only grow in the years to come. Add to that books, games, social media, theme parks and other multimedia and entertainment industry activities that benefit specifically from the image and the fear factor of sharks. Sharks also drive social media viewership and the development of social media influencer fame and wealth. For example, the top 10 Instagram influencers have 9.7m followers and, according to Influencer Marketing Hub, have estimated cumulative earnings of $30,209 per post. (This value, though, is not explicitly included in the Total Conservation Value since it is difficult to attribute to one particular species).
HEDGE VALUE is defined as the statistically driven financial value that a stakeholder would be willing to pay to prevent the population from falling below the minimum viable population or rising above the carrying capacity. It is a common risk management strategy that aims to restrict the losses that may arise due to unknown fluctuations in the investment prices and to lock the profits therein.
IMPACT VALUE is the added value that is created by increasing the population sustainably through active conservation or species management taking into account management, ecosystems and exogenous factors.
TOTAL CONSERVATION VALUE is the sum of the above values. It represents the total value created by the species population when it is sustainably and actively protected and managed.
VALUE IN VALUING BIODIVERSITY
In November 2021, the IFRS (International Financial Reporting Standards) announced the formation of the ISSB (International Sustainability Standards Board), which will be developing disclosure standards pertaining to climate change and other sustainability issues. The ISSB will merge the work done by the CDSB (Climate Disclosure Standards Board), TCFD (Task Force on Climate-Related Financial Disclosures), and VRF (Value reporting foundation) with the intention to launch the IFRS SDS by 2023. You can learn more here.
While the document explores and discusses multiple forms of biodiversity impact metrics, the CDSB Framework already explicitly discusses the use of monetary valuation as a common measurement for biodiversity. The CDSB continues to state that the monetary value should be treated as a minimum monetary value. This supports the service provided by Endangered Wildlife OÜ, whereby the company calculates a verifiable, justifiable minimum baseline financial value for biodiversity. The drive to establish biodiversity-related reporting standards is due to the complexity of the topic. In particular, the complicated principles, when applying existing accounting standards regarding biodiversity, is the issue pertaining to how to report on and value biodiversity from a financial perspective.
According to IAS 41, biological assets, particularly from an agricultural perspective, are living plants or animals. This basic definition does not preclude wildlife and, in Endangered Wildlife OÜ’s understanding, wildlife stock should not necessarily be excluded from the scope of IAS 41. In order to therefore incorporate the animals into a company’s books, it is necessary to also understand the accounting behind the recognition and measurement of the animals. However, according to IAS 41, two of the three requirements for recognizing biodiversity, include:
It is probable that any future economic benefits derived from the assets will be attributable to the Company.
It is possible to reliably measure the fair value or cost of the assets, for example through the use of prices quoted at an active market(s), whereby an active market is one in which (1) the items traded within the market are homogeneous; (2) there exist both willing buyers and sellers; and (3) prices are publicly available. If no active market exists, the value can be linked to the most recent market transaction prices or adjusted market prices for similar assets.
These two points have been a bone of contention, which has led to measurement becoming the main tool for biodiversity. This is where Endangered Wildlife OÜ is placed, in that the company is able (1) to identify the future economic benefits from biodiversity, and (2) to reliably measure a fair value for biodiversity.
CDSB The Climate Disclosure Standards Board is a non-profit organization working to provide material information for investors and financial markets through the integration of climate change-related information into mainstream financial reporting.
TCFD Task Force on Climate-Related Financial Disclosures. They have developed a framework to help public companies and other organizations disclose climate-related risks and opportunities.
VRF Value reporting foundation. It houses the Integrated Reporting Framework and the SASB Standards.