Rethinking the financialization of ‘nature’

Introduction

While finance capital has long been entwined with the production of nature, this coupling has become both more intense and more extensive over the neoliberal era. On the one hand, financiers have become further entrenched in their relations with more conventionally defined aspects of the natural world through dense linkages and new financing arrangements in mining, oil and gas extraction, farmland, and agricultural production. On the other, financiers have developed new instruments that involve substantial financial engineering for novel engagements with more-than-human natures, such as weather derivatives, catastrophe bonds and commodity index funds. This entanglement continues to expand both geographically and sectorally, as the industry has helped produce financial assets in diverse fields such as carbon markets, ecosystem services compensation and mitigation schemes, water rights, agricultural microinsurance, and agri-food chains. Given the breadth of engagement, we conceptualize the financialization of nature – linked to the more general assetization of almost everything – as a process of ontological reconfiguration through which different qualities ¹ of nature and resource-based production are translated into a financial value form to be traded in specialized markets.

The widening and deepening of financial interest in the natural world is emblematic of the staggering growth of the financial sector in the neoliberal era, as finance as a proportion of overall economic activity continues to expand and financial capital seeks out new investment frontiers or creates new products from which to derive income (Froud et al., 2000; Krippner, 2005; Leyshon and Thrift, 2007; Martin, 2002), or – probably more accurately – rents ² (Andreucci et al., 2017; Gunnoe, 2014; Zeller, 2010). Scholars from economic geography and cognate disciplines have explored these dynamics and made valuable contributions demonstrating the dynamism, mutability, and often pernicious impacts of financial forays into varied socio-natural settings (Bracking, 2012; Büscher and Fletcher, 2017; Dempsey, 2016; Fairbairn, 2014; Isakson, 2014; Johnson, 2014; Knox-Hayes, 2013; Labban, 2010; McAfee, 2016; Majury, 2014; Ouma, 2014; Pollard et al., 2008; Sullivan, 2013).

Finance capital’s venture from the command centers of global finance into far distant places to produce new socionatures has been theorized as an environmental fix, whereby nature and resource-based production serve as new circuits for capital to help resolve global capitalism’s multiple crises (financial, climate, food, energy) (Brand and Wissen, 2014; Ekers and Prudham, 2015; Johnson, 2015; McMichael, 2012). Yet little is written about the fixers themselves, how such fixes are discursively and materially organized, how they articulate within concrete settings, and indeed, whether the work of fixing is successful – even on its own terms. This theme issue shifts attention from rather abstract circuits of capital to the situated, entangled operations of capital in order to interrogate these questions. The papers, based on a series of sessions held at the Global Conference on Economic Geography in Oxford in August 2015, examine points of convergence and divergence between financialization as a planetary process and the frictional encounters of finance and nature in its multifarious forms across a range of ‘asset classes’. Acknowledging that the financialization of nature is ‘a powerful yet heterogeneous and contingent process of capture and conversion’ (Bear et al., 2015), the contributions draw attention to ‘both the material aspects of capital’s intervention in specific situations and their wider articulation into systemic patterns’ (Mezzadra and Neilson, 2015: 1). In the process, they suggest new avenues and sites of critique and engagement.

Getting between M-C-M′

Each of the papers moves in between M-C-M′ – Marx’s schematization of the circulation of capital’s form from money, to commodity, to more money – to study the particularities of financial operations in their discursive, social and material entanglements (Christophers, 2011; Labban, 2010; Ouma, 2015). They also investigate the specific conditions that mediate and limit attempts at financialization, treating the realization of M’, or accumulation via financial channels, as an empirical question to be answered rather than a starting assumption. The authors’ insistence on retaining ‘C’ in the formula is significant, as the production of a material output or service with a use value from which a more abstract financial value is derived still underlies many of finance’s speculative activities in relation to nature and other domains.

Heeding Christophers’ (2015a) caution, this collection’s aim is resolutely not to add to the exponentially growing catalogue of empirical accounts detailing ‘the financialization of’ another industry, product, or process. In fact, the pieces, individually and taken together, challenge the conceptual model of financialization as a process driven by a black-boxed and shifty actor, ‘finance’, that rolls out via a predictable set of transformations across far-flung geographies and biophysical spheres. Indeed these accounts tend to question the utility of ‘financialization’ in toto as a theoretical lens or explanation. The ‘real-life incarnations’ (Visser et al., 2015: 541) of finance-gone-nature often unfold in frictional, unexpected ways, highlighting the fallacy of an ‘epistemology of similitude’ (Ouma, 2014: 164) that assumes that nature and resource-based ventures are financialized in the same way as other domains of the economy. Here, we summarize the content of the papers and identify major conceptual themes derived from them, which suggest an agenda for further research.

Bigger’s paper examines the creation and administration of markets in tradable permit systems (TPS) – including carbon emissions and water pollution – as a signature neoliberal mode of environmental governance. Rather than fully financialized rights to despoil nature, however, Bigger finds a ‘continuum of economization’ running from cases that are actually impositions of quotas and standards, to administrative price setting, to illiquid or bilateral arrangements, to more highly liquid markets. The hybridity of TPS requires a more nuanced assessment of the political possibilities afforded by their use. The appearance or presence of financial market infrastructure should not be mistaken as necessarily signifying market behaviors and practices, and indeed market infrastructures may be used to accomplish a variety of other aims.

In this vein, Asiyanbi theorizes the social and economic transformations accompanying a Nigerian carbon sequestering forest management project. In its fully elaborated conceptual ideal, Cross River state would realize financial gains by leaving forests standing rather than cleared, by way of internationally recognized markets for credits representing avoided greenhouse gas emissions through the Reducing Emissions from Deforestation and Degradation (REDD+) framework. While financial gains have proven challenging to realize through REDD+ schemes, Asiyanbi identifies the incomplete but nonetheless highly impactful and durable formations that have been organized in the process of making Cross River state ready for REDD+ investment. Despite finding that the material practices underpinning the financialization of Nigerian forests are ‘thin, sluggish, fractured, hybridized or stalled’, the transformation of the state budget model from its dependence on timber extraction to dependence on rents for prohibiting extraction is real enough. So too are the resulting laws and militarized security apparatus deployed to defend the ‘carbon forest’, thus undermining local access to forest-based resources and intensifying violence. The ‘organizing actions’– problematizing, visioning, implementing, and stabilizing – that accompany market-making in environmental finance include a diversity of actors beyond the state, leading Asiyanbi to stress the processes of intervention rather than identity of the intervener.

The identity of (financial) interveners, on the other hand, becomes a key point of contention in Sippel’s investigation of transnational financial investments in Australian farmland. Instead of a simple account in which the sale of some of Australia’s largest agricultural landholdings to financial investors was derailed by ‘countryminded’ moral valuations of land, Sippel complicates the picture by demonstrating how moral judgements were attached to investors’ national origins and motives, which met varying degrees of political acceptance. This entailed the rejection of certain kinds of financial capital – particularly Gulf State sovereign wealth funds and Chinese investment firms – and the ‘ambivalent embrace’ of others – particularly British and domestic pension funds. This debate about the national origins of farmland finance ultimately reshaped legal statutes, creating a ‘moral imperative’ for the country’s domestic pension fund to move into farmland investments. Thus, moral judgements triggered a deepening entwinement of citizens’ pensions with financialized nature.

Kish and Fairbairn likewise investigate the moral foundations of financializing farmland, but instead of examining rationales in the receiving societies, they consider the internal moral universe of farmland investment. They open the black box of the investor by juxtaposing rationales of impact investors and mainstream investors, and by identifying narratives that mobilize capital and delineate standards for the behavior of ‘good’ economic investor subjects. Here, ‘value’ itself takes multiple forms: mainstream investors measure value in terms of agricultural productivity and quantitative returns on investment in line with the shareholder value paradigm (see also Li, 2014), while impact investors deploy plural ‘values’ via narrative storylines emphasizing entrepreneurial transformations alongside social and environmental principles. By unpacking the internally differentiated world of money management, the paper helps break down the often homogenized categories of ‘the investor’, ‘capital’ or ‘global finance’ that characterize much of the literature on financialization.

Rather than being tightly bound by a single theoretical framework, the papers take different analytical routes to realize their pragmatic agendas. Sippel, as well as Kish and Fairbairn, ground their engagements with the financialization of farmland in the traditions of moral economy, performativity and the sociology of worth – particularly the work of Boltanski and Thévenot (2006 [1991]), which has rarely been utilized in relation to financial markets and financialization (but see Christophers, 2015b). Asiyanbi embraces a Foucauldian framework to capture the organizing actions that attempt to accomplish the financialization of conservation through REDD+ projects in Nigeria. Bigger merges the concerns of social studies of finance with green political economy, particularly Moore’s world ecology (2015).

Though the contributions are not all equally focused on the systemic parameters that constitute M-C-M′ as a lived process, they are all concerned with how the links that enable the journey from money into more money come into being. Despite their fragile nature, ‘the linkages between capital and “nature” are not forged in a random or arbitrary way’, as Sippel notes. Instead, such articulations require ‘particular conditions of existence to appear at all, which has to be positively sustained by specific processes, which is not “eternal” but has constantly to be renewed, which can under some circumstances be overthrown, leading to the old linkages being dissolved and new connections – re-articulations – being forged’ (Hall, 1985: 113–114).

Accounting for moralities, values, and affect

Rather than necessarily implying the weakening or evacuation of non-economic values, the work of financialization requires the negotiation and deployment of moral norms and values. Perhaps nowhere is this more frictional than in the case of agricultural land, which is ‘perceived differently from other resources due to its unique cultural and symbolic meaning and its national significance’ (Sippel, 2018; see also Li, 2014). Sippel, along with Kish and Fairbairn, provides long overdue insights into the moral grounds on which the legitimacy of capital placements into farmland are negotiated. Linking to important earlier work on the morality of market society (e.g. Fourcade and Healy, 2007), both consider morality ‘a social phenomenon that can be empirically investigated in that it refers to what a specific group or society at a given time comes to see as good or bad, legitimate or illegitimate’ (Sippel, 2018). This is an important move, as ‘morality’ and ‘finance’ are often presented as antithetical to one another.

In this context, Kish and Fairbairn identify two sets of moral registers and performative practices in farmland investments. Where mainstream investors largely either testified to their positive contributions of increasing land’s productivity or defensively hedged against accusations of speculation, impact investors used storytelling to suture ostensibly divergent value systems together. Yet critical analysis must not rest at identifying the publically performed moral economies of finance; as Kish and Fairbairn show via case studies in Ghana and Mozambique, ‘moral performances can have a highly tenuous relationship with actual investment outcomes; having done their job of attracting investor capital, companies may or may not deliver on the economic, social, or environmental outcomes promised.’

Sippel shows that political resistance mounted against the financialization of farming is not always geared against marketization, or even the financialization of farmland as such. In highly commoditized societies such as Australia, it may be the source, or ascribed ‘culture’ of finance capital that matters. Even though Anglo-Saxon investors are the biggest farmland investors in Australia (and neighboring New Zealand), Chinese and Gulf State investment generates the most suspicion and derision.

This underscores that capital does not simply flow from A to B, nor is something born as an asset class. Many nature-based ventures remain ‘alternative’ – they are not mainstream, are still illiquid, and require far more ‘narrative’ than conventional asset classes. Like tradable permit systems for environmental harm (Bigger, 2018), different asset classes or subclasses are accompanied by different ‘value stories’, which take on particular importance where value creation moves beyond the narrow confines of conventional industry metrics, e.g. in the case of impact investing.

Sippel’s and Kish and Fairbairn’s cases allow us to scrutinize the interlocking ‘promise dimensions’ (Knorr-Cetina, 2010: 334) of financial accumulation – the intricate relation between the temporal, relational and persuasive/affective facets present in a given case. Affective dimensions in particular require further investigation as we conceptualize the expansion of finance’s operations into nature and other domains, since affective relations such as mistrust, solidarity, or anxiety not only co-constitute the financial dispositif as ‘forces that compel, attract and provoke’ (Rutherford, 2016: 285), but also incite resistance toward the financialization of nature (see also Richard and Rudnyckyj, 2009). The papers collected here demonstrate how certain kinds of affect, from enthusiastic spectacle to threat and insecurity, are pivotal to generating financial value and authorizing particular circulations of capital. While farmland investors pride themselves on simultaneously feeding the world and making returns, nationalist and/or racial anxieties about loss of Australian territorial integrity dictate the reworking of the national pension fund into a major farmland investor, and ecological anxieties about the disappearance of Nigerian forest seem to require its redefinition in terms of metric tons of carbon. The relations between enthusiasm, threat, uncertainty, and loss suggest an as yet undertheorized relation between affective and effective capitalization of nature.

Identifying levers for political critique and a forward-looking agenda

Earlier research on the financialization of nature was exceptionally valuable in problematizing the application of market logics to the management of human relationships with the environment (Lohmann, 2009; McAfee, 1999). But attempts to economize, marketize, assetize, or otherwise render financial different aspects of socionatures are fraught, complicated, unsettled, and may have surprising consequences, either intended or otherwise. It is in these snags and moments of uncertainty that we see avenues for political critique and engagement. As with so much in the realm of politics, the form of engagement will be shaped by immediate contexts. Nonetheless, we see two broad sets of interventions taking shape in these papers and elsewhere, cohering around the politics of information and the politics of legitimation. Such interventions may be undertaken separately or, more forcefully, as constituents of one another.

The politics of information is too often sidelined in research on financialization. We agree with Asiyanbi (2018) that unpacking the grounded operations of finance can help unsettle the pretence of complexity that continues to subsume the political to the technical in financialization. Doing so could open spaces for wider debates and more political practices, generating real answers to socio-ecological crises rather than temporary financial fixes. But how can we practically produce knowledge about the grounded operations of finance when many of its key players – the investment banks, hedge funds, private equity managers, family offices, endowments and pension funds that ought to be the objects of public scrutiny – keep their profiles low and doors closed? Such practices of non-disclosure are supported by the still overwhelming epistemic authority that finance commands over financial matters and a global legal architecture that is tilted in favor of financial investors. Notwithstanding recent methodological attempts to trace the sociospatiality of various forms of capital, including finance, in order to make things public, ³ we should not underestimate the barriers to generating knowledge about finance’s operations in and beyond nature. An alternative source of information may be the state. However, different states show different capacities and willingness to make finance’s footprints and operations visible. In some cases, the state – e.g. via public records about financialized nature – may allow us to gather information of use to political projects (as in Sippel, 2018), in other cases the state may systematically obscure what is going on, or may simply be ignorant about it. However, even where information is available, its unearthing alone is insufficient: it must be wielded to interrogate the politics of legitimation that buttress finance.

Meanwhile, the establishment of liberal economic orders, even in their most bureaucratic form, requires legitimation at a number of scales. While variants of Marxist thought have referenced this as ideology and hegemony (Cohen, 2017), we urgently need more nuanced understandings of the practices, politics, and plural value stories through which financial orderings of the economy become legitimate (or not). In each of the contributions, financial players refer to different ‘higher common principles’ (Boltanski and Thévenot, 2006 [1991]) to maintain some sort of social legitimacy: productivity gains, social impact, environmental protection or the greater national good. The authors refuse to accept these at face value, and instead identify the moments at which this legitimacy can be called into question – rendered a matter of concern – either on its own terms, or through external critique. Asiyanbi offers an excellent example of simultaneous internal and external critique by demonstrating how the promises of financially mediated conservation efforts evaporate as elites and state actors capture much of in-flowing capital meant to prepare the conditions by which forest communities might eventually benefit from the sale of carbon credits. With this process stalled, communities are deprived of livelihoods while benefits accrue elsewhere and it remains unclear what, if any, environmental benefit is achieved. Beyond questioning the legitimacy of impact investors’ value stories, Kish and Fairbairn go further to suggest that ‘expanding the scope of moral critique might even mean reintroducing questions about the morality of ground rent and land ownership concentration.’ Meanwhile, another avenue for engaged critique is through and with bureaucrats and implementers themselves, highlighting the resistance of bureaucrats, as in the case of Bigger’s TPS, or demonstrating the ineffectiveness of financial logics for provisioning environmental goods on their own terms (e.g. Dempsey, 2016; Robertson, 2006).

Bearing in mind these possibilities, we see paths forward and lacunae that merit investigation. A major omission of much current work is theorizing the relation between the case and its generalizability, or lack thereof. Bigger is the only author in 2018 to expressly consider this question, but he is able to do so because his study is a synthetic account rather than a singular case. Kish and Fairbairn’s comment that the cases they consider are ‘neither generalizable nor, we suspect, particularly exceptional’ is typical of much recent work. To generate a more comprehensive understanding, future studies should establish an explicit rationale for cases selected and move beyond ideographic description. While there is some debate in the neoliberal natures literature about whether one-to-one comparison is completely possible (Bakker, 2010; Castree, 2005), we continue to believe that cross-case comparison is essential. If not explicitly comparative, studies should consider the generalizability of the case across contexts and sectors. As Christophers (2015a: 188) puts it, ‘unless studies of this ilk are able to hint at wider, more generalizable findings, perhaps concerning the relational connections between different orbits and modes of financialization, they do not offer huge promise…’.

Following this methodological concern about case selection, work within this genre could engage with other types of data, especially of the quantitative variety. While we have flagged challenges of data access above, there are nonetheless multiple avenues for utilizing or producing data that might enrich our understandings and provide fertile ground for comparison. For example, we might assess financial interventions according to their own metrics, alongside an analysis of metric choice and data collection practices. Alternatively, creating or collating new data sets could provide the comparative basis called for above; for example, Dempsey and Suarez’s (2016) tally of financial flows in conservation finance could be repeated in other arenas, especially if coupled with a spatial component that provides insight into hotspots and spaces that remain relatively unintegrated into circuits of natural-financial capital.

Finally, although financialization is very much a class project across scales and spaces (Duménil and Lévy, 2005), little work on the financialization of nature in particular has engaged with class dimensions in an explicit or sustained way. One important exception is Brand and Wissen (2014), who suggest that the financialization of nature ‘promises to cope with both the economic and the environmental crisis by opening new fields of accumulation, articulating dominant forces and integrating relevant subaltern ones’ (17), thereby extending an imperial mode of living of various classes through ‘the appropriation of labour and nature from elsewhere’ (Brand and Wissen, 2014: 30). This ties the reproduction of these classes to the circulation of capital in and through nature: the fee-collecting financial elites engaged in money management; the high-net worth individuals, institutions, and endowments investing their money in green financial products; the ‘“mass affluent” in national middle classes’ (Seabrooke and Wigan, 2017: 13) who entrust their money to pension funds and life insurance companies targeting various forms nature; and the populations in core capitalist countries (including Gulf states and China) more generally, whose huge aggregate ecological foot and hoof print (Weis, 2007) continues to swell despite claims that it is compensated for elsewhere.

New financial instruments for the management of diverse environments seem set to continue proliferating, as the basic conditions for their deployment – especially unabated environmental degradation and the concentration of capital in the hands of financiers – remain unchanged. The collected essays open new avenues by which to understand these initiatives as they actually exist. These essays are united in their resistance to taking the smooth rollout of finance for granted. We feel this unity in purpose signals an emerging maturity within the literature on finance and nature more generally, questioning the depth, speed, coherence, uniformity, and progress of financialization’s advance (e.g. Dempsey and Robertson, 2012; Dempsey and Suarez, 2016; Fletcher, 2013; Fletcher et al., 2016; Higgins et al., 2014; Lapeyre et al., 2015; Loftus and March, 2015). What may at first glance appear as an accomplishment of ‘marketization’ and ‘financialization’ is often a fragile and contingent process in-the-making with little resemblance to either the stylized markets of textbooks, or to critical political economy’s ‘real subsumption of nature by capital’ (Bigger, 2018; Johnson, 2017). The stakes of this conceptualization are more than theoretical: by questioning the ability of narratives to actualize themselves in practice, critical research underscores that financialization is contestable and malleable, and can begin to identify levers for transformational critique.