Back when I worked at Waste Management, Inc., I developed a fascination with the question of value. There is, it seems, an entire invisible economy hidden behind the one on the surface: an economy of “negative” values. While it is the same size and shape as the conventional economy, because it deals with exactly the same materials and energy when we’re done with them, the “nega-economy” is characterized by how much people will pay to get rid of something rather than how much they’ll pay to acquire it. Thus people pay a bit to get rid of most recyclables, a bit more to get rid of household trash, and quite a bit more to get rid of materials with particularly undesirable qualities, such as tires, chemicals, motor oil, etc.

Ironically, the same qualities that make something especially expensive to get rid of are often the same qualities that gave the item its most valuable characteristics back when it was a product. Tires, for instance, are nearly indestructible. This is great when you’re driving around: your life depends on it. Once the few fractions of an inch of tread are gone, though, this indestructibility makes disposal or recycling a nightmare. The same molecular attributes that make batteries, pesticides or computer monitors useful make them equally dicey to dispose of.

Recently, it has begun to strike me that a similar phenomenon is at play in the way we think about real estate.

Large tracts of land are appraised and valued based on specific characteristics. Features that make a parcel particularly desirable might include proximity to transport and services, potential for natural resource extraction, and of course development potential. When land is held as an asset on a corporate balance sheet, the values are added up to form the basis for decision-making, and for tax purposes.

Ecological features on the landscape are, however, a minus for the balance sheet. The presence of a wetland area or of habitat for an endangered species is bad news from the perspective of producing economic value from land; these features trigger legal obligations for protection and conservation of various types. The legal and regulatory structure designed to protect ecological features was put in place because of the increasing scarcity of such places. The irony is that scarcity is usually a key driver of economic value, but in the case of conventional real estate appraisal, the presence of scarce features limits economic value. Or at least, it has up until now.

I’ve been working with a team of trendsetters in this field who are identifying and conserving ecological features on privately held lands for the express purpose of adding bottom line value. The team has been convened by the Electric Power Research Institute (EPRI) and includes the talents of the GreenVest land management strategy group, the Kauttu Valuation appraisal group, and the Natural Strategies business management strategists.

Here’s how it works: Essentially, the trick is to understand the newly developed markets for specific types of services provided by conservation strategies, and providing those services to interested buyers. This strategy is most effective when land can be managed to provide multiple benefits, often to multiple buyers.

A single parcel, for example, might contain wetlands, endangered species habitat, and forestland. Development of infrastructure in the region which impacts habitat or wetlands may be required to mitigate those impacts through purchase of permanent protection of similar habitat or wetlands. Markets are rapidly developing for forest management specifically for the carbon uptake which trees provide as they grow; the carbon credits can then be purchased by companies which have undertaken voluntary greenhouse gas emissions reduction programs. These programs may not be voluntary much longer. And of course conservation of tree cover affects downstream water quality; a number of deals have been struck between municipalities and upstream landowners to pay for the water purification service of the intact forest ecosystem.

The combination of regulatory and market pressures recognize the economic value of conservation strategies is crystallizing rapidly, and provides the basis for transactions which benefit property owners and society at large. The EPRI Eco-Solutions team capitalizes on these trends by assessing not only existing ecological features on a property, but the potential to develop "additionality" of these features. The features are cataloged through biological, hydrological, and carbon sequestration potential assays. Additionality is designed through a strategy of protection, enhancement, restoration or creation of ecosystem services.

Protection, through conservation easement or other legal mechanisms, is the least expensive option, while each additional step requires more investment and provides more services. The value analysis then rests on the team’s knowledge of market trades for comparable types of services.

The time is coming when the ecological values of many parcels will outweigh the extractive or development potential. As scarcity drives regulation, degrees of freedom for corporate decision makers increasingly will be restricted. Strategic thinkers within companies that own and manage large tracts of land are beginning to see this pattern and are acting to take (or make) the high ground they’ll have to live on.

The question of what is a “waste” and what is a “commodity” has become complicated as we increasingly make use of secondary materials in the mainstream economy. This is good news, as is the new complexity and opportunity in the issue of “positive” or “negative” value of ecological features on privately held lands.

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Adam Davis is a principal and co-founder of Natural Strategies LLC, a management consulting firm specializing in strategic approaches to decision making using sustainability as a key driver.