#42: Ralph Chami (Blue Green Future) – How Much Is a Whale Worth, Dead or Alive?

Ralph’s bio:

Ralph Chami is the CEO and Co-Founder of Blue Green Future and Rebalance Earth. He spent 25 years at the International Monetary Fund, most recently as Assistant Director, before turning his focus to valuing living nature as an asset class. His work, which puts a financial value on the ecosystem services provided by whales, elephants, seagrass, mangroves and forests, has been featured at TED, in the Financial Times, National Geographic, the New York Times, and on CNN. He is the recipient of the 2024 MadBlue Five Oceans Award and holds a PhD in Economics from Johns Hopkins University.

Timestamps:

00:01:10 - Introduction: Ralph Chami 

00:02:10 - Ralph Chami sharing his early passion for music

00:04:17 - The whale encounter that changed everything “before 2017” and “after 2017”

00:05:20 - Building a model to estimate the economic value of whales’ carbon capture

00:09:30 - Fertilising, another unknown ecosystem service provided by whales 

00:13:15 - How wrong incentives completely alter the true value of whales 

00:16:00 - Telling the story of whales and elephants as natural assets with Fabio Bergonzi

00:18:15 - Seagrass and Carlos Duarte’s marine ecology insights

00:19:05 - More living entities that provide valuable services for free

00:22:05 - The fallacy of the current system which ignores planetary boundaries

00:24:40 - From valuing extraction to rewarding the preservation of living things

00:27:00 - Seeing the intrinsic value of nature can make for a better future

Useful Links & Resources:  

Ralph Chami on LinkedIn.

Blue Green Future: Website, LinkedIn and YouTube. 

Get in touch with The Ocean Age's host Fed DeGobbi on ⁠⁠LinkedIn⁠⁠, ⁠⁠X⁠⁠ or by emailing directly at fed@oceanage.co

The Ocean Age Podcast is edited by Nebojsa Lešević. Sarah Carpenter and Giulia Leanza are our research assistants. The show notes for this episode were produced by Cecilia Bombonato.

Please send in your feedback: what do you want to hear more or less of? Any suggestions? Would love to hear what you think!

Transcript

Fed DeGobbi:Welcome back to The Ocean Age. This is Fed DeGobbi and today I've got for you another episode recorded in-person at the World Ocean Summit in Montreal. This one is with Ralph Chami, CEO and Co-Founder of Blue Green Future.

Ralph spent 25 years at the International Monetary Fund, before turning his attention to a rare question in his field: what is the value of living nature, as opposed to nature we kill or extract? His answer, that a single living whale is worth around two million dollars in ecosystem services over her lifetime, went viral and helped open a new way of thinking about nature as an asset class. His work has since been featured at TED, in the Financial Times, National Geographic, the New York Times, and on CNN. Together with his team at Blue Green Future and Rebalance Earth, he's building a new field he calls Science-Based Finance, valuing seagrass, mangroves, forests, elephants, whales, the things that quietly keep the planet running.

We sat down in a quiet corner of the conference venue with a full size whale model hanging overhead, so you'll hear the occasional whale noise in the background. Here it goes.

Fed DeGobbi: And then I went into electric and doing some, I was in like a cover band as you do, you know, to sort of learn ropes. And then went into like our own original stuff. And it was like an alternative rock.

Ralph Chami: Yeah.

Fed DeGobbi: Yeah. Some hard stuff.

Ralph Chami: Very similar trajectory.

Fed DeGobbi: That's fantastic. It was one of the best experiences, you know, in terms of building connections with somebody I had a shared experience with. You know, those people, you just build a bond that is quite incredible.

Ralph Chami: There's nothing like it. Being on stage, playing music, jamming. It's so personal.

Fed DeGobbi: And just working toward a shared goal, you know. Two, three times a week, on and on. I love that. For free.

Ralph Chami: That's my favorite. If I could do it for a living, I would. I wasn't good enough. Same here. Yeah, yeah, I decided I wasn't good enough. Yeah, yeah.

Fed DeGobbi: My dad always said, that's fine, but keep working on your plan B because

Ralph Chami: Yeah. And that's what happened with me. Yeah. I thought I was very good. At 16, I went to England and thought I'd never come home. I just disappeared. I disappeared, discovered that there are so many better guitarists who are starving. Like, oh, my God. They're much better than me. And look what's happening. So I came home, according to my dad, and never mentioned it again. and went on and, you know, went to the university and stuff. But my heart is music always. Music always. I mean, it's my dream. Yeah. Maybe there is an intersection between the two. Definitely there is. It affects how you see, how you connect, especially in this work that we do on nature. It's all about connecting. Because we talk about the value of a living nature. Yeah. See, you hear that? That's a living nature.

Fed DeGobbi: That's pretty well-timed, isn't it? Yeah, it is. So, somebody this morning mentioned to me that you once looked at a whale in the eye. Yes. And that changed their life. Yes. What's the story behind that?

Ralph Chami: Well, it was my first outing. By the way, when I went to see the whales, I knew nothing about whales. Nothing. Nothing prepared me for this. So it's not like I had read or studied or nothing of the sort. So you're on a boat, on a 25-foot boat, in a 25-foot boat, middle of nowhere, and this 100-foot creature surfaces next to you.

Fed DeGobbi: Unexpectedly.

Ralph Chami: Yes. Yes, definitely. Because when they say, took my breath away, pretty much. And usually I say, the first thing that came to mind after the shock is, the first thing that comes to mind is what you know from previous experiences. And I was raised by the Jesuits. So the first thing that came to mind was Jonah's story. Remember, get swallowed by the whale. But Jonah had a happy ending. I wasn't sure what ending we were going to have. I kept thinking, she's going to swallow us and that's it. No one will ever know we were here. But there was no fear whatsoever.

Fed DeGobbi: Why do you think that is?

Ralph Chami: Because she had no bad intentions towards us. And then the eye opens and an intelligent being is looking at me saying, I thought that's what she was doing. She's saying, I see you. I get goosebumps. But do you see me? She was saying, I see you. Yeah. I know you're here, but do you see me? And I, I just started crying. I'm almost going to lose it now because that, that changed everything. Everything changed that day, that moment that's 2017. Yeah. So there's Ralph before 2017 and there's Ralph after 2017. Cause that moment I thought, where have I been all my life? Seriously. How is it that I, by the way, she's the largest creature that ever lived. She's bigger than any dinosaur you would ever can imagine. How is it that this creature alive? And I had no idea that she existed. And I thought I was an educated person because I read a lot and I've been through a lot and I realized I was completely illiterate. So that's, that's, um, that connection. And then later, So that's the story of looking. The next part was when the scientists and the experts taught me, because I didn't know anything, that whales capture carbon on their body. And I asked, you know, how much? And they said, well, it depends on the species. And scientists are very exact. They want to know this species, this much. And I said, yes, on average, because I'm an economist. We always think on average. What's the average price? What's the average productivity? What's the average wage? That's not how they think. So at night, as they're all asleep, I'm sitting with my iPad. And I'm very good in quant. So I created an Excel spreadsheet. I went to one paper that they asked me, they said, go read it. And there in that table, the scientist had put it all, but he had it per species. So I created a composite species. based on the largest. The largest is the blue whale, and then the fin whale, three-fourth. And then I created this spreadsheet and did the calculations, hit the button, fell off my bed physically, because it says nine tons. Nine tons? Of carbon, which is multiplied by 11 over 3 becomes carbon dioxide. So that's 33 tons. And I thought, oh, that's how many trees is that? So I googled very quickly, 1,500 trees. So a whale, this whale, just by frolicking freely in the ocean, just by living her life, not aware of your existence or mine, just being herself, I thought, she's capturing carbon. She's actually part of the story of how we mitigate climate change. She's keeping that carbon cycle. in equilibrium, you see? And I was like, has anybody looked at that? So I started Googling it, no one. It's like, how is it the story, the best, the most important story never told, how is it? And then I couldn't sleep that night at all. Then in the morning, we didn't go back on the water. So I went for a long walk, trying to clear my head like, what is going on? Because I was working the IMF. And at the IMF, we were trying to figure out what is the price of carbon that would change people's behavior. And at the time, the IMF was thinking of a price of $57 per ton and so forth. And I kept thinking, but I'm at the IMF, and I'm senior director. I have no idea, you know, about this. So if I don't know anything about this, almost all of my guild doesn't know anything about this. Anyway, so the next day at dinner on my third glass of wine, they start talking about something called the whale pump. The whale pump? Yes. And I said, whale pump? OK. What's a whale pump? What's a whale pump? Yeah, exactly. They're like, well, you know, whales eat krill. Lots of krill. So you would think that when we hunted the whales almost to extinction, so when the whale population dropped precipitously, you would think the krill population would thrive because the predator, they discovered just the opposite. Seriously? Yeah. How is that possible? Exactly. That was the puzzle. The puzzle that puzzled the scientists. So that the whale population tanked, And with it, tanks the krill population. How is that possible? What is missing from the equation? So it turns out, think of a triangle in your head. The base of the triangle is the whales like to eat krill. What does the krill like to eat? Phytoplankton or zooplankton. So now draw the next line of that triangle. Now why is that important? Because phytoplankton is where the biological life of the ocean starts. phytoplankton grabs about 33 gigatons of carbon dioxide from the atmosphere. It's like the foundation. Exactly. And fixes is a lot of it at the bottom of the ocean. Right. OK. So by the way, that's equivalent to four Amazon forests per year. Four Amazon forests. That microscopic organ, it's the beauty of life. Yeah. Of life longing for itself. So the whale eats krill. The krill eats phyto. And then the question is, what does phyto need in order to survive? It needs phosphorus, nitrogen, and iron. Okay. All right. Now, where would you get those from? Well, I thought, well, maybe, you know, rivers from land will bring all these minerals into the water. Movement of wind over land will pull the minerals into the water. Yeah. But now you're in the Southern Ocean. None of that. None of that. Yeah. Where is the fight to getting all of that? Somebody's gotta bring it there. Yes, the whale. They eat a lot of krill, and because they eat a lot, excuse my expression, they poop a lot. Of course. And that poop is orange, and orange and red are the sign of ferrous. Yeah. Iron. So the poop of the whale is fertilizing the phyto. So you eat a lot, you poop a lot, there's more phyto, there's more krill, and you get this virtuous cycle. I was like, what in the world is this? They said, the whale is fertilizing its own food. They defecate a lot. And by the way, when they dive and they go up, they move the nutrients. It's called upwelling. And even when they swim horizontally, it's called the horizontal belt. They bring with it also nutrients this way. So they're moving nutrients up and down, they're mixing. And they're pooping, and they're fertilizing the phyto. So I asked the question, so you're telling me there's carbon on the body of a whale, and the whale is fertilizing the phyto, which means the phyto becomes more active, it grabs more carbon, dioxide. Yes. What's the total impact? They said, no one's ever done that. Well, why are you asking that question? I said, dude. You want to know? Well, I'm asking this question, OK, because the whale, in a sense, is helping to fight climate change. Just like the trees grab carbon dioxide from the atmosphere and fix it in the biomass and in the roots, here's a whale living her life just living her life. She's having carbon on her body. And when she dies, they're very heavy. They sink. And whales sink beyond 1,000 meters. That carbon is suspended forever. Unless humans play around with it, it's suspended in the water. It doesn't have to be on the ground, by the way. Anything below 1,000 meters, that carbon is sequestered. So it's sequestering carbon on its body. And it's by fertilizing the phyto, it's grabbing carbon. They said, yes, but why are you asking? I said, has anybody valued that service? They thought I was completely crazy. Well, you have to be crazy to think like that. Why would you think like that? I said, well, I work for the IMF, and I provide a service, and they pay me a salary. Here's a whale providing a far more important service than I would ever provide. Not getting paid. What is the salary? Yeah. They thought, well, can you calculate it? I said, I'm a quant guy. You give me that data, I'll figure it out. Yeah. And that's what we did. And what is that important? What's the importance of it? I'll tell you why. Because at that point in time, this is 2017, these people, these colleagues that I was with, were trying to save the whales. And they were saying, no one cares. Because any ship that hits a whale, there's no penalty. But kill a whale, chop it to pieces, you fetch 40,000 in Japan. You fetch some money in Iceland, in Norway, where they continue to eat whale meat. So in death, it has a price. In life, it has no price, actually a price of zero, although it's producing all these value. It's grabbing carbon, it's enhancing the krill population, and krill is incredibly valuable. But yet, kill a whale, a beautiful living whale, there's no penalty. So the incentives are not just the penalty, but the incentives are out of balance. That's it. So that's exactly it. So we wrote together, my colleagues and I, we said, what is the value of the services provided by a living whale? Turns out, $2 million over her lifetime. Okay, with some variations, of course, depending on species, but it's not 40,000. So even the idea we're trying to talk to our guild, we're not trying to talk to the scientists who know already how valuable the whales, we're trying to tell our own people on the policy side, the finance side, the general public, that a living nature, living for herself, as the whales are, far more valuable than a dead nature, so why kill it? So it's not only intrinsically priceless, as all life is precious, but it's financially valuable to us. We're trying to make the argument. So that's how it started with, I call it, me being an accidental tourist, no vision whatsoever, just asking the question. Of course, when we wrote that piece, it went viral. The reaction was beyond our imagination. And it created a snowball effect because the next thing is this Italian dude calls me from Paris. Well, no, a scientist.

Fed DeGobbi: Sounds like the beginning of an interesting story.

Ralph Chami: Yeah, exactly. So he calls me in my office at the IMF. Yeah. He says in his Italian accent, hey, my name is Fabio Berzaghi. I'm like, yes, how can I help you? All right. He said, hey, you say the whales are crap carbon. I said, not saying, the scientists say, I'm just valuing it. He said, yes, but my elephants do the same thing. Your elephants? He said, yes, these are the forest elephants. Right. Not the savannah, because he studied the forest elephants. And what Fabio had published in the top journal in Nature, that those elephants are also like the whales, they're ecosystem engineers. The way they walk around and traipse and all this stuff, they increase carbon sequestration in the trees by 14%. Also not getting paid, I would imagine. Not being killed, because the tusk of a dead elephant is $30,000.

Fed DeGobbi: So there's obviously a parallel.

Ralph Chami: Exactly. So he said, can you help me?

Fed DeGobbi: Yeah.

Ralph Chami: We need to tell their story so we bring to attention their life and their contribution to the public's attention. And so together with Fabio, same team, we wrote a number of papers saying that just the carbon sequestration alone, by the way, not on the body of the elephant here, unlike the whale, because elephants, when they die, they die on the surface. So that carbon dioxide, that carbon goes back up. But the carbon in the trees and only in the biomass of the trees, is at least worth 1.75 million over the lifetime of an elephant. So when we did that, then the UN came, UNDP, and called me up one day and says, you seem to know how to value living nature. Most people value dead nature, gas, oil, timber, extraction. You're talking about living nature. I said, well, I don't know. I'm an expert, but why are you asking? Oh, can you value seagrass? I know nothing about seagrass. Same thing, accidental tourist. No vision. Because people ask me now, vision, what vision, man? I said, seagrass? What does seagrass do? Okay, I'm guilty of visiting these resorts, beach resorts, where you walk into the water and your feet touch the seagrass and you start saying, oh my God, disgusting, right? So I felt guilty saying I've done that. Okay, so they said, you better talk to this famous guy named Carlos Duarte, who was the number one marine ecologist. So we call up Carlos Duarte. Hey, Carlos, what is a seagrass? Oh, seagrass. Sequesters carbon. When you have healthy seagrass, you have healthy fish stock. When you have healthy seagrass, you stable flooding. When you have healthy seagrass, you purify the water for the corals. All of these- That's a lot of jobs. Of a living seagrass. That ugly duckling turns out to be gold. So with Carlos, we wrote, so you start to see, we write with the scientists. We need the science. and we are financial quantitative economists. We build these models which allow us to value the services of a living. So you start to see a theme. So from the seagrass, we did the mangroves, salt marshes, and you start to see a common theme that is nature, living nature, not living for you and me, living for itself. is not only intrinsically invaluable, but financially extremely valuable, which means it's an asset. So we started using that language. Why? Because the moment you use that language, my guild I spent 25 years at the IMF in policy circles. The policy guys start saying, what? An asset? I mean, I can make money off of it. You say, yeah, you can make money, but how? By protecting it and restoring it, not by killing it.

Fed DeGobbi: That's where I was going to go with this, because I'm sure there's somebody listening right now that is thinking, OK, if I sell whale meat, I get money. And then there's a number of people that take that money home. But when you say, well, actually, the living whale is worth $2 million or whatever, where does the money come from?

Ralph Chami: Who gets it in the end? So part of it is, so let's step back a little bit. The current model. because you're telling me currently. The current model sees no value for a living nature. Sees only value in dead nature. This is what you're telling me. Kill a whale. So what's the logical conclusion? You're going to kill all of nature. And that's exactly what's happening. When people tell me there is a climate risk, there's a nature risk, it's because the market system grew up to think there's only value in killing nature or extracting nature. But then, unless nature is infinite, we're going to destroy it in your lifetime and mine. And to my knowledge, if nature dies, we die. That's what the Earth system scientists are trying to say. If you talk to Johan Rockström and Carlos Nobre, all of these guys are saying, we have breached seven out of the nine planetary boundaries, meaning This view that's based on nothing, that nature is infinite, has led us into a self-inflicted predicament. We seem to act as if nature is infinite. No matter what you do to it, it replicates itself. That is not true. Nature is alive like you and me. Just like in life yourself, you can't keep giving if you don't receive. I practiced Tai Chi for 12 years. The first movement in Tai Chi is what? Give, receive. You have to give to receive. You can't just receive without giving, right? Darwin said the same thing. People always tell me, Darwin said survival of the fittest. I said, dude, you've never read Darwin. You should read Darwin very carefully because Darwin says the species that survive is the species whose members realize they needed to work together. The principle of reciprocity. And that's what First Nations and indigenous people never forgot, is that they live in harmony with nature. In fact, I was raised by the Jesuits. I'm not a religious person, but I just want to show you, it's even in the old texts. In the text it says, give us our daily bread. It doesn't say, give me tomorrow's bread. It doesn't say, give me one month's bread. It doesn't say, give me one year's bread, so I eat this much and I hoard the rest and I raise the prices. None of this. There's a balance and we've out of balance. So back to your question is yes, I can kill the whale and make money, but the end of the story is very ugly. When the whale dies, whale is like the canary in the mine. She's an ecosystem engineer. When they die, the ocean dies. And if the ocean dies, there's no life. Neither in the ocean. nor on land, because it's one continuum, land and ocean, they're always talking to each other. And we are part of that conversation, although we act as if we're not. So the recognition of this idea that yes, I grab, but that's basically saying I can only get value from killing nature. So I have a phrase I always use, whatever we can kill, or extract, we can price. But what keeps us alive, we treat as an externality. That is our predicament. And that's why we are where we are. If things were okay, you wouldn't be interviewing me. That's very true, yeah. We'd be playing guitar. We'd be jamming right now. Which, by the way, we can still do. We just need to find a couple. The issue right now is we are not okay. Nature is dying. And by the way, it's nature that dies that creates the climate, not the other way around. It's nature. Nature is dying. The seas is nature. The ice melting is nature. The forests are on fire. That's nature. So nature is saying, I am alive just like you. I can't keep giving. without taking, and you need to look after me. I am the infrastructure of life. I am the home in where you live, just like your home and my home. If you don't fix the roof, if you don't do the entretien, it'll cave on you. That's exactly what's happening to us. So what we're doing together with the team, my colleagues and I, are trying to say to the markets, there's a whole new asset class called the living nature. You will also make money, but this time you'll make money in perpetuity and sustainably. Why? Because the model, the new model is if you leave nature alone and you let it grow, nature will thrive and you will make money. And you may ask me how? Well, I can sell, forget the whale for a minute, let's talk about seagrass. If I have healthy seagrass, I can calculate how much carbon. I can sell the carbon credits or biodiversity credits. I know how much the fish increase in fish. I have a delta in the fish and I know the value of that fish. When I have healthy seagrass, I stay above flooding. I can calculate the value. All of these are marketable activities that have market value. As ecosystem services. As ecosystem services. Using market prices, market values. And that's a completely different change from where we were before. I was guilty of it. I was a professor, and I would tell the students, when should you cut down a tree? By the way, the standard in all econ classes, they'll ask you that question. When should you cut down a tree? And the answer is when the interest rate is greater than the growth rate of the tree. You should cut it down. Why? Because we're only looking at the tree as timber. But the tree captures water. produces rain, it's called green water, enhances soil quality, enhances water quality. Science now, advances in science, allows us to measure all three and calculate the value. So there's a value in the living tree. That's the new paradigm that we're talking about. And if we were to adopt it, it doesn't take much. By the way, it's not either or. It can live side by side with extraction. but extraction is no longer the only game. No, not a sustainable one. Exactly. So both, yes, we need wood to build houses, but you also can leave the forest to live a lot longer life, captures more carbon, keeps it in the ground. You give and you take.

Fed DeGobbi: I'll ask you a closing question because we're on the World Ocean Summit, lots of people here today and tomorrow, lots of leaders, entrepreneurs, experts traveling into Montreal to be here. If you could have a big banner in the main room for everybody to see, what would it say?

Ralph Chami: Tomorrow is going to be an amazing day. The house of tomorrow is going to be much better than today. And in order to live in the house of tomorrow for tomorrow, we need to recognize, we need to change our relationship towards nature. Thanks so much. It's a pleasure. Thanks for your time.