As we have said in a previous article, on the historical landmark that was COP15, nature loss (i.e. the sixth great extinction) is a monumental challenge for the world and its economy and by extension the finance sector worldwide and locally alike. However, thankfully, it is also becoming a topic that is talked about more and an area where expertise is increasing at an astonishing pace.
The Natural Capital Investment Conference, organised by media outlet Environmental Finance, brings together a range of experts and practitioners annually to help foster understanding, create connections and support/highlight action in the finance community that is combatting nature loss. And it is one of those events where even during dry speeches or highly technical panels only a very select few don’t pay attention recognising as they do the critical importance of what is being discussed.
After attending last year, to expand our knowledge in nature finance while designing the Natural Capital Fund Framework, we were invited to speak on a panel about regulation and nature-related disclosures this year. Alongside the managing director of one of the Guernsey Green Funds – Ross Grier, as well as other experts.
Among the numerous panels, there were a few key points made that are worth relaying to our industry and anyone else considering Natural Capital Investment:
· There are trade-offs to investment in nature-positive projects but there are different tools that can be used in different ways – depending on whether public funds are available to pump prime – to avoid investors having to give up returns – namely blended finance; carbon markets and payments for ecosystem services.
· Blended finance (providing a public subsidy to draw in private capital) can be used as a tool to show the business case for projects/investments but if it is used it should be considered as a bridge not a crutch.
· Broadly there are three ways to invest in biodiversity:
1. directly;
2. by halting biodiversity loss through investment in stopping the drivers of biodiversity loss e.g. improving the nature performance of assets already held by an entity; and
3. through enablers – i.e. investing in projects/technology/etc. that enable more nature-positive outcomes.
And finally, and maybe most surprisingly, biodiversity-positive outcomes can just be a side effect of an investment: for example, investment in better land and forest management will increase yield and returns but it also has positive outcomes for biodiversity and the overall health of the land and forest.
Let us just conclude by saying that of course not all of these points will apply to every project or investment, but they demonstrate that consideration of nature as well as nature-positive investments themselves can take on many different forms. Perhaps we are still at a point where economic returns and nature-positive outcomes require some creativity occasionally but it is certainly not impossible to combine the two and given the increasing importance of the topic – early engagement is crucial.
