Opening the second core day of Sustainable Finance Week, Dr Gemma Cranston, Executive Director of Pollination, talked about a regenerative approach to farming, biodiversity credits and growing investor opportunities.
Read her full speech below.
Well, good afternoon, everybody. What a kind introduction and an absolutely packed event that we’ve got. I’m really thrilled to be here. It’s my first time in Guernsey and I’m absolutely thrilled that it’s sunny. Yesterday was a bit of a shock to the system and when we walked to Art for Guernsey in the rain, with high heels in cobbles, I thought that was a little bit cruel. The other slightly cruel thing was Ben Goldsmith’s keynote yesterday. I then had to go back like nope, can’t say that, nope I can’t say that either. So, I’m going to give you a riff on his keynote yesterday. I will build on it, I’ll provide some additional colour to it. But hopefully, you’ll hear some slightly different stats and a slightly different sort of high-level perspective from me and bringing it back down for the Finance Community and I can share some more insights from some of the corporates that I’ve been working with as well.
So first of all, I wanted to just give you some numbers. I think it’s always nice to have some quantification to just sharpen the mind. So three figures: 83, 1 million and 44 trillion. The 83 is actually a percentage. Now this is the amount of wild mammals that have been lost caused by human degradation. So humans have caused the loss of 83% of wild mammals by mass. The 1 million represents the potential number of animals that we could lose as a result, again, of human activities. The 44 trillion is the $44 trillion that you’ve probably all heard the WEF speak about many, many times, which represents the total economic value that nature brings every year. The 44 trillion, the big number that’s about half of global GDP. So there we go. We have a very clear link between the global economy and nature. We very much depend on it and we must reduce our impacts as best we possibly can.
So nice examples, pollinators. I’m from Pollination. I’m often asked “Oh, you must know a lot about bees?”. I don’t. I enjoy honey, I enjoy the products that are pollinated by bees and other species. If we were to lose all pollinators, and I didn’t include myself within that, we’re looking at an average of $577 billion a year, and that’s just one small element of nature. That’s unposted. You don’t get a bill from the bees. They’re merrily going out there doing their job. If you’ve ever seen the bee movie, and they all go on strike and they decide they’re not going to do it anymore. That’s a genuine thing that could happen if we don’t think about the natural habitats that these bees require, and it’s not just bees either. Fruit bats are the ones that pollinate palm trees. The tiny little midge if anyone wants a bar chocolate in the evening, and my particular favorite thing to help me relax, is that and a glass of wine. If we didn’t have that tiny midge, no cocoa, none. You could hand pollinate but there’s one tiny little species that our cocoa agroforestry really, really do depend on so quite, quite stark. We talked about mangroves yesterday, the annual property damage would increase if we lost all of our mangroves by 1 trillion. So again, some fairly big numbers, potentially alarming trends.
But who cares? Why’s nature so important? And I often ask this to people I say, what does nature mean to you? How do you think about biodiversity? Can you give me some examples? And people respond Oh, it’s tigers. It’s polar bears, humpback whales. The dulcet tones of David Attenborough. And those are things I love about nature. I love going out. I love being able to look out and walk outside and enjoy and breathe fresh air, swim in the sea and all the rest of it. But the thing that we often forget is the intrinsic worth and the joy, but we forget about the day-to-day functioning of businesses, finance and the global economy, that fundamentally depends on nature, and its services and its assets that we all use. So, let’s not just think about those incredible species. Let’s think about the broader picture of nature and natural capital. We do talk a lot about impacts and dependencies, the so called double materiality, if anyone’s read the TNFD closely. The impacts are the thing that I think many people are very focused on at the moment, it’s associated with risks and how can we start to avoid some of those degradations? How can we have zero deforestation? How can we reduce the amount of pollution that we’re putting into our waterways and so on and so forth, but it’s also about dependencies. So that piece around that tiny midge and that chocolate bar, we need them. We can’t do it without them. Likewise, landscapes and then, I am going to keep harping on about mangroves, the protection that they give to climate resilience to flooding and we heard an awful lot about flooding yesterday from our colleague from FloodRe. We simply can’t exist unless we have nature there to underpin us and biodiversity that underpins that natural piece as well.
Looking to solutions, I mentioned TFND, the Task Force for Nature related Financial Disclosure, and we’ll hear some more about that in the panel, I have no doubt and in particular will probably want to talk about it. This has obviously just been launched. We’ve had, I forget how many beta versions and how many pilot tests there have been of the TNFD. I think when they launched it, there were something like 7,000 participants on that one-hour webinar when they were announcing it and sharing with the world for the first time, the final version. And this is really an important moment in time. This is the first time where we’re actually going to see a framework that allows corporates and financiers to understand how they can report on their risks and their opportunities associated with nature, but it doesn’t just stop there. TNFD is an amazing piece of work, and it is an incredible starting point, but the companies and financial institutions I’ve been speaking to think great, I’ll just do TNFD, you just do TNFD, and you’re done for that moment in time. There is a huge amount of work that still needs to be done. You still need to set the strategy; you still need to decide how you’re going to implement it. You still need to decide how you’re going to finance it. You still need to also think about how you’re going to collaborate within your sector and potentially with some of the other sectors as well. So I think it’s an incredible moment in time, but let’s not forget, it’s the beginning of, I hate the word journey, it’s the beginning of a process that we need to go through.
Another thing we talked about was offsetting yesterday and I just wanted to pick up on that. The audience was canvassed in terms of where they had a strong opinion about offsetting, and everyone was very polite about it and I wanted to jump up and say what do you mean? Carbon or nature? They’re very different. If it’s carbon fine, but let’s make sure that’s the last thing that we do. Let’s make sure we’re considering actually for biodiversity as well. Avoid the damage, look to reduce the damage, look to restore, regenerate and then maybe you can think about offsetting if you’ve done all these other things and if it’s your last case, last opportunity to make some sort of change. With biodiversity, it’s totally different. You can’t trade biodiversity. It’s unfundable. You can’t say I’m going to offset this beautiful piece of Amazonian rainforest over here by planting some oak trees in Guernsey. It doesn’t work because the ecosystem and the species and biodiversity and the nature that’s associated with that particular piece in the Amazon is totally different to what we’ve got over here in Guernsey. So, I just want to put a word of caution to you all that we can say biodiversity credits, absolutely. We should be encouraging our corporates, and we should be encouraging our financial institutions, we should be encouraging our governments to find ways to deliver on their nature positive objectives and their ambitions. And you can absolutely use biodiversity credits to do that. The nature markets are nascent, but they are coming. So, there are many opportunities to potentially be leveraged in that space, but please don’t try and offset biodiversity.
The other thing Ben nicked from me yesterday, he talked about Pakistan. He talked about this huge restoration project that’s happening in the Sindh province, Delta Blue, which is actually one of the projects that Pollination has been supporting. It’s the largest mangrove restoration in the world. What Ben didn’t mention was one of the fundamentally important pieces when we’re talking, so back to the credits piece, the carbon credits, we want to get the highest value, highest integrity, carbon credit that you can actually get. So it’s not just about sequestering and capturing the carbon. It’s about engaging the local people, indigenous peoples in the local communities who are the people planting those mangroves and they need to get some benefit from doing that. So, there’s a benefit sharing mechanism that’s also provided to them. We’re also looking at being able to measure and monitor and verify some of those nature and biodiversity outcomes too. So it’s, again, it’s not just a pure play carbon piece, and I think this is the way that the markets are starting to shift, and actually what we’ve been able to see is that in selling those credits, people are willing to pay significantly more because it’s got a high integrity piece associated with it. There are many debates going on around the world, around whether we need to separate biodiversity credits and carbon credits or whether we stack them or whether they need to become one piece. I don’t have the answers, maybe next year, we can come back and have a further debate around what’s appropriate, but it’s been bringing those two pieces together and having a market value people are willing to pay that I think it’s really interesting.
Of course, that payment and the value you’re getting out of it has to be patient. Because those mangrove plants, those oak trees that you’re going to plant, you can’t switch on a switch and suddenly find, oh look I’ve managed to sequester 100,000 tons of carbon, because the plants are small. It needs to grow, it needs to photosynthesize, it needs to capture that carbon, so we have to be patient. And I think that’s a mindset shift that we need to be able to unlock to be able to say, do you know what? It’s okay, I’m not going to get returns in the immediate future in the immediate sort of six months to a year, it’s going to be more 10 years to 15 years. We’re seeing funds that are being started out there. Climate Asset Management is one of them where you know that minimum ten year tenure and that’s okay, and they’ve got lots of great projects and lots of great LPs are a part of that so I think that’s really exciting.
Another piece a little closer to home, I think it is always nice as we have a lot of conversation around the global south. We have big problems in the developed North around forming for example. I’m come from Cambridge, I live in the middle of The Fens. I look out my window and it’s lovely, it’s all agricultural, non biodiverse field but it’s great, lovely and flat. And my girls, I have two children, two girls, and I think it’s wonderful because they see the tractors coming back and forth and they can tell me, mummy it’s a John Deere, or Massey Ferguson, and they can tell and they’ll tell me if it’s got a plow or a cultivator or a roller on the back of it and I just don’t have the heart to tell them wouldn’t it be nice if actually we saw less machinery and we saw less of the spraying and we saw less of the irrigation and so on, and some of the farmers around us are looking at a more regenerative approach. And I think that’s my top tip for COP. I think regenerative agriculture is going to be the thing that many people are going to be talking about, and there’s quite a lot of interest. But the problem we’ve got is, if we want to, we’ve got large corporates who are making many commitments towards being nature positive, we’re going to have a million hectares that have now been transitioning into regenerative agriculture. Who’s actually going to deliver that? It’s not going to be the Mars employees. It’s not going to be Unilever who are actually doing, it, it’s the farmers, it’s the people on the ground who need to make that change. Well, are they going to be compensated to do that? And if they’re not, they’re already under a lot of pressure and a lot of stress, and they’re not exactly profiteering hugely and there’s a huge amount of risk. But you’ve got these brands who are saying, but we want you to move to regenerative. We’ve made these commitments. We’ve also made Net-Zero commitments, so we think that’s going to help us to be able to deliver that. So we ended up in a really challenging situation where we’ve got costs, to be able to transition are going to go up and the risk is also quite high because that transition, there are not many farmers who have actually done a full blown transition, there’s no data out there that says, you know what, there might be a small slump in productivity, but give it five years, three to five years, you’ll be gravy, be fine, no problem. What’s that farmer going to do in that three to five year period? They’re finding that their crops yield is significantly diminished, and they’ve had to invest how much on new types of tech or new types of farming approaches and that’s just in the UK and sort of in Europe and the US. So how do we unlock that? So we’ve been having these conversations, to try and say, you know what, there’s not one actor that can actually resolve this. We need to bring the farmers together with the corporates, with the banks, with the insurance or the asset managers with the local communities to identify who’s going to step in, and if you can pull one lever, what does that unlock within the system that then enables others? Can we de risk it? Can we provide a simple framework that farmers can work towards that a number of different food companies were all bought into and the banks recognise? I can see that you’ve de risked that now, now I’m willing to offer a preferential loan, lets find what’s actually possible with regards to that? I think it’s challenging because no one’s proven it yet, but watch this space. I would like to be able to say, next year, we might have some examples and we might actually have some proof cases to be able to share.
So what’s in it for the investors? I guess that’s the final point I wanted to make. There’s more pressure, but there’s also growing opportunities. I think the business case for investors to be able to think about nature is essentially threefold. The first one is investee companies were facing constraints, increasing constraints on their use and the access to nature. The second is companies and investors will face increased investments and customer interest in business models which use nature wisely and have fewer negative impacts. And finally, I think there are many new potential industries that are going to be made possible that will emerge and provide many different opportunities. If you don’t believe me, we actually spoke to 557 investors in a report that was released yesterday, called Nature Finance Focus, so if you go to the Pollination website you should be able to find it. You can read all the stats, but there are a couple of things I just want to draw out. I’m really interested in what people were going to say and what sort of analytics we were able to pour out of this. The first one was that the vast majority of the respondents were in the region of 30 billion to 500 billion US dollars, assets under management. So, we’re not talking about the small guys. We’re talking about the big guys who are starting to recognise that nature is important, and they took the time to talk to us and to share their thoughts on an institutional scale. The second point I wanted to make was that 63% of them saw that opportunities in nature were the primary motivator for them wanting to engage and that blew my brain a little bit, because risk is everything to so many people. That was what’s driven the climate agenda, it’s all been about risk, and to finally hear a group saying, do you know what I think this is an opportunity for us now? I felt like the clouds have parted and there was something exciting and something tangible that people are motivated by positivity, they don’t want to deal in risks, they want to deal in opportunity and forward looking. We’ve got the global biodiversity framework that was set at COP15 in Montreal, and that’s got a whole host of different targets that we want to conserve and restore 30% of our lands and our seas by 2030. With growing stakeholder pressure, the need to demonstrate impact and to grab hold of those opportunities is absolutely growing. So, I think there’s two tasks, potentially to take forward. One is to understand and reduce your risk and impact associated with nature, and the second is to then find models, investing in modules that are actually going to improve nature and enhance it. Sounds easy, right? And there are really nice, straightforward steps that you could use to evaluate your portfolio and things like that. I am very conscious that I have only got 30 seconds left, so I’m going to wrap up. You’ll hear more from me in a moment anyway in the panel, but I just thought it’d be useful just to think back to some of those big stats. Nature is in crisis. Climate is in crisis. It’s a twin crisis. We need to find answers. Channel your inner David Attenborough, but also let’s get commercial about this. Let’s find out what the real market opportunities are to work with nature rather than against it. I think we need true systems change and the only way to do that is collaboratively with passion and ambition. So, thank you all so much for listening.
