Week of 14 February 2022
For more green on our planet (and more ‘green’ in our coffers) invest in nature
Our key takeaway: Investing in nature and nature-positive solutions is both an ecological and a socioeconomic imperative, but the current financing gap risks meaningful progress. Companies and investors have distinct roles to play in bridging the investment gap: taking strategic and ambitious action within their own operations to mainstream nature-positive investments; and advocating for the public sector to create a favourable climate that incentivises investment in nature.
The World Economic Forum’s (WEF) Global Future Council on Nature-Based Solutions published a white paper on the investment landscape for nature and nature-based solutions:
- Why invest in nature?: Investments in nature-based solutions mitigate risks—including physical, transition, and societal and economic. WEF reports that “[m]ore than half the world’s GDP–$44 trillion–is at immediate risk due to nature loss.” At the same time, investing for nature-positive outcomes could “create new business opportunities to the scale of $10 trillion annually and create 395 million jobs by 2030.” Despite the clear imperative to facilitate and accelerate these investments, we face an alarming gap: “To meet climate, biodiversity and land degradation targets, a $4.1 trillion financing gap in nature needs to be closed by 2050, with bold action starting immediately. Closing this gap equates to quadrupling financing for nature-based solutions from current levels.”
- How can we close the investment gap?: The report sets out two “action-oriented pathways [that] can create the critical mass needed to accelerate systemic change: (1) business leaders take strategic actions within their own operations to demonstrate the business case for nature-positive investments and mainstream these cases, and (2) business leaders advocate for governments and international institutions around the world to redesign public support schemes and create the policy and regulatory conditions needed for investments in nature to become more financially attractive.” In support of these pathways, WEF outlines eight examples of actions that the private sector can take to mainstream investment in nature. These include avoiding harm (“Refuse business investments that might harm the environment and present legal or reputational risks; Identify, value and mitigate nature-related risks in enterprise operations”); reducing resource use and restore nature (“Value natural assets and ecosystem services (e.g. pricing for carbon or water) to drive portfolio and operations decision-making; Strengthen supply chain resilience as a key performance indicator; Consider nature-based solutions as part of bottom-line improvement strategies”); and transforming systems (“Invest in R&D, technology and capability building to reduce the costs of sustainable alternatives and gain a competitive edge; Develop a specialized range of financing insurance and risk-sharing mechanisms, with longer-term horizons and layered income sources; Agree on industry standards for disclosures and invest in measurement and monitoring tools to integrate biodiversity impact measurement into existing frameworks on climate change and ESG”).
- What are next steps for companies and investors? The report calls on companies and investors to take three broad actions: (1) “Understand, value and disclose your impact and dependency on nature so that nature-destructive investments become a thing of the past”; (2) “Adopt nature-positive strategies as a norm in your decision-making, in a way that redefines your purpose and enables you to become more competitive and resilient”; and (3) “Lead and innovate to fast-track revenue-generating investments in nature and develop options to finance the transition.”