A Takeoff Moment for Nature-Positivity

Reversing the damage to nature is an enormous task requiring major leaps in investments in nature-based solutions, but new methodologies and standards for translating nature-related risks into financially-relevant metrics could push things along.

Biodiversity loss is happening at historically unprecedented rates, with many of the invisible costs of human impact on nature unaccounted for. Yet to reverse the damage to nature when humanity has “collectively mismanaged its global portfolio”, as described by eminent environmental economist Sir Partha Dasgupta, is an enormous task.

Annual investment in nature-based solutions needs to triple to over US$500 billion by 2030, from US$200 billion today, to reach the Rio Targets.

“We need to redirect financial flows from activities that harm nature towards those that protect, restore and sustain nature. It is imperative that non-state actors, businesses, financial institutions, cities and regions embrace this paradigm shift by placing nature at the forefront of climate action and strategic agendas,” said HE Razan Al Mubarak.

These investments are projected to create over 390 million jobs as well as unlock US$10.1 trillion in business opportunities, she said.

Speakers at the second day of the conference unpacked the scientific, economic and business case for nature-positivity, and how substantial capital can be catalysed to support nature-based solutions, especially now that we can better translate nature-related risks into financially-relevant metrics.

Unlocking debt financing for nature

Once the private sector clarifies the business case for investing in nature, and more importantly, quantify the risks associated with doing that, financing for nature can be crowded in, said Frederick Teo, CEO of GenZero, a Temasek-owned investment platform focused on accelerating decarbonisation. Giving the example of how the world can now put a tangible economic cost to the impacts on agriculture brought about by a depopulation of bee colonies, Teo believes that nature-related risks can now be better translated into financially-relevant metrics.

Consequently, however, the discussions around pricing nature also encourages a mindset where businesses choose to innovate only in a direction that is profitable. Sir Partha Dasgupta told Ecosperity Week that pricing nature – particularly the “invisible and silent” processes in our natural ecosystems – is still difficult. “We are looking at a situation where many markets are still missing…and if that is so, nature is still priced too low.”

The next step for nature-related disclosures

“Nature, in terms of risk framing, is no longer a “corporate social responsibility issue”. It is at the core of risk governance and opportunity management, just like climate change,” said Emily McKenzie, Technical Director, Taskforce on Nature-related Financial Disclosures.

As a voluntary market-led initiative, TNFD’s objective in developing a framework to guide nature-related disclosures was to shift financial flows away from activities that harm nature and towards those which help it thrive. Its Technical Director Emily McKenzie shared that the taskforce’s work has now shifted into implementation, with a focus on collaborating with standards-setters GRI and ISSB to ensure interoperability and harmonisation.

As of January 2024, at the World Economic Forum in Davos, 320 organisations from over 46 countries have committed to start making nature-related disclosures based on the TNFD’s recommendations.

Capacity building for small and medium-sized enterprises is also a priority. Peter Bakker, President and CEO of World Business Council for Sustainable Development (WBCSD) said that through the council’s engagement with businesses, it has found that organisations still lack internal stakeholder engagement protocols to disclose against TNFD. There is also a risk that the businesses largely adopt “compliance thinking” when meeting sustainability disclosure requirements and there should be close monitoring of how the new framework works in practice when applied.

Carbon markets: wild frontiers or safe harbour?

According to United Nations Environment Programme (UNEP), TNFD and the World Economic Forum’s estimates, the biodiversity credits market could reach US$2 billion by the end of the decade – the current size of the voluntary carbon market – and nearly US$70 billion by 2050.

Carbon market players believe that the governance of these mechanisms is becoming increasingly sophisticated, with refined methodologies and rules, which could mean immense potential for implementing nature-based solutions. Bill Townsend, Co-Founder and Chief Strategy Officer of Anew, a project developer, believes that the sophisticated and progressive buyers “never left the table” but instead were waiting for carbon markets to mature and achieve greater scientific integrity and accountability.

Technology advancements, particularly the developments in satellite imagery and advanced geographical information system (GIS) for better mapping, were cited as key shifts that would lead to better transparency. Robin Rix, Chief Legal, Policy and Markets Officer of credits certifier Verra, said that through the hiring of a new Chief Technology Officer, it wants to make better use of technology. The organisation is also looking to regulators to set up stronger frameworks to govern nature-based carbon offsets.

Jennifer Morris, who heads up global conservation outfit The Nature Conservancy, argued that biodiversity credits should not be internationally-traded as it does not make scientific sense for nature preservation, though she does not rule out “like for like” regional biodiversity credits from the same ecosystem. She added that many credit buyers are not willing to pay a premium for co-benefits in carbon offsetting projects, though increasingly these mindsets are shifting, with nature-based assets being valued in a more holistic manner.

Watch the session playbacks: