The financing gap for nature
Just as with financial capital, our natural capital needs to be invested in and sustained. The private finance sector has a critical role to play in halting and reversing nature’s decline, the overarching mission of the UN Convention on Biological Diversity being discussed right now at COP15. Public funding is currently $130 billion per year. It is estimated that an additional $700 billion annually needs to be invested in nature.
This needs to come in two forms:
- The integration of strong and effective biodiversity requirements within ESG to steer capital away from nature negative investments and towards nature positive ones. This requires the coming together of a diverse range of experts to enable the flow of biodiversity data and knowledge between geospatial locations where impacts/dependencies occur, with disparate corporate portfolios and distant financial investors.
- The ability to create viable nature recovery projects at scale, through innovative financial mechanisms, that allow private investors to receive a return on investment from nature-based portfolios.
And of course the two are interlinked.
Critical elements for success
Despite the overwhelming evidence of their efficacy, habitat restoration and management, urban greening, green infrastructure, and natural flood risk management have for too long been viewed as ‘nice to have’ in design and planning, but rarely have they been prioritized because in classic economic analysis, the costs have outweighed the benefits. Measuring the short-, medium- and long-term economic benefits these interventions can provide and bringing these into the market, enables private sector institutions, to understand the materiality of nature to their business, and address it accordingly.
Government endorsement, legislation and policy is necessary to provide the finance industry the clear signal it requires to invest with confidence. Blended with public money, investment can be derisked.
Learning lessons from the establishment of carbon markets, there needs to be a strong governance mechanism from the outset, to ensure that nature markets develop with high integrity and the necessary safeguards.
WSP has been involved in several recent projects that are working to connect sustainable finance with nature restoration activities on the ground.
Within the London Borough of Islington, we supported our local government client to develop urban green space across the borough through pocket parks set on dead-end roads. To finance the project, we helped the council secure seed funding from the Natural Environment Investment Readiness Fund (NEIRF), a UK Government initiative which provides grants to nature recovery and biodiversity projects, with the aim of sparking further investment. Through NEIRF, Islington sought to attract sustainable financing from the private sector so that it does not rely on council funds that are going to come under increasing pressure in years to come. Working with local government can also ensure any solutions implemented are effective and relevant to local habitats and communities.
Any approach needs to be done at a landscape, grassroots scale which is location specific, which then creates an opportunity for scaling up to a regional and national level. With the support of a nature finance advisory firm, WSP UK is advising a national landowner on where they should target nature recovery initiatives that can be commercially viable yet deliver a range of environmental and social benefits to wider society. The business model being explored could enable them to channel finance into implementation costs, sell high-integrity biodiversity and carbon credits to others, and contribute towards their own targets and commitments on nature recovery.
A growing nature economy
The growth of the nature economy will bring in many professions and skills – beyond our ecologists, engineers, and planners, those with experience in finance, business leadership, digital innovation and transformation, and public advocacy are in high demand and will be key to successful outcomes.
With the right people to implement natural solutions, and an investment community that appreciates the economic long-term benefits of nature, biodiversity protection and restoration will fast become a priority for project developers.
To learn more about how WSP helps companies invest in biodiversity solutions that support their operations, visit: Biodiversity & Natural Capital
For expert insight into the issues being discussed at COP15 in Montreal, Canada, visit our conference hub at: COP 15