Nature’s investment frontier
Practical paths forward for biodiversity markets and finance
By Ricardo Bayon, Charles Bedford, Genevieve Bennett, Adam Davis, Ben Guillon, Katherine Hamilton, Michael Jenkins, Dr. Timothy Male, Martine Maron, Julia McCarthy, Yuejia Peng, Fabien Quétier, Mariana Sarmiento, Ryan Sarsfield, David Tepper, and Amrei von Hase View PublicationBiodiversity-based investment themes are suddenly in the spotlight, after years of feeling like a bit of an understudy to the carbon market. Given a ballooning finance gap for nature, and the obvious materiality of nature risk to business, there is renewed interest in economic instruments that can drive private investment toward interventions to avert biodiversity loss or restore degraded ecosystems, and in doing so generate attractive cash flows.
This report offers a set of expert perspectives – grounded in a collective century’s worth of experience in biodiversity markets, drawing from commentary and thought leadership published by Ecosystem Marketplace news.
It offers both lessons learned and recommendations on what the forward path looks like to drive more private investment into nature and biodiversity. It begins with a look back on what we’ve learned about delinking development from nature loss from three decades of experience and experimentation with biodiversity markets, with an essay contributed by Adam Davis, Co-founder and Managing Partner at Ecosystem Investment Partners (“Offsets and investments: Thoughts on de-linking economic development and biodiversity loss,” (page 12).
There are sizeable opportunities, connected to a wave of new infrastructure investment on the horizon globally to expand that model to new geographies, as Mariana Sarmiento, Charles Bedford, and Dr Timothy Male argue (“How we harness an infrastructure boom to close the biodiversity finance gap,” page 18). Doing so would chart a different course for economic development in Global South countries where nature is substantially still intact. Nature-based asset classes are a promising field for entrepreneurs and land managers.
In doing so, we’d see new business models emerge based on restoration and regeneration—a whole “restoration economy,” with jobs that would be difficult to outsource, roboticize, or replace with AI (although new technology can certainly drive better results at scale). This is already happening in the United States, where ecological restoration now employs more people than coal mining. It’s a future worth pursuing.
But a reality check is due on what is likely to really attract demand, Ben Guillon and Genevieve Bennett argue (“Design for demand: What actually drives private finance for nature?”, page 22). A “Field of Dreams” mentality (“If you build it, they will come”) is likely to get entrepreneurs in trouble.
On the demand side, biodiversity credits and other conservation assets offer a path to not simply fix the damage, but go “nature positive” by creating more nature than there was before. These ambitions need to be grounded in the mitigation hierarchy, or credits could be used for greenwashing, warn Martine Maron, Fabien Quétier, and Amrei von Hase (“No shortcuts to nature positive,” page 30).
Biodiversity might lend itself well to being “stacked” with or “stapled on” to other investments in carbon and value chains. Julia McCarthy and Ryan Sarsfield (“Beetles in a pay stack,” page 33) offer a useful framework for thinking about how to do this effectively.