Can Markets Save Nature?

Can Markets Save Nature?

This is the overarching question of a report which I co-authored and recently published through the Centre for Climate Finance and Investments at Imperial College London.

Against the backdrop of heatwaves during the European summer of 2022 and the war in Ukraine which – in addition to unmentionable human suffering- is causing food shortages and contributing to food inflation, we suggest that we have landed in a perfect storm of climate change, nature loss, and fragile food supply systems.

New business models that embrace and integrate natural capital rather than undermine it are urgently needed, and this report catalogues investment models from around the world which do just that. Investments in agriculture and the food value chain stand out as a particularly ripe opportunity, both because of the need to reduce emissions from these activities and because of the traditional underinvestment in these sectors.

As an illustration, we identify a group of European companies with an enterprise value of $4.8 billion (global estimate: $15 billion) whose businesses in the food, agriculture, and pharmaceutical industries are integrated with nature through ambitious circular economy and sustainable land use principles. These companies illustrate the new nature economy and investors who are looking for nature-positive solutions to today’s climate and biodiversity challenges could consider the addition of such companies to their portfolios.

The report identifies five enablers for creating scalable and sustainable investment models. Key amongst these is the requirement for repayable investments - either through revenues or cost reductions. Standardisation - to attract mainstream investors- and genuine profit sharing with local stakeholders are other crucial elements.

However, there is no simple solution to the question of how to finance nature. Can markets save nature? The answer is “not yet and never on their own.” The public sector will continue to have a legitimate and meaningful role to play in funding fundamental ecosystem service. But the private sector can, will and must be part of the solution.

You can find the report and an introductory video here: https://imprl.biz/FoF3