Last year’s Paris Agreement was a remarkable feat - 196 countries came together to reach consensus on a set of goals for halting climate change. Together with the United Nations Sustainable Development Goals (SDGs), six of which explicitly address the role of nature in creating a sustainable future, this represents an unprecedented international agreement on the need to protect the health of both people and nature.
But figuring out how to actually achieve these goals will only become more difficult as the world’s population grows and becomes more affluent, requiring the expansion of infrastructure and consuming ever more resources. If we can’t address those needs while still reducing carbon emissions, we have little hope of reaching the goals laid out in the Paris Agreement and the SDGs.
We need a radical new solution set for our sustainable growth challenges - and we have those solutions in nature itself. A growing body of evidence shows that some nature-based infrastructure can be just as effective as traditional, man-made infrastructure and, perhaps more significant, that nature-based solutions can play a much bigger role in mitigating climate change than anyone previously thought.
This is important news. Indeed, nature-based solutions are uniquely capable of helping to meet the needs of a growing population while still curtailing the amount of carbon released into the atmosphere - but only if we’re willing to scale up investment in them.
Consider this: just a small fraction of the tens of trillions of private dollars managed by institutional investors could supply the needed funding for the conservation activities captured in the SDGs.
We’re still a long way from that reality - bringing existing conservation efforts to the scale needed to make a dent in long-term sustainability goals will require buy-in from governments, funders, corporations and the broader public. But if we can get intellectual buy-in from policymakers on the importance and efficacy of natural-based solutions, we may be able to secure the financial buy-in we need from private investors in order to achieve such growth.
Natural solutions – a proven record
We’re getting closer to the intellectual buy-in we need. Increasingly, engineers and other technical practitioners concur that in some situations nature-based infrastructure can be as effective as man-made infrastructure - and often at a lower cost. One of the best examples is the protection of natural watersheds in order to ensure clean water supplies: New York City has long relied on watershed conservation to clean and filter its water, a solution it expanded in the 1990s as the city faced deterioration of its water quality from increased sources of pollution.
National and municipal governments around the world, with the help of corporate partners and NGOs such as The Nature Conservancy, have made further investments in watershed conservation through water funds - a system in which downstream water users compensate farmers and other upstream users to protect and restore watersheds. Activities like reforestation, the use of cover crops between growing seasons and stream bank restoration can both reduce runoff and nutrient pollution and increase crop yields, reduce carbon emissions, and protect biodiversity within watersheds.
Recent years have also seen recognition of the role nature plays in protecting coastal communities. The devastation of Hurricane Sandy in New York and New Jersey in 2012 was a turning point - it was clear that communities fronted by dunes, marshes, and oyster reefs suffered less damage than those without these natural defenses. Since then, research by The Nature Conservancy has quantified the effects of healthy reefs and wetlands on wave force and erosion. In Florida’s Miami-Dade County, the local government is now working with engineering firm CH2M and The Nature Conservancy to assess the benefits of mangroves and coral reefs for coastal flood risk reduction, and similar efforts from Grenada to Vietnam have shown promise.
Perhaps most significant is the role that nature can play to mitigate climate change. We’ve known for a long time about the important role of tropical forest conservation in curbing emissions from the land-use sector. But nature’s potential reaches far beyond tropical forests. We realize now that if we look across forests, agricultural lands and wetlands, nature can deliver more than a third of the emissions reductions we need by 2030 to keep global temperatures from rising more than 2 degrees Celsius - the primary goal of the Paris Agreement.
The potential for private financing
Promising as these solutions are, implementing them will require funding - the second level of buy-in. And even if policymakers back their support with funds, public financing alone, or even public financing combined with philanthropy, won’t allow us to scale enough projects to address our global sustainability goals. But public and philanthropic funding are crucial to help create the conditions that will attract the private conservation financing needed to change the game.
Private conservation finance is a young but rapidly growing field. A new generation of investors and consumers expects less environmentally impactful products and services, and companies are seeing opportunities to make money. Credit Suisse CEO Tidjane Thiam stated the case plainly in a report published by Credit Suisse and McKinsey & Company in January: “The continuing disappearance of Earth’s last healthy ecosystems is sadly no longer news … What is news is that saving these ecosystems is not only affordable, but profitable.”
In an April report, Credit Suisse followed up with a series of strategies through which companies and investors can profit from conservation finance, including investment in ecosystem services and the use of finance mechanisms to improve agricultural practices. NatureVest, the Conservancy’s impact investment unit, is structuring projects in this vein, including a debt-for-nature restructuring plan that will allow the government of the Seychelles to redirect some of its debt toward marine conservation and climate adaption. Other NGOs have developed similar deals, including sustainable coastal fisheries and reforestation projects led by the conservation organization, Rare.
These projects represent a good start - but they don’t yet represent a sufficient portfolio to attract serious private investment. As my colleagues Andrew Deutz and NatureVest lead Marc Diaz recently wrote, a project worth tens of millions is still “one or two orders of magnitude below the scale at which institutional investors deploy capital.” Furthermore, they note, the lack of track record for such projects increases the perceived risk for investors. In order to attract the financing needed to scale conservation projects … we first have to scale conservation projects.
A new blueprint for scaling nature-based investments
Fortunately, public investment can get this process started. Governments, along with their NGO partners, can identify new conservation projects and provide the startup capital to get them off the ground. At the international scale, development banks can assist by providing de-risking mechanisms such as political risk insurance and first-capital loss. Ideally, governments and NGOs working together could establish enough similar projects that they could be bundled together into larger financial products, creating an asset class that could be analyzed and rated - a key step in attracting large-scale private investment.
To facilitate such processes, The Nature Conservancy, Credit Suisse, the International Union for Conservation of Nature, and Cornell University have formed a Coalition for Private Investment in Conservation (CPIC). The coalition brings together stakeholders and experts from every step of this process - governments, NGOs, foundations, corporations, financial institutions - to share information and expertise on scaling, replicating, and aggregating conservation projects into financial products that will deliver market-rate financial investment.
Using this shared expertise, the coalition aims to develop “blueprints” for projects in different regions and sectors, focusing on reforestation, sustainable agricultural intensification, sustainable coastal fisheries, coastal resilience, and watershed management. Eventually, the coalition hopes to build a small portfolio of projects that can be aggregated into a larger investment product.
Nature’s solutions are available right now
Beyond creating its own portfolio of projects, the intention of this coalition is to accelerate global progress on private financing in conservation. Nature-based solutions need to play a major role in the global sustainability agenda, but even with significant investment they won’t solve all of our problems. If we are successful, nature-based solutions will allow us to hold our ground on carbon mitigation and adapt to current conditions while we further develop and deploy the technology we need to fully transition to a low-carbon sustainable future - but this can’t be achieved if we don’t start implementing them soon. What’s more, if we fail to maximize nature’s potential now, we risk losing more of these critical natural systems – and the opportunity to leverage them - later.
But there is hope. We’ve already reached considerable agreement on our goals, and we already know that nature-based solutions can help us achieve many of them. We also know that reaching the scale we need will require actors in the public sector to enable the conditions that will attract private finance in conservation. If governments, NGOs and investors start working together now on implementing and growing nature-based solutions, we have a real chance at making the investments we need to secure a future where people and nature thrive together.