Climate and Nature

Why a scientific approach is key to funding nature tech

Abstract palm hands touching brain with network connections, innovative technology in science and communication concept in a story about nature tech

Nature tech will be key to accelerating action on biodiversity loss and the climate crisis. Image: Getty Images/iStockphoto

Divya Seshamani
Managing Partner, Greensphere Capital
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Climate and Nature

  • Nature tech is increasingly key to scaling up nature-based solutions, but many companies have a limited evidence base.
  • Given the urgency of the dual crises of climate change and biodiversity loss, investors must not risk misallocating capital and resources on solutions that may not work.
  • A scientific and evidence-based approach will be key to accurately measure, monitor and verify the benefits of nature-based solutions.

Given the urgency of the dual crises of climate change and biodiversity loss, one of the greatest risks we face is that we misallocate capital and resources to businesses based on shallow or static science, resulting in solutions that either don’t work or make the crises worse.

It is known as the ‘windshield phenomenon’: the comparative cleanliness of today’s car windshields against the nostalgic recollection of bug-splattering car trips through the countryside just 20 or 30 years ago.

The windshield phenomenon reminds us of a deeply worrying truth about the loss of nature and the threat that it poses. Namely, that the fewer dead insects point to fewer insects, less pollination and therefore an existential threat to the human food system.

The windshield phenomenon, however, is only an anecdote and anecdotes, while being powerful storytelling tools – and often inspirations for developing a scientific hypothesis – are not scientific evidence themselves. Managing, mitigating and innovating our way out of these systemic risks is going to require hard data and deep science, not anecdotes.

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Venture capital is sometimes accused of favouring strong storytelling over science. As a venture capitalist myself, many of the companies we see in nature tech – technology that can be applied to enable, accelerate, and scale-up nature-based solutions – often have a limited evidence base.

Given the urgency of the crisis, one of the greatest risks we face is that we misallocate capital and resources to businesses based on shallow or static science, resulting in solutions that either don’t work or make the crisis worse.

The emerging market for nature tech and nature-based solutions

When you look at the unprecedented systemic risks from the loss of nature, compounding with the climate crisis, the economic and moral imperative to act is clear.

The European Central Bank has calculated that about 72% of companies – roughly 3 million individual businesses – and three-quarters of bank loans in the eurozone are highly dependent on ecosystem services such as the pollination provided by insects.

Exposure of euro area banks’ loan portfolios to nature-related risks
Exposure of euro area banks’ loan portfolios to nature-related risks Image: ECB

As a category, nature tech and nature-based solutions include widely understood cultivation approaches such as afforestation and regenerative agriculture. There are also more niche solutions like multistrata agroforestry, or improved rice cultivation, and reducing or making productive use of food waste.

Nature-based solutions can provide around 30% of the emissions reductions needed to deliver on the 2°C goal in the Paris Agreement.

Investing in ecosystem restoration can also create enormous value, with every $1 estimated to give a return of around $30 in wider economic benefits, as well as providing important employment opportunities – particularly in rural areas.

Some of the specific solutions being developed today include finding strains of coffee plants that are resilient to climate impacts, specialist monitoring of biodiversity using environmental DNA, designing nature-based infrastructure such as water treatment ecosystems, and improving disease resistance in crops by using genetic screening.

The solutions we scale up need to harness science to ensure that they are not in fact decreasing the resilience of our ecosystems and food systems, and importantly that they are not leading to negative unforeseen consequences. The best approaches to address these risks often come from nature itself.

Aligning scientific research with capital flows

Credible long-term commercial funding of nature tech and nature-based solutions will need to deliver results across three dimensions: benefitting the bottom line, the environment, and the communities delivering the solutions.

Auditable evidence to show solutions work will encourage more capital into the sector, ensure the capital flows are efficient and appropriately priced. Applied science institutes will be critical to giving us these evidence-led approaches to accurately measure, monitor and verify benefits.

As the librarians of the world’s biological data, institutes such as Royal Botanic Gardens Kew with the Millenium Seed Bank and International Plant Names Index, or the Zoological Society of London with the EDGE Index are best placed to navigate the huge data sets required for developing or assessing solutions – creating new lenses, through the use of machine learning and artificial intelligence, to understand and use this data better.

Their scientists also work on large field studies and have solutions that are practical, cost-effective and can unlock landscape-scale transformation.

With auditable, cost-effective methods of collecting evidence, capital can appropriately price risk and – critically important to increasing fund flows to nature-based solutions – price insurance.

Science is the antidote to greenwashing

The windshield phenomenon is not a definitive indication of insect decline. It is a classic lesson that correlation of observations is not a replacement for hard evidence, and often don’t provide pathways to the right solution.

Anecdotes are not the basis for investment. We need to take action to ensure that vested interests, overstated challenges and unsupported claims do not undermine the momentum of a market that will be essential in tackling urgent global challenges.

As an investor, investments grounded in the best available science help me to solve two key issues. First of all, it helps solve the problem of adverse selection and investing in poor technical solutions.

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Secondly, working alongside respected institutes that have a strong mastery of the global legal frameworks governing nature can help us navigate longer-term challenges such as ownership and governance of biological data, or ethical questions in deploying solutions that impact ecosystems.

I believe the single biggest liability that could hold back the emerging market for nature tech and nature-based solutions is the loss of market confidence driven by perceived greenwashing.

The ultimate antidote to this is for us as investors to prioritise the integrity of the entrepreneurs, science, and nature tech solutions we choose to invest in, scale and commercialise.

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The views expressed in this article are those of the author alone and not the World Economic Forum.

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