Checking In On Our Investments
The State of Nature’s Fortune
With climate week right around the corner and with more interest from the business community than ever before, people have been asking for my take on efforts to encourage investment in nature.
You may recall that way back in 2013, Jonathan Adams and I co-wrote a book on this very topic: Nature’s Fortune: How Business and Society Thrive by Investing in Nature.
At the time, we saw big opportunities for investments that would both protect nature and also produce valuable co-benefits, including the opportunity to:
Sequester and remove carbon emissions that cause climate change
Protect both the quality and quantity of water
Provide protection from extreme weather and sea level rise
Improve and enlarge natural habitat areas to bolster biodiversity
Create successful substitutes for single-use plastic
Improve health outcomes and reduce extreme heat in urban environments
Manage excess water challenges in cities
Substitute plant-based proteins to replace meat
And so much more.
We argued that initiatives like these would increase the number of savvy business people and firms engaged with nature and accelerate both capital formation and innovation.
I was running a big global conservation NGO at the time. It seemed to me that we would be able to protect much more nature if we had more people, more organizations, and more capital on the side of nature. That’s why I wrote the book.
So how is our play going? Let’s check in.
We’ve made great progress!
For those of you who will be in NYC during climate week, pay attention and you will see what I mean. Many companies, investors, government officials, NGOs and other market participants are actively engaged in such initiatives.
Nature-based carbon credits are a good example. This fledgling market is active all worldwide with a myriad of actors: project originators, verifiers, financiers, technologists, regulators, government officials, journalists — all energetically engaged.
To state the obvious, this new marketplace is not without its challenges. We read every day about serious problems: fraudulent claims, disputes about who deserves which benefits, and the struggle to originate high-quality projects (or even to agree on what constitutes high quality). But in my view, such developments are a normal and positive part of any new financial market.
Some participants are arguing that the market needs stringent regulatory oversight and/or much better disclosures. The Science Based Target Initiative seeks to limit how much a net zero-targeting company can rely on credits. Many observers (including the Instigator) debate the merits of avoided emissions deals vs carbon removals. Some environmental organizations are opposed to any use of offsets at all.
In my view, all of this increased scrutiny and debate by a diverse and growing group of participants is positive. It’s just what we need to take this market to the next level.
Time will tell if this opportunity truly becomes as important as we envisaged a decade ago, but I am optimistic about the trajectory.
As for the other investment opportunities noted above, they are all variations of this same theme. There is growing activity, more participants, lots of debate about how to get things right, outspoken critics, exciting “hockey stick” business projections, and some continued uncertainty.
What got us here won’t get us there.
Most of the investment in nature thus far has been voluntary. There are some regulations and/or government-provided incentives that encourage folks to engage, but for the most part engaged organizations are doing so because they foresee economic and environmental upside.
It strikes me that further progress will be constrained without more supportive public policy. Accordingly, I believe market participants should devote more resources to efforts to develop the necessary policy (however difficult that seems in today’s political world).
Take nature-based substitutes for single-use plastic, for example. I see many exciting products emerging. But, compared to the products we want them to replace, they tend to be more expensive, difficult to produce at scale, and not preferred by customers.
I’ve personally urged big consumer companies to invest more and/or buy the startups behind these new products in order to take these breakthrough innovations to scale. But they tell me that they view such a move as too high risk and too low return in the absence of tougher regulations on single-use plastic.
The same kind of obstacles thwart most of the other opportunities noted above.
So if — like me — you want to see investments in nature scale over the next ten years, get your organization to invest more in political engagement so we can develop the supportive policy we need.
Onward,
I will join you in your optimism and agree we are making progress. The number of national private conservation projects has also increased over the last ten years. Like many of your initiatives it has been frustratingly slow. We are still pitching to blank stares and shaking heads in the real estate investment realm as they struggle to recognize that it is vital to privately conserve agricultural lands, wetlands, biodiverse forests, and cultural resource rich lands because once they are gone, they are gone.
"There are no sacred and un-sacred places. There are only sacred places and desecrated places."
- Wendell Berry
The loss of private land to development is still at a rate of 6000 acres a day in this country. But every linking private parcel that creates a precious wildlife corridor, or every historical ranching legacy preserved is one step forward to maintaining the economic, social and ecological value/fortune of nature for next generations.
I do see hope on the horizon. There is something different about the incoming classes of students at our regional educational institutions and their appetite to learn about protecting the planet.
As an educator, I often find myself having to apologize to this next generation for failing in my generations effort to leave them a better world. I was told by my parents that I was the last generation to witness open space and I mumbled about impossibilities. We, the boomer generation, were cautioned, then warned, and finally alerted to our misguided lifestyles. To late?
Better late than never. Our apologies should not be done to have the last word, nor ask for forgiveness only to mask our infidelity in our relationship to the planet. There is no time left for hand wringing, pity parties and finger pointing but to use our remaining time to align with and invest in this - reGeneration.
I appreciate your optimisim about the debate on nature-based carbon credits; it's a good way to see a silver lining to that grey cloud. I wonder if you can help provide another optimisitc framing to that debate: what about the critique of the shrinking market for carbon credits given the Paris Accord framework?
In other words, doesn't Paris significantly shrink the market for carbon credits, because the Paris agreement is entirely focused on a nation's domestic emissions and bringing domestic emissions to zero? For developed countries by 2050 all domestic emissions should be zero or offset with domestic offsets, and so who is the long-term buyer of carbon credits in developing countries outside of often small manufacturing bases in these economies? Doesn't this significantly shrink the size of the market for carbon credits where most of the nature is, i.e. in developing countries?