Let's be honest about the new narrative for Nature

As I reflect on my 10-year tenure at CISL, I am struck by both the progress made by business, governments and financial institutions in navigating their relationships with nature and my personal frustration that actions are not occurring at the pace and scale they need to.

The future we want is clear: a world where human activity is considerate of nature; where we work with nature to provide benefits to society, business, and ecosystems; where we recognise that the system is interconnected, and we each play a role in ensuring the right balance and are active in the maintenance and restoration of nature. To deliver this vision we need to transform our economic and financial systems to fully integrate nature and to make changes to many aspects of how we live our lives. It will need a paradigm shift in how all of us view and value nature and require resources to mobilise and enable this transition. 

With the CBD (Convention on Biological Diversity) COP15 in Montreal rapidly approaching, the opportunity to set the pathway to deliver truly transformational change for nature is now upon us. We know from the Dasgupta Review that our unsustainable engagement with Nature is endangering the prosperity of current and future generations and we have read the practical insights provided by the WEF showcasing nature positive pathways that could shift us towards a nature-positive economy. We know that the current economic system doesn’t track flows of value other than financial, and at the same time we have seen businesses and financial institutions starting to wake up to the systemic risks associated with the challenges of climate change and nature degradation. 

We need to fundamentally re-evaluate how we think about nature and redesign our economy such that it considers a broader context of values. The classic question of ‘What is the business case?’ is still being posed and we now need to be honest about what this truly looks like. There are not going to be the immediate, oft promised win-wins –the commercial imperatives are not clear cut. But we are running into a biodiversity extinction and without leadership and long-term, holistic approaches, and to some extent a degree of bravery, we will never make the  step change we need to break this cycle of destruction. Let’s be honest, there is no money tree; the reality is that we need to invest in nature and nature will pay us back in dividends but that will take time and may not be considered commercial in today’s value sets. The commercial logic we should be applying requires a longer-term outlook.

There are some stakeholders that understand this logic, such as farmers, communities and families that have a long-term connection to and dependence on specific places, and some sectors that have long-term planning cycles for the development of assets. They all recognise the need for ‘patient capital’. But the majority of businesses and financial institutions, whose success is only measured by short-term financial performance, are stuck and are the victims of short-term capital.

We don’t have any silver bullets, instead we need fundamental shifts to occur across business, government, and finance - a new climate-nature compact could deliver integrated solutions to these interconnected systems. Perhaps COP15 can be the critical moment to turn rhetoric into action with business, government and finance coming together to commit to act and deliver tangible change.

Setting the enabling environment

The transformation of our economy requires Governments to provide the right incentives and regulatory frameworks that open up the necessary activities. They can look to tackle market failures to make it easier to mobilise private capital. Government policies can support the flow of finance to less traditional investments and could even de-risk these activities. 

It is clear, however, that this isn't just a policy issue but a political issue. Governments need to be convinced of the underlying importance of nature to a healthy and prosperous economy and society, and understand how nature relates to pressing domestic issues facing many Governments, such as cost of living, economic growth, and national security.

The ask of financial institutions

For me, investing in nature is the most fundamental change we can make as a society. Capital markets can adjust to unlock direct investments into a nature-positive future and investors could respond to how companies in their portfolios use and rely on nature. We need the right incentives to be put in place so that markets appropriately value nature and we also need efficient mechanisms so that financial institutions can integrate nature and nature-related risks into decision-making. The development of TNFD (Taskforce for Nature-related Financial Disclosure) is a first step towards delivering this and I hope will result in companies operationalising strategies and action plans to reverse their impacts on nature, disclose these publicly and track their performance. This is underpinned by the recent Business for Nature campaign, supported by over 330 businesses, to make nature assessment and disclosure mandatory. However, we need more clarity about what good really looks like for a nature-positive company and what standards and data are needed to enable confidence in going beyond target setting and to dispense with greenwash.

Even with full disclosure, more will need to be done. Investors and shareholders need to be aligned with CFOs and Executive Committees in terms of objectives and approaches in order to accelerate the flow of finance to support nature-positive activities. Boards also have the opportunity to be pivotal in supporting this transition, unlocking opportunities for longer term investments and innovative value creation.

The business imperative

Finally and fundamentally, business activities should maintain and restore nature, rather than degrade and damage it. Business needs to address the absence of a near-term business case to do what is in the long-term best interest of the organisation. This will require business models to be re-evaluated and re-designed to focus upon long-term value creation for people and planet.

Businesses should be assessing and addressing where their greatest risks and opportunities exist, thinking about the true value of their assets – not just financial performance – and considering how these create value flows throughout the economy. After all, the underlying business model, and its perceived value by investors, depends on reliable and cost-effective access to nature and all the services it provides. 

Let’s not be siloed in our attempts to deliver on net zero and nature-positive, which can result in unintended consequences, but rather be joined up to create efficiencies and more holistic outcomes. At the very least we should be challenging ourselves to have zero-deforestation supply chains by 2025, to shift towards sustainable and regenerative production of our food and fibre commodities, to utilise nature-based solutions and for companies to think beyond their direct value chains to address, invest and deliver on the goals to protect and restore nature. 

Acting together

There is certainly plenty for companies to be getting on with, but the majority of business most likely won’t move without the support of government or impetus from financial institutions. Finance needs to flow through the economy to unlock and enable nature restoration and regeneration, and to shift away from damaging activities that have large carbon footprints.  I would argue that businesses can be more explicit about this, publicly sharing that they want to act but are prevented from doing so by markets and regulation. Let’s encourage business to contribute to processes that can change the context; COP15 offers this exact opportunity.