Natural Capital Investment 2021 conference roundup

Channels: Investment, Natural Capital, Policy

Companies: Finance for Biodiversity (F4B), University of Cambridge, Aviva Investors, eftec, Global Canopy, HSBC Pollination Climate Asset Management, The Nature Conservancy

People: Simon Zadek, Sir Partha Dasgupta, Steve Waygood, Ece Özdemiroğlu, Nicky Chambers, Martin Berg, Charlotte Kaiser

Environmental Finance's Natural Capital Investment 2021 virtual conference has ended after a full day of panels, speed networking sessions, and a live discussion group.

Simon Zadek, chair of the Finance for Biodiversity (F4B) initiative opened the event with a keynote on the interdependence between finance and nature.

Quotes from the conference:

Martin Berg, head of the natural capital impact strategy at HSBC Pollination Climate Asset Management: "We are doing a lot of thinking on how you prove that impact has been achieved. It requires a baseline, and this is something that needs to be established. So far, no initiative has developed this baseline [for natural capital]."

Simon Zadek, chair of the Finance for Biodiversity: "Would you lend money to a corporation without a balance sheet? If not, why on earth are we lending money to sovereigns without some understanding of what their balance sheet is. As the Dasgupta review highlighted, increasingly nature is both a source of critical resilience in the context of climate change, and a source of productivity growth for a growing number of countries that are depending on a new range of products and markets."

Charlotte Kaiser, managing director at NatureVest, at The Nature Conservancy: "It's not always so straightforward to capture the financial value of natural capital...There's a demand for precision, which I don't think we can meet at this time. At the [individual] deal level you can see that precise impact but it's a little more challenging to roll that up to portfolio level."

Steve Waygood, chief responsible investment officer at Aviva Investors: "The Dasgupta Review says that understanding and accepting the simple truth that our economies are embedded within nature is really important. I absolutely agree. But there is a more complicated truth that is much more inconvenient; we haven't yet structured capital markets in a way that finances the future that we all wish to retire into."

He connected the ongoing sovereign debt crisis affecting many developing countries with the current crises affecting the world's biodiversity. He also called for a 'green lens' to be applied to the Covid-19 relief offered by governments and international bodies such as the International Monetary Fund (IMF).

An often-referenced topic of the day was the 600-page Dasgupta Review on the economics of biodiversity that was published by the UK government in February and authored by Sir Partha Dasgupta of the University of Cambridge. Dasgupta also gave a pre-event address at the conference.

The report, commissioned by the UK's HM Treasury and written by Sir Partha Dasgupta of the University of Cambridge, concluded that public and private financial flows are "critical" to supporting a "more sustainable engagement with nature". It also called for better disclosure of nature-related financial risks and tying asset manager fiduciary duty to biodiversity impact.

However, Steve Waygood, chief responsible investment officer at Aviva Investors said that report falls short in suggesting how policy makers and investors should price-in the externalities of nature.

He pointed out that the report simply says this needs to happen, without outlining how it should: "Investors need to know: what is the external cost? Secondly, they need to know if it plausible that, over an investment time horizon, regulators are going to internalise that externality?

"As soon as it looks plausible, you then you have to price it into the way that you do routine valuations. That is how you capture the whole market and change market fundamentals. If we are going to power a transition towards a nature-aligned future, then we need to internalise these externalities."

Panels discussed nature-based investment metrics, investing for impact and accounting for and valuing nature – all topics with several challenges yet to be solved.

Commenting on this, Ece Özdemiroğlu, founding director of London-based consultancy eftec, spoke about a forthcoming accounting standard for natural capital that could help investors grappling with the problem of assigning a financial value to preservation and improvement of nature.

However, the most said term of the day was "TNFD" – the Taskforce for nature-related disclosures, reflecting the levels of interest in the nature-based twin to the Taskforce for climate-related disclosures, despite being a relatively new initiative. Nicky Chambers, the programme and impact director of Global Canopy, and co-chair of the TNFD outlined the plans and expected timeline for the initiative in its nascent stages.

In addition, Odile Conchou, who serves as the financial sector ‘focal point’ for the secretariat of the Conference of Parties (COP 15) to the Convention on Biodiversity (CBD) announced that it has launched a ‘finance engagement programme’, which it says could help define a ‘roadmap’ to help financial institutions implement the CBD’s proposed framework.

Environmental Finance previously reported that COP 15 is to be postponed for a second time as the coronavirus pandemic disrupts preparation. While the new date has not been announced, Conchou said at the event: “The COP15 to be held this year is as important for biodiversity as COP21 [in Paris in 2015] was for climate change,” 

All of the sessions from the day are available for on-demand replay. Click here to register for the event and view the discussions.

Annabelle Palmer