Your kind never sees us whole. You miss the half of it, and more. There’s always as much belowground as above”.

Richard Powers

2019 Pulitzer Prize winner The Overstory begins from the perspective of a tree, raising all too common human short sightedness. Look beneath the canopy and you’ll discover the complexities of our plant ancestors. Beneath the forest floor lie metropolises of life, forming the bedrock of all that stands above. For too long, nature was the unseen half of our planetary puzzle. This year, it has become a source of clarity on an otherwise blurred horizon.

It’s been a year of crescendos for nature. Dasgupta’s review anchored the biosphere into economic thinking. Global finance, which funds biodiversity loss, grew aware of risks nature poses to economic stability. Big corporations started setting science-based targets for nature. In Glasgow, offsetting through restoration mainstreamed natural climate solutions. Yet the financing gap for ecosystem-based adaptation remains massive, and a global agreement on biodiversity has yet to emerge. Pledges to ban deforestation by 2030 remain fictional without quantifiable targets or industry-wide private finance exclusions. Nature isn’t second-in-line anymore, but proper comprehension of its benefits and solutions has some way to go. It has become clear that nature’s interrelations with climate are key to unlocking both net-zero and nature-positive goals. Transversality in finance and governance are the only plausible pathways.

How is nature changing financial risk perceptions?

Finance is finally uncovering our global economy’s dependence on non-human life. Corporates steered towards activities that destroy ecosystems will incur unsustainable costs and losses. Measuring biodiversity risks is no longer a frontier option, hence standards bodies, coalitions, and policy frameworks – most notably France’s article 29 – are seizing the case. Experience of climate-related risk reporting can inform these developments, but at its core nature is more physically asymmetric and operationally decentralised than carbon. Ecosystems interact in different ways in different places, and datasets to measure such interactions are not yet in the right place. Target-setting is colliding with non-universal understandings of nature.

Ignoring the interplay between climate and biodiversity risks could render any material risk assessment ineffective or downright counterproductive. Take an example. Farmers in Brazil’s Cerrado region face the loss of ecosystem services due to soil desertification – a nature-related risk – but ignoring the shift in rainfall patterns stemming from the Amazon’s rapid conversion into a net carbon source – a climate-related risk – may downplay the assessment of losses over any given time. There are many such instances where climate and nature mutually reinforce each other and compound risks.

Financial institutions see now that climate scenario analysis has been suffering from a glass half full. That’s why the Taskforce on Nature-related Financial Disclosures (TNFD) will see complementarity with TCFD as its leitmotiv in the coming year. Over time, the framework designed to centralise nature risk reporting practices will allow organisations to understand climate and nature risks in conjunction. Where the TNFD could be transformational for climate disclosure is in its consideration of double materiality – the impact of and the impact on nature – which the IFRS and TCFD have for now put aside. Mainstreaming two-way relationships into financial reporting could very well be a building block for strong sustainability principles, rethinking the role of corporations within their surrounding environment and recognising the existence of limits to the biosphere.

How can impact investment drive nature-positive?

Changing risk perceptions is one side of the coin. On the flip side, the climate-nature nexus as a framework for capital reallocation can alleviate the financing gap of nature-based solutions. Restoring peatlands appeals to asset owners precisely because they have a high carbon sequestration capacity. Insurers value mangroves as protective tissue for coastal populations as climate change adaptation tools. Conservationists know all too well that ecosystems don’t inherently attract funding. That an understanding of ecosystems as carbon sequestration assets has permeated international thinking, through ratification of Article 6, is good news. For the hardest-to-abate sectors at least, carbon offsetting is here to stay. There’s definite momentum for carbon credits to work in favour of biodiversity.

Nature-based projects are currently more in demand than renewable energy or energy efficiency projects, and the carbon market is set to grow 30-fold by 2030. REDD+ credit prices have doubled in the last year. Concurrently, private policy momentum will enable the emergence of rules and standards for the voluntary carbon market, to ensure offsetting integrity and guarantees that credits be only part of the decarbonisation equation. Too many investors still consider their job done with offsets.

One of the key developments in the coming years will be the expansion of channels for ecosystem-based investment and insurance, mostly already practiced at public level. Examples include Chinese ecological compensation schemes for Protected Areas, where the state pays local officials for the protection of ecosystems otherwise up for commercial use, the EU rewarding farmers for increasing carbon stocks in their soil, or a Norwegian-backed fund paying Gabon US$17m for its forest protection services, to share the costs of maintaining global public goods.

Experimentation with such initiatives will expand the commercial opportunity of natural capital. Impact investment will increasingly take a beyond-carbon perspective on natural assets, with the development of bio-based materials in construction, cosmetics, and fashion spurring nature-based products, and infrastructure increasingly going green.

A challenge, however, will be to ensure that market-based mechanisms are sufficiently large, low-risk, and translate into environments enabling redistribution and local development in countries of the Global South, where most key biodiversity areas lie. Ecosystems will not appear as a viable source of economic prosperity in emerging countries if benefits aren’t shared collectively. This is one of the promises of blended finance models, whereby local expertise of public finance combines availability of private capital with justice on the ground. 86% of NBS financing still comes from public money; its guidance will be determinant. At COP26, the world’s largest MDBs pledged to mainstream nature across their activities and double up efforts in nature-positive financing. Crucially, private initiatives will also rely on the formulation of international targets to correlate at KPI-level, with most eyes are steered towards Kunming.

Integrated governance and the importance of a positive narrative

The second pathway for the climate-nature nexus must come from governments. Research has shown NDCs to disregard land use in their climate change equation, while biodiversity strategies under CBD ignore the sequestration potential of ecosystems. Appetite for nature was high at COP26 – a climate summit – so the idea isn’t completely absent. Yet most national strategies still reflect siloed thinking. Bioenergy is a textbook example of incompatibilities between climate and nature-related objectives. From a pure focus on GHG emissions, we ask ourselves: should we develop bio-based, low-carbon alternatives to fossil fuels to reduce emissions? The answer seems clear. With an integrated approach, the question becomes: do we clear more land for intensive agriculture – itself requiring energy – and reduce our natural carbon sequestration budget? Remote sensing and satellite data are powerful enough for this type of trade-off measurement to take place. Spatial design can help inform public investment in a way that benefits both nature and climate.

Nature will also need to permeate all policy domains in which it operates. Loss of ecosystem services poses equal risk to policymakers working on defence, health, or housing; this transversal dependency on nature is not matched in governance architectures. Distribution of executive power asymmetrically forces nature-related issues onto a single department, which lacks the political will or ability to systematise nature. Indeed, biodiversity’s portrayal in politics remains fixated on the preservation of wildlife, absent linkage with socio-economic stability. A recent French report arguing for integrated environmental governance called for a new agency – France Transition – to conduct technical guidance on how best to allocate risks between government agencies. Once aligned, collective bargaining with local government, corporations, and civil society will work towards a single goal. It is illusory to believe we can attain net-zero and nature-positive at the same time with perpendicular approaches at state level.

Most crucially for governments, people need a positive narrative. In the middle of a twin health and economic crisis, we are collectively pessimistic, disjointed, and tired. An initial flavour of climate catastrophe, reinforced by an anxiety-inducing media establishment and its growing polarisation of domestic politics, is not helping. But nature restoration and its benefits for climate action can serve as a narrative only if it speaks to everyone. One idea, grossly marginalised in global and national governance, is food. Food is about so much more than agriculture. Food systems are deeply connected to national sovereignty and security, trade, culture, wasteful production processes and excessive consumption patterns, land ownership, racial injustice, individual well-being and collective progress, and as demonstrated by Covid-19, about human and non-human health.

The crux of the food crisis is about transitioning away from yield and towards ecosystem management, but its protean factors of influence and interaction make it a profoundly social issue, requiring society-wide conversations. Food is our first and most direct link to non-human life. Food can be a philosophical compass within otherwise technical portrayals of climate and nature, thereby opening the gates to an integrated outlook on energy systems and the material economy too. In Europe, the Green Deal must be as humanly tangible as it is technically flawless. In Europeans must wake the desire to put systematic transformation into action. Excessive focus on carbon border adjustments and taxonomies, nonetheless key for global environmental convergence, would miss a crucial pillar. France’s presidency of the EU will be a testing ground for reconciling European green values with civil society. Nature, through the prism of food and agriculture, should be highlighted during March’s summit on ‘New growth and investment models’.

As the year ends, there is a quiet vibration in the ground. Amidst the financial commitments, corporate targets, pledges, and coalitions, something much deeper is coming to a boil. Recognition of our species’ complete dependence on the non-human. The search for a newfound role in a long-forgotten community. If we look past its technical flesh, nature-positive is a mission of redemption from our surroundings, and a journey towards humility. Environmental ethicist J. Baird Callicott says we have lost our biotic identity. The time is ripe for forging a new one.


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