Last week I went to the Rebalance Earth Conference on Natural Capital. I couldn’t stay all day and missed the afternoon sessions but Rob Gardner has promised that we’ll be able to share recordings of the sessions so look forward to some VLOGs in the weeks to come talking to how we can invest to increase biodiversity and capture a natural premium.
I’m pleased that more than Tuesday’s sell-out audience can hear what the Government are up to seeding a natural capital fund with Federated Hermes and find out what is going on to reverse the decline in nature abroad and in the UK.
He and his colleagues boldness displays the genius. power and magic we must preserve and put to use over the decades ahead.
You’ll have your chance to take yours as videos of the sessions become available. Here’s Rob’s summary of the event.
Five natural capital issues you can’t afford to ignore
David Craig, Co-Chair of the Taskforce on Nature-related Financial Disclosures (TNFD), told the Conference
“Two and half years ago, many financial institutions said: ‘We’ll get round to nature when we have fixed climate.’ No one is saying that anymore.”
Ralph Chami, assistant director at the International Monetary Fund & Co-Founder of Rebalance Earth, told us:
“We can not handle climate change and biodiversity risks sequentially. We need to address them at the same time because we are in the eleventh hour.”
In July 2020, an initiative to bring together a Taskforce on Nature-related Financial Disclosures (TNFD) was announced.
This framework is a game-changer as it provides a way for companies, asset managers, and owners to assess their impact on the natural world like they have done with climate change under the Taskforce on Climate-related Financial Disclosures.
With the complete framework set to be adopted later this year, here are five things you need to know about natural capital.
1. The scale of the biodiversity challenge
Opening the conference, John Glen MP, chief secretary to the Treasury, said:
“In my lifetime, we have witnessed close to a 69% drop in wildlife populations.” Freshwater populations have fallen by an average of 83%, he added.
To accentuate the point, my co-founder, Walid Al Saqqaf – Rebalance Earth 🐘 🌳, said,
“imagine if you lost 70% of your team, you wouldn’t be able to operate!'”
The next generation will be born into a world where one million species are threatened with extinction.
“If I have grandchildren, they could find there is habitat loss on an unimaginable scale,”
“Biodiversity has been declining rapidly because of human activities such as land use changes, pollution, and climate change, bringing some species to the brink of extinction,”
If the moral argument isn’t enough, he added that this biodiversity degradation can impact global GDP.
“There is an irony here because for centuries, natural capital assets – meadows, woodlands, wetlands – have been allowed to degrade as an accepted cost of economic growth,”
Glen went on:
“The conflict between growth and the environment is a false dichotomy; the environment is the foundation for our economy and society.”
Successive governments in the UK and worldwide still need to implement the measures our collective responsibility demands for this loss.
“We need to act urgently to protect ecosystems,”
2. Nature helps to solve the climate crisis.
Tackling the climate crisis will require the human population to reduce their greenhouse gas emissions and offset carbon dioxide emissions.
Our co-founder Ralph said:
“It is not enough to cut off emissions. We also need to drain the tub and pull the carbon out of the atmosphere.”
While there has been much discussion about the development of carbon capture technology, nature is one of the most potent ways to reduce CO2 in the atmosphere.
“The latest IPCC report says if nature is protected and rejuvenated, then not only do you reduce biodiversity loss, but it will also help you to reduce climate change by at least 38%.”
In other words, we must tackle climate change and biodiversity challenges together because we are running out of time, and nature will help us mitigate global warming.
Getting nature to help us to mitigate climate change is about more than just reforestation. Ralph says:
“Oceans play an important role in sequestering carbon, as do phytoplankton, salt marshes, seagrass, and mangroves.”
Fauna also has a vital role to play in carbon capture. Whales most of all
“Great whales’ bodies also collect carbon. When they die, their bodies are so heavy they sink to the bottom of the ocean sequestering carbon on the ocean floor”
3. Can we put a price on nature?
Suppose we want to protect nature to protect biodiversity and maximise its role in mitigating climate change. Is there a way to fund nature?
“At the moment, philanthropy helps funds conservation, but we need another $700bn a year to do the job properly,”
Rather than increasing the amount given to philanthropy, the solution might be to create a motive for us to invest in nature. The challenge is to put a price on nature.
Carbon markets give us a way to do that.
“Europeans trade carbon with each other at a current price of over $100 a tonne,”.
This allows for valuing the carbon sequestration of a forest elephant. As Ralph said,
“the lifetime expected discount earnings of an elephant is $2.6m, equivalent to a lifetime salary of $50,000”.
As Walid pointed out, there is a vast difference in value for a dead elephant, $40,000 for its tusks, versus a live one that generates an income of $50,000 a year, which can be used to fund new jobs for the local community. Enabling an illegal logger who earns a monthly salary of $150 to retrain and become a field researcher and technician who can make over $600 monthly. A win-win-win for the elephant, the local community, and the planet.
It is not just fauna that can be valued but also flora. Chami said:
“Seagrass’s extraordinary ability to sequester carbon means it is worth at least $1 trillion.”
Using scientific estimates of the ability of oceans, flora, and fauna to capture carbon means these can be given a value that provides us with a mechanism for us to invest in nature or for a business to mitigate its impact on biodiversity.
4. The role of frameworks in assessing the threat to biodiversity
One of the most important lessons learned from climate change is creating a consistent language and an assessment framework to enable companies to make a set of recommended disclosures. These disclosures will provide valuable data for others to assess a company’s impact on biodiversity.
Implementing the TNFD later this year will be a significant step in enabling companies and investors to assess their impact and dependency.
Speaking at the Natural Capital conference, Emily McKenzie, Technical Director at TNFD, described the three core components of the TNFD.
“The first is a set of core concepts and definitions to build a consistent language.”
The second is a set of recommended disclosures to determine what should be made transparent by corporates and financial institutions about the way they interact with nature and the risks and opportunities which emerge from that.
“The third is an assessment framework to help companies get started because natural capital is new and complex,”
said McKenzie. This gives simple ways for a company to assess its impacts and dependencies and the emerging risks and opportunities.
The TNFD is not, however, the only framework. Fellow panelist Stephanie Hime, Director at Little Blue Research and part of the Capitals Coalition Technical Advisory Board, said:
“It easy to feel scared by the number of new frameworks in development.”
But there are three which overarch all of them – the commitments on the global biodiversity framework, TNFD’s test beta framework, and the science-based targets for nature.
“Companies should take comfort in the alignment which is starting to take place,”
5. The power of collaboration
Until recently, we have thought of natural, social, human, and produced capital as separate entities, which ignores how these different resources influence one another.
Speaking at the conference, Mark Gough, CEO of Capitals Coalition, said:
“We need a system to be able to look at these capitals in an interconnected way.”
He added that the Capitals Coalition was established to enable collaboration between people with different expertise and skill sets.
The importance of experts in different types of capital working together is illustrated by the recognition that climate change and biodiversity must be tackled together.
But there is a steep learning curve. Natural capital is a new concept to companies and investors, so collaboration is vital to ensure biodiversity is saved before time runs out.
“We have followed an open innovation approach to developing the TNFD, putting out a beta version of the framework every three months.”
She added that anyone is welcome to provide a framework, which is then consolidated into the next version of the framework.
Collaboration is necessary when drafting frameworks and once companies get to the nitty-gritty of working with local communities to protect biodiversity. But, unfortunately, that doesn’t happen at the moment.
Speaking at the Natural Capital conference, Abi Gatty Irving, Executive Director at the THIN GREEN LINE FOUNDATION UK, said:
“The knowledge of indigenous communities – and their rangers – is not listened to in board rooms.”
Rob ends his post with a call to action.
Together we can all create a world worth living in.
We have opportunities to invest in Liberia to help protect and restore the forest elephants, create new jobs and fund better access to healthcare in the Gola Rainforest and Sapo National Park.
By investing in Plymouth City , Plymouth Sound National Marine park, and Dartmoor, we can take a comprehensive ecosystem approach to protect and restore beavers, peatland, and seagrass to create a nature-positive place to live, work and visit.