WEF: How to Finance the Nature-Positive Transition
The transition to a nature-positive economy represents one of the most promising avenues for economic growth and environmental sustainability in the next decade.
The World Economic Forum (WEF) estimates that it could create US$10tn in annual business opportunities and 395 million potential jobs by 2030.
However, it says the transition will require strong leadership and up to US$2.7tn in annual investments.
Lindsay Hooper, CEO at the Cambridge Institute for Sustainability Leadership, says: “We will need to make some significant changes in the near term in order to be able to secure a more prosperous, fairer, greener future.
“Being honest and courageous about what it will take to achieve that is really important.”
What is a nature-positive economy?
The nature-positive economy model aims to stop and reverse nature loss.
Wildlife populations have shrunk an average of nearly 70% over the past 50 years, and three quarters of the Earth’s land surface have been severely altered by human activity.
More than half of the world’s GDP is highly or moderately dependent on nature, so further damage will cause significant economic harm.
Nature-positive strategies represent a shift from minimising environmental damage to actively restoring and enhancing nature.
Moving towards this model will require divesting from assets that degrade nature and redirecting resources towards sustainable use and restoration.
However, Alexandra Banks, Global Nature Leader at EY, says: “The need to establish clear metrics to underpin a globally agreed definition of Nature Positive is critical.”
The growth of nature-related private financing has grown from US$9bn to more than US$102bn in the last four years.
The WEF’s advice on how to finance the transition
The WEF says financial institutions can support companies to reduce their impact on nature by participating in three spheres of influence:
- Financing ‘in value chain’ changes to corporate practices
- Financing ‘beyond value chain’ restoration and conservation activities
- Engaging to transform the underlying systems
In the Forum’s engagement with financial institutions, it identified key barriers to this including data availability on corporate disclosures, lack of resources and expertise and unclear business cases.
To combat issues with data availability, the WEF recommends that financial institutions prioritise and locate relevant data to assess the nature performance of companies and inform decision making.
It also suggests collaboration with public finance and industry to create financing mechanisms that will help to build strong business cases to reduce the impact on nature.
The WEF explains that climate change and nature need to be tackled together, and the nature-positive transition offers an opportunity for financial institutions to make progress on net zero goals.
Michael Baldinger, Chief Sustainability Officer at UBS, says: “Natural capital is the missing piece of our net zero puzzle.
“Both affect human lives, global economies and the business landscape.
“The capital needed to finance the net zero transition is around the same size as today’s equity market. It took us 150 years to build those equity markets, we have way less time to build a green capital market of an equal size.”
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