Natural solutions – a proven record
We’re getting closer to the intellectual buy-in we need. Increasingly, engineers and other technical practitioners concur that in some situations nature-based infrastructure can be as effective as man-made infrastructure—and often at a lower cost. One of the best examples is the protection of natural watersheds in order to ensure clean water supplies: New York City has long relied on watershed conservation to clean and filter its water, a solution it expanded in the 1990s as the city faced deterioration of its water quality from increased sources of pollution.
National and municipal governments around the world, with the help of corporate partners and NGOs such as The Nature Conservancy, have made further investments in watershed conservation through water funds—a system in which downstream water users compensate farmers and other upstream users to protect and restore watersheds. Activities like reforestation, the use of cover crops between growing seasons and stream bank restoration can both reduce runoff and nutrient pollution and increase crop yields, reduce carbon emissions, and protect biodiversity within watersheds.
Recent years have also seen recognition of the role nature plays in protecting coastal communities. The devastation of Hurricane Sandy in New York and New Jersey in 2012 was a turning point—it was clear that communities fronted by dunes, marshes, and oyster reefs suffered less damage than those without these natural defenses. Since then, research by The Nature Conservancy has quantified the effects of healthy reefs and wetlands on wave force and erosion. In Florida’s Miami-Dade County, the local government is now working with engineering firm CH2M and The Nature Conservancy to assess the benefits of mangroves and coral reefs for coastal flood risk reduction, and similar efforts from Grenada to Vietnam have shown promise.
Perhaps most significant is the role that nature can play to mitigate climate change. We’ve known for a long time about the important role of tropical forest conservation in curbing emissions from the land-use sector. But nature’s potential reaches far beyond tropical forests. We realize now that if we look across forests, agricultural lands and wetlands, nature can deliver more than a third of the emissions reductions we need by 2030 to keep global temperatures from rising more than 2 degrees Celsius—the primary goal of the Paris Agreement.
The potential for private financing
Promising as these solutions are, implementing them will require funding—the second level of buy-in. And even if policymakers back their support with funds, public financing alone, or even public financing combined with philanthropy, won’t allow us to scale enough projects to address our global sustainability goals. But public and philanthropic funding are crucial to help create the conditions that will attract the private conservation financing needed to change the game.
Private conservation finance is a young but rapidly growing field. A new generation of investors and consumers expects less environmentally impactful products and services, and companies are seeing opportunities to make money. Credit Suisse CEO Tidjane Thiam stated the case plainly in a report published by Credit Suisse and McKinsey & Company in January: “The continuing disappearance of Earth’s last healthy ecosystems is sadly no longer news…What is news is that saving these ecosystems is not only affordable, but profitable.”
In an April report, Credit Suisse followed up with a series of strategies through which companies and investors can profit from conservation finance, including investment in ecosystem services and the use of finance mechanisms to improve agricultural practices. NatureVest, the Conservancy’s impact investment unit, is structuring projects in this vein, including a debt-for-nature restructuring plan that will allow the government of the Seychelles to redirect some of its debt toward marine conservation and climate adaption. Other NGOs have developed similar deals, including sustainable coastal fisheries and reforestation projects led by the conservation organization, Rare.
These projects represent a good start—but they don’t yet represent a sufficient portfolio to attract serious private investment. As my colleagues Andrew Deutz and NatureVest lead Marc Diaz recently wrote, a project worth tens of millions is still “one or two orders of magnitude below the scale at which institutional investors deploy capital.” Furthermore, they note, the lack of track record for such projects increases the perceived risk for investors. In order to attract the financing needed to scale conservation projects…we first have to scale conservation projects.