Nature's regenerative power
Nature-based solutions, including the protection, restoration and sustainable management of our land systems, provide an opportunity for investors to diversify portfolios and minimise their portfolio climate-risk.
Nature is in peril. The economic growth and rise in global prosperity that we have seen over the last half-century has been based on an extractive, wasteful and fossil-addicted economy which has resulted in a climate crisis and the destruction of nature at an unprecedented scale.
More than 55% of global GDP depends on nature. From construction to energy to food: nature is the true engine of our economy. Yet we have already breached six of the nine planetary boundaries identified by science as underpinning environmental stability. As we push past these limits - such as climate change, biosphere integrity and land system change - these boundaries interact, creating cascades that reach across multiple systems. Many of these boundaries are now on the threshold, or have already breached the threshold, of long-term, irrecoverable, tipping points.
We are eroding the foundation of our economy.
Nowhere is this more apparent than in our broken food systems. Food production is responsible for 80% of deforestation, 35% of greenhouse gas emissions, and is the single largest cause of biodiversity loss on land . We must transition to deforestation-free and regenerative farming methods that restore nature while mitigating and adapting to climate change. Crop diversity will replace monocultures; technological innovations and revitalised natural ecosystems services - such as insect pollinators and pest predators - will reduce agricultural chemical inputs; we will engineer climate-resilient crops; and we will help nature to renourish our degraded soils. We will produce more food from less land, better food for healthier diets, and provide space for nature to regrow.
The same economic paradigm shift is needed across all sectors. We must move from an extractive to a regenerative economy. Where we take less and recycle and reuse more. And where we harness nature’s ability to provide materials and essential ecosystems services in a way that boosts biodiversity.
A net-zero, nature-positive economy
Increasingly, nature is becoming an entirely new asset class, creating value, cash flow and returns. Nature-based solutions, including the protection, restoration and sustainable management of our land systems, provide an opportunity for investors to diversify portfolios and minimise their portfolio climate-risk.
Innovations in nature-based real assets will help investors realise green alpha while playing a key role in boosting biodiversity and driving the transition to a nature-positive economy. Finance will turn deforested, underperforming landscapes into biodiverse regenerative farms and agroforests. The commodities produced will be known as regenerative commodities and will command a premium among buyers required by regulations and consumer sentiment to minimise the environmental impact of their business models. At the same time, as landscapes are restored to health, they will benefit from the growth of new markets that reflect their increased value as stores of carbon and homes to a wider range of biodiversity. This will be the nature premium.
We believe that nature is currently the world’s most under-priced asset class. As the financial community wakes up to the essential role nature will play in tackling the climate challenge, demand for regenerative commodities will drive the biggest revaluation of the next century.
For long our economic model has prospered at nature’s expense, but a new economic paradigm is now beginning to emerge. Nature is worth investing in.