It’s going to take substantial investment in natural capital to sustain humanity’s future on Earth.

But where is that funding going to come from?

For the Coalition for Private Investment in Conservation (CPIC), its members, and attendees of the organisation’s recent bi-annual meeting in London, private investment capital may be the answer with the most potential to contribute to narrowing the nature conservation financing gap.

The meeting, co-organised by Palladium and the Cornell Atkinson Center for Sustainability, was held at Palladium’s new London office and was attended by over 50 delegates, representing leading nature investors and conservation organisations.

The group gathered to share the latest updates on nature finance and take part in discussions on biodiversity credits, business models, and the market enabling conditions that are critical for the scale up private finance for nature. “CPIC events are not only a platform for discussion, but also a catalyst for actionable climate and nature finance solutions,” says Alan Martinez, Senior Manager at the Cornell Atkinson Center for Sustainability.

The CPIC is a global multi-stakeholder initiative, made up of a group of investors, banks, project developers, NGOs and research institutions, focused on building the enabling conditions that support a material increase in private, return-seeking investment in conservation.

“For the event, we gathered a group of experts to have a series of conversations focused on finding solutions and progressing three priority areas for driving the nature market forward,” explains Palladium Director of Climate Finance, Elmedina Krilasevic. “We were thrilled to host the event in our new office and even more so, thrilled at the calibre of conversations and insights shared by our speakers and in the breakout sessions we held.”

The three priority areas of focus were implementing biodiversity credits, the enabling environment for nature investment, and business models for nature and biodiversity.

Implementing Biodiversity Credits

Biodiversity credits can be used to boost financing for the conservation and restoration of biodiversity by allowing private companies to finance activities, such as forest conservation or restoration, that deliver net positive biodiversity gains. The discussion focused around some thorny issues that need to be solved if these instruments are to create a meaningful impact, including data and buyer integrity, and siloed approaches for measurement.

“The group agreed that we need to unify the various frameworks and tools, and support initiatives that drive data integrity,” Krilasevic reports. “We are starting to see harmonisation of these approaches by sector leading actors like the Biodiversity Credit Alliance, and Global Biodiversity Framework which will help to drive greater clarity and integrity in the marketplace.”

Some group members also called for greater regulation to catalyse the market. This would increase investor confidence in the market and increase investment in biodiversity projects and project developers.

“Creating clear demand signals remains the most urgent issue to further catalyse the biodiversity credit market” adds the Biodiversity Working Group Co-Chair Edit Kiss. “It was encouraging to see a great interest from working group members encompassing investment and supply side. However, for investors to be able to start allocating risk capital for pilot projects, more clarity is needed on the business case for companies using those credits.”

The Enabling Environment for Nature Investment

The financing gap for the restoration and protection of valuable landscapes and the life within them remains huge; Ecosystem Marketplace estimated that US$300-400 billion per year is needed to preserve healthy ecosystems globally. Currently, only around US$52 billion per year flows into conservation projects, of which just US$8.2 billion was committed by the private sector between 2004 and 2015. Public funding will not fill this gap alone. It will be critical to find ways to attract private finance into the marketplace.

And the investor community is interested. Investors recognise that the preservation of the world’s ecosystems presents a big opportunity as well as reducing threats to their wider portfolio of investments. In recent years it’s been promising to see increased investment into conservation; however, many of these investments have been small scale. What is needed is investment into larger projects that can deliver landscape level impact for people and nature.

The groups agreed that there is too much distance between suppliers of nature and biodiversity projects and the financers. Project developers are often based in emerging markets, far from the actors who manage the funding that is needed to develop these projects and bring them to market. So, the supply and demand need to be closer, to get a better understanding of how to work together.

Ultimately, bringing investors closer to the market and helping them to get a better understanding of this new asset class will also help to reduce perceived market risks.

Business Models for Nature and Biodiversity

According to those gathered, there is a lack of commercially viable and replicable biodiversity business models. Biodiversity markets are new and not enough is understood about how to design and create successful and investable projects that can deliver biodiversity and nature and outcomes for people whilst also being financially viable.
More examples will help facilitate replicable investments in conservation projects that deliver biodiversity outcomes to be commercially viable and investable.

What was clear, says Krilasevic, is that investors are increasingly recognising the world and our future depends on nature and its services, making the connection between thriving ecosystems and economic success abundantly clear. “It was encouraging to see that the solutions to many of the challenges facing the market were becoming clear and that the skills and expertise of CPIC as well as their global clout will help to drive the market forwards,” she adds.

“All eyes will be on Biodiversity COP16 in Colombia, as a platform to find solutions to these challenges on a global scale.”

For more, contact info@thepalladiumgroup.com.