Notes on the Finance for Nature Global Summit, May 2019
“A new investment paradigm to accelerate the Sustainable Development Goals”
By Martha Walsh, Communications Director
This week’s Finance for Nature Global Summit began with an address from Karen Rodgers, the Scottish Government’s Head of Financial Services and Fintech Policy, in which she — unwittingly or otherwise — summed up a key goal of Project Heather: “let’s take impact investing from niche to norm”.
The two day meeting in Edinburgh, organised by the Global Ethical Finance Initiative, the UNDP, the Scottish Government and the New York Declaration on Forests Global Platform, brought together parties from across the spectrum: institutional investors (including our host, Baillie Gifford), multinational corporations, governments, NGOs, to talk about finance for nature. Which is what, exactly?
Well, without wishing to depress you, we’re facing crises on a number of fronts. Climate, biodiversity, soil and land, water, plastic and pollution, oceans and inequality. If you don’t think those risks will affect your life, your livelihood or your pension, you may wish to remove your head from the sand, Ozzy. Did you know that 75% of all drinking water depends on forests? That 3.2 billion people depend on forests, farms or fisheries for their livelihoods? And that nature provides nearly 40% of our climate crisis solution?
We met to discuss the challenges, and share ideas to create solutions. Here are some of my takeaways.
We’re not speaking the same language
This was an international convention and as I often find these days, most of the foreigners spoke better English than us Brits. But there remained a language problem, and that was around a uniform way of demonstrating impact across different frameworks. Whether you work on a conservation project or as an institutional investor, the chances are you may not follow the same standards and metrics as your peers, much less between the former an the latter.
Impact calculation and reporting frameworks, something close to our hearts at Project Heather, are just one of the areas where standardisation is desired yet near-impossible. Bob Mann, President of Sustainalytics (the leading independent ESG ratings company), noted sagely, that data will always be subjective and qualitative, there’s no way around it.
But whether we’re talking about Natural Capital, Natural Capital Accounting, Landscape Finance, or even just using the profusion of acronyms that fills the sector (get your SDGs here!), more education and more standardisation is required. Nature-friendly investments too often fail to attract the capital required, but not because there is no return — instead it could be the lack of scale, country risk, political and regulatory regime instability, dependence on volatile markets, clarity on business model and cashflows, no agreement on metrics. That the capital is focused in certain global regions while nature-friendly projects are mostly in others throws up immediate barriers.
There’s money to be made
This isn’t about hugging trees or knitting your own yogurt. Half of the World Economic Forum’s top global risks relate to the environment and to climate change, and have a material impact on a company’s operational costs, reputation, risk and profitability. Innovative financial instruments can help accelerate private investment in inclusive, nature-friendly enterprises. Sustainable supply chains are reliable ones, and reliability is music to consumer goods companies’ ears.
The multinationals are trying
We heard from Tesco, Unilever, Nestle, and Kering about their efforts to improve the supply chain and reduce deforestation.
- Kering, the luxury goods company, sees sustainability not just as an ethical necessity but as a driver of innovation and value creation. Their Materials Innovation Lab is a library of more than 3,000 sustainable fabric and textile samples to ensure responsible alternatives are used within the brands’ collections. The company has published an annual environmental profit and loss account since 2015.
- Unilever is the largest global consumer of palm oil at 1.5 million tonnes per annum, yet only accounts for a tiny percentage of the global market. The company has set itself a zero net deforestation target, but their efforts need to be replicated across the sector to effect change, with only 41% of palm oil worldwide certified as non-deforestation.
- Tesco are busy calculating their soy footprint, in order that they can ensure it, too, does not contribute to deforestation. That is easier said than done — soy goes into animal feed which ends up in that chicken tikka masala ready meal you might pick up on the way home from work, so to ensure 100% certified sources is challenging. They highlight the work of the Cerrado Manifesto, the new frontier in deforestation in the Brazilian savannah.
- Nestle meanwhile has partnered with Business in the Community on LENS — Landscape Enterprise Networks — a regional approach which harnesses commercial interest in how landscapes function to drive investment and innovation around strategic assets like soils, aquifers, access infrastructure, habitats and tree cover.
90% of us want ethical investments but only 5% of us have them
If you have a pension — and since auto-enrolment in the UK you probably do — have you checked where it’s invested? Is it in the default fund and is there an ethical alternative? If there isn’t an ethical alternative, have you asked your employer’s pension fund provider why not?
Scotland the brave
The Scottish Government is one of only seven worldwide to have adopted the United Nations Sustainable Development Goals into a national performance framework. Nature is indivisible with the SDGs, and collaboration is needed to create solutions. That’s what is refreshing about this community. It’s one thing for peers within a sector to work together; but to get the range of organisations in one room — from the biggest companies and institutions to charities, NGOs, development agencies and other non-commercial enterprises — is unusual to say the least. But we shouldn’t be surprised to find such a selection here in Edinburgh, a city at the heart of a move towards sustainable finance and sustainable economic growth. The Davos of ethical financing? (™Chris Tait) It might just be!
