Financing the Nature Transition: a holistiQ approach

May 20, 2024

Nature, our keystone asset, at risk

Despite our growing dependence on nature, its global condition has been deteriorating for decades. Since the 1990s, produced capital, including roads and factories, has doubled while natural capital has declined by 40%.

Nature and biodiversity loss are closely tied to climate change, as ecosystems, remove more than 60% of anthropogenic carbon emissions. However, climate change and related risks like wildfires, droughts and pests are reducing nature’s ability to provide climate mitigation and adaptation services, and in some instances, can transform natural sinks into substantial sources of greenhouse gas emissions (GHGs).

In 2023, wildfires in Canada emitted 1,740 megatons of CO2, around three times the country’s annual GHGs. Wildfires have devastating impacts, including costs for fire suppression, property damage and increased insurance claims, amounting to a total of USD $10 billion annually. Insured losses from natural catastrophes, including those related to climate change, have been increasing over the last decades. Since 2017, average annual insured losses have exceeded USD $110 billion, more than doubling the previous five-year average of USD $52 billion. Climate change and related extreme events will also threaten price stability. A recent scientific study estimated that rising temperatures may cause food prices to increase by 3.2% per year . In an increasingly changing environment, investing in nature is a very cost-effective way to reduce climate and disaster risk while enhancing the adaptation of ecosystems, and therefore of our economic system.

Rethinking our economy: towards a Nature-based Economy

To ensure sustainable wellbeing and economic prosperity for future generations, we must embrace the nature transition a shift towards a regenerative economy that is powered by and prospers in harmony with nature: a Nature-based Economy. An economy that recognises nature as the most precious asset upon which our economic system depends.  A Nature-based Economy relies on healthy, biodiverse and resilient ecosystems and their associated ecosystem services – together referred to as nature-based assets. Nature-based assets are the foundation for creating circular bioeconomy value chains that are nature-, people- and climate-positive across the entire economy, connecting primary, secondary and tertiary sectors. Such transition requires investing at scale in transforming degraded natural capital real assets into nature-based assets through the implementation of Nature-based Solutions (NBS) and circular bioeconomy approaches that holistically integrate the landscape to the value chain level.

NBS encompass activities that protect, restore and sustainably manage natural and modified ecosystems simultaneously benefiting people and nature. NBS can be integrated into circular bioeconomy business models that enhance natural capital and the flow of ecosystem services throughout the business cycle. The advances of science and technology allow for the development of new circular biobased solutions capable of replacing and environmentally outperforming fossil and non-renewable products across most economic sectors: food, fashion, pharma, construction, chemicals, energy, tourism etc.

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Marc Palahi, Chief Nature Officer at Lombard Odier Group and Laura Garcia, Nature Specialist at Lombard Odier Investment Managers

Authors

Marc Palahi, Chief Nature Officer at Lombard Odier Group

Laura Garcia, Nature Specialist at Lombard Odier Investment Managers