Sustaining Investments in Ecosystem Services
“Private finance can and must be harnessed to drive critical protection and management of biodiversity and ecosystem services. […] Biodiversity and ecosystem services, which are often referred to as nature, are the foundation of human well-being and economic activity.”
(The World Bank Group, Mobilizing Private Finance for Nature, 2020, Executive Summary)
Deterioration of Nature – transformative change – financial challenges
Socially sustainable mobilisation of expenditures and capital investments for nature are urgently needed to restore the basic human relationships with nature that enable human life on earth.
“Financial and climate stability are two increasingly interdependent public goods. But, as we enter the Anthropocene , long-term sustainability extends to other human-caused environmental degradations such as biodiversity loss, which could pose new types of financial risks.”
(Bank for International Settlements, The Green Swan. Central banking and financial stability in the age of climate change, 5. Conclusion – Central banking and system resilience, 2020)
Since the first industrial revolution, much of the world’s land surface and most of its seas have been radically altered and polluted. During this process, a large number of biological species have lost their natural habitats and become, or risk becoming, extinct.
Deep and parallel changes in the structure, functioning and economic characteristics of societies have their cultural reference in mainstream economic theories and conceptualisations. “Land” comes in classical economic theory before “labour, capital and entrepreneurship” in the list of “factors of production”, and stands out in our minds as a given and self-sufficient piece of reality.
And so, within mainstream economic thought, “land” becomes understood as simply the first “building block of the economy”, “what people use to produce goods and services” (Federal Reserve Bank of St. Louis).
We should not be surprised therefore to observe a dramatic reduction in the wealth of land compared to a couple of centuries ago: put simply, “people have used” a great part of that wealth “to produce goods and services”. When “using land” only as a “factor of production” we also “consume land”, and this is what humans have been doing, on a massive scale, since the first industrial revolution.
In economic theory, “factors of production” are intrinsically “scarce”: “This scarcity of resources means that producing some goods and services leaves other goods and services unproduced” (Federal Reserve Bank of St. Louis). This implies, on the one hand, that some less economically attractive demand remains unsatisfied, and, on the other, that “scarcity” defines pricing of the required resources.
Looking back through history over the millennia and centuries, it is easy to see that, often, political events were driven by the desire to access directly “land” and exert power over it (i.e., “natural resources”) in order to reduce the pressure of scarcity, limitations in the production of goods and services and even the need to share with others its profits and rents.
“The factors of production are resources that are the building blocks of the economy; they are what people use to produce goods and services. Economists divide the factors of production into four categories: land, labor, capital, and entrepreneurship.
The first factor of production is land, but this includes any natural resource used to produce goods and services. This includes not just land, but anything that comes from the land. Some common land or natural resources are water, oil, copper, natural gas, coal, and forests. Land resources are the raw materials in the production process. These resources can be renewable, such as forests, or nonrenewable such as oil or natural gas. The income that resource owners earn in return for land resources is called rent.”
(Federal Reserve Bank of St. Louis – https://www.stlouisfed.org/education/economic-lowdown-podcast-series/episode-2-factors-of-production# – retrieved 2022-12-26)
“Natural capital and ecosystem services are essential to economic activity in many forms and their degradation (e.g. soil erosion due to climate change) can have a major impact on human and produced capital.”
(Bank for International Settlements, The green swan: central banking and financial stability in the age of climate change, 2020, § 4.5 Integrating sustainability into corporate and national accounting frameworks, p. 61)
But outside mainstream economic theory and conceptualisations, “land” is not merely a “factor of production”; it is, instead, the natural wealth sustaining all forms of life and so the foundation of human well-being and economic activity.
And, so, humans need to go beyond “land’s” sole consumption and bestow upon it actions which enable its continuous regeneration and restoration: this is a very basic description of a truly “circular” perspective in the “use of land” by humankind.
“Circular” implies a bidirectional relationship between humans and the rest of Nature, and so an adequate and constant flow towards Nature of resources (both natural and human), together with goods and services resulting from human economic activities. This flow of natural and human resources, as well as of goods and services, towards Nature corresponds to the need for the preservation, restoration and maintenance of the natural wealth sustaining all life.
“The United Nations Environment Assembly (UNEA) has noted that, in a circular economy, ‘products and materials are designed in such a way that they can be reused, remanufactured recycled or recovered and thus maintained in the economy for as long as possible, along with the resources of which they are made, and the generation of waste, especially hazardous waste, is avoided or minimised, and greenhouse gas emissions are prevented or reduced. […]
The interconnections between climate change, biodiversity loss, overconsumption of resources, waste generation are now well recognized, as are the consequences from the associated impacts to people such as environmental injustices, social inequity and work opportunities. […] A just transition framework for the circular economy can identify opportunities that reduce waste and stimulate product innovation, while at the same time contributing positively to sustainable human development, ensuring that no one is left behind and to sustainable growth and jobs. […]
The Alliance would gather:
- Governments that are willing to take the leadership in advancing on circular economy and resource efficiency to achieve sustainable consumption and production (SDG12). The members are represented by the authorities that are responsible for and are in charge of developing policies and initiatives in their respective jurisdiction.
- International organisations, including UN agencies, funds and programmes, that play a key role in accelerating the achievement of sustainable consumption and production as well as natural resource management and want to support a global just transition to a resource efficient and circular economy as a means to a more equitable use of resources for achieving sustainable development.
And would also gather:
- Circular economy stakeholder platforms at regional level to increase consistency and cooperation with and among existing platforms.
- Business leaders, professional associations and industrial clusters who want to seize the opportunities offered by the circular economy model for the improving resource efficiency of their businesses, thus contributing to decoupling the world’s economic growth from environmental degradation.
- Environmental NGOs, civil society organisations and representatives of Indigenous Peoples who want to provide their expertise on circular economy practices contributing to sustainable consumption and production, and better natural resource management.
- Relevant international networks and initiatives, as their participation will ensure optimal information sharing and complementarity.”
(GACERE, Concept Note Global Alliance on Circular Economy and Resource Efficiency (GACERE). Towards Just Transitions, 22.02.2021)
“the EU needs to accelerate the transition towards a regenerative growth model that gives back to the planet more than it takes, advance towards keeping its resource consumption within planetary boundaries, and therefore strive to reduce its consumption footprint and double its circular material use rate in the coming decade.”
(European Commission, Circular Economy Action Plan. For a cleaner and more competitive Europe, 2020, 1. Introduction)
“NBS and Circular Economy and Bioeconomy: There is a need for greater research on how NBS fits with circular and bioeconomy approaches. Some examples are evident, for example connecting greening buildings to wastewater reuse or connecting the bioeconomy to decentralised and connected green infrastructure and organic waste management. At the EU level, the Strategy for the Bioeconomy encompasses all sectors and associated services and investments that produce, use, process, distribute or consume biological resources, including ecosystem services.”
(EU Commission, The vital role of nature-based solutions in a Nature positive economy, 2022, sec. 5.3.1, p. 102)
“Sustainable and circular management and use of natural resources as well as prevention and removal of pollution are mainstreamed, unlocking the potential of the bioeconomy, ensuring competitiveness and guaranteeing healthy soil, air, fresh and marine water for all, through better understanding of planetary boundaries and deployment of innovative technologies and other solutions, notably in primary production, forestry and bio-based systems.”
(EU Commission, HE Work Programme 2023-2024, Part 9 Food Bioeconomy, Natural Resources, Agriculture and Environment, Introduction, Expected impact (strategic plan), pp. 15, 16)
The simple acknowledgment that the “use of land” by humans cannot result in its consumption alone, but requires corresponding human actions in favour of its continuous regeneration and restoration in a truly “circular” perspective, poses a huge challenge for humankind.
Besides the inevitable opposition and path-dependencies of human societies and economic systems, implementing “circularity” may become extremely difficult given that Nature, while providing the ecosystem services which regulate the climate and absorb carbon, prevent soil erosion and floods, and supply humankind with food, clean air and water, is nevertheless an intricate web with Biodiversity at its core, mostly unknown and therefore mostly out of human control.
Confronted with this enormous challenge, environmental scientists have moved to the simple conclusion that solutions to the environmental crises need to build on Nature itself as a vital ally in the fight against climate change and all kinds of degradation of ecosystem services. Within this perspective, only Nature-based Solutions (NbS) can provide a template for actions to protect, restore and manage sustainably Nature in order to maintain and enhance its vital ecosystem services.
The deployment by businesses of current expenditures and capital investments on behalf of Nature has the potential to address an important part of the overall exploitation of natural wealth by humans. However, these financial outlays will hardly ever offset, on their own, the loss inflicted on Nature by humans. In fact, part of Nature’s loss is not directly related to economic activities but rather indirectly, i.e., through an abusive consumption of goods and services and in the “use of Nature”.
Poor handling of waste, leakages of toxic substances and other abuses of the natural environment, all stemming from an inadequate disposition of care by humans, exemplify losses of natural wealth which, although occurring outside direct economic activities, have an enormous negative impact on Nature. The pollution of the Earth’s oceans by plastics is a clear and negative showcase for all this.
Nevertheless, such abuses of the natural environment may often stem both from general economic frameworks dealing inadequately with negative externalities (e.g., their inadequate pricing) and from insufficient or ineffective enforcement of existing regulations.
The setting up and enforcement of environmental legislation, the environmental education of citizens, the designation of protected areas and volunteer work to help Nature represent some self-explanatory examples of flows of social and natural resources towards Nature which are not directly related to economic activities, but are addressing the need to transform the mainstream models of consumption and production according to a truly “circular” perspective”.
“The biodiversity crisis and the climate crisis are intrinsically linked. […] But just as the crises are linked, so are the solutions. Nature is a vital ally in the fight against climate change. Nature regulates the climate, and nature-based solutions, such as protecting and restoring wetlands, peatlands and coastal ecosystems, or sustainably managing marine areas, forests, grasslands and agricultural soils, will be essential for emission reduction and climate adaptation.”
(European Commission, EU Biodiversity Strategy for 2030, § 1)
“Due to the ability of NBS to deliver multiple benefits, NBS can be as much as five times more cost effective than conventional engineered solutions. Although gray infrastructure is effective when meeting one goal (e.g. treat water or retain water), it can be extremely costly to build and to maintain and, over time, its value may depreciate significantly,while investments in NBS may appreciate as more services are realized”.
(United Nations Global Compact CEO Water Mandate and Pacific Institute, Benefit Accounting of Nature-Based Solutions for Watersheds: Guide, 2021, p. 8 – https://ceowatermandate.org/nbs/wp-content/uploads/sites/41/2021/03/guide.pdf )
Developing Nature-based Solutions, scaling up the knowledge of Nature for the definition of such solutions and applying environmental monitoring technologies to the various layers of the environment: all this, and more, needs to be done to build a truly circular relationship between humans and the rest of Nature for the benefit of its continuous regeneration and restoration.
Over time, wide ranging efforts to tackle this challenge have been developed internationally. Many different approaches, schemes and solutions have been tested and deployed across different geographies and different natural, social and institutional environments, all while taking into account various critical issues.
Now that the climate and biodiversity crises are posing an existential threat, this mine of knowledge and experience is being evaluated in order to address the complexity and scale of the required forthcoming actions.
One main focus is on solutions which address the need to introduce and expand payments for ecosystem services (PES) throughout societies.
Well-established systems such as The EU Emissions Trading System (EU ETS), to protect the quality of the Earth’s atmosphere by regulating carbon emissions, are being further developed and new solutions introduced to deliver payments for other ecosystem services such as positive biodiversity impacts and ecotourism offerings.
To address the long-time horizon issue of NbS projects, i.e., typical lifecycles of five or more years, funding is often obtained through blended finance. This combines early-investment concessionary capital from the public sector, such as multinational development banks (MDBs) and philanthropic organisations, together with the potentially much larger pool of private capital available from the corporate and institutional fund markets but which seeks higher commercial returns.
The EU Horizon Europe research programme, targeting actions which support the green and digital transitions, further examplifies, well illustrating the complexity of this challenge and the significant amount of resources (social, natural and financial) required to meet it.
“A hydropower company faces major costs due to upstream riverbank erosion; sediment in the water is damaging equipment and reducing operational efficiency. The company knows that planting vegetation in the river’s catchment area would stabilize the soil and prevent erosion […] Technical assistance from the Natural Capital Financing Facility (NCFF) helps the hydropower company enter into an agreement with a group of farmers in the catchment area. Under the agreement, farmers will stop grazing livestock on the land directly adjacent to the river, and instead engage in replanting and forest protection activities. In return for these activities (which deliver ecosystem services such as sediment prevention and increased water quality), farmers will receive annual compensation payments.”
(European Commission, EIB, Investing in Nature: Financing conservation and Nature-based Solutions, a practical guide for Europe, Part C, Theoretical Case Study 1, p. 16)
“The EU Emissions Trading System (EU ETS) is a cornerstone of the EU’s policy to combat climate change and its key tool for reducing greenhouse gas emissions cost-effectively. It is the world’s first major carbon market and remains the biggest one.”
(European Commission – https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets_en )
“In early 2020, Finnish forest-based bioindustry company, UPM, became one of the first companies to link a revolving credit facility (RCF) to a biodiversity target. The interest on the €750 million RCF is tied to UPM meeting its goal of having a net positive impact on biodiversity in the company’s forests in Finland, and a separate carbon reduction target (BNP Paribas, 2020).”
(The World Bank Group, Mobilizing Private Finance for Nature, 2020, p. 56)
“The Natural Capital Financing Facility (NCFF) was established by the European Investment Bank and the European Commission as a dedicated programme to support pioneering conservation and NbS projects. […] Examples of projects include green infrastructure (e.g. green roofs, ecosystem-based rainwater collection, flood protection and erosion control), payment for ecosystem services (e.g. programmes to protect and enhance forestry or to reduce water or soil pollution), biodiversity offsets (e.g. compensation pools for on- and off-site compensation projects), pro-biodiversity and adaptation businesses (e.g. sustainable forestry, eco-tourism) and NbS for adaptation to climate change.”
(European Environment Agency, Nature-based solutions in Europe: Policy, knowledge and practice for climate change adaptation and disaster risk reduction, EEA Report No 01/2021, § 5.4, p. 93)
“From an investment perspective, the instruments for financing NbS can be based on debt, equity or a combination thereof […] Green loans are made available to finance eligible green projects. The green loan principles of the Loan Market Association specify under which conditions a project may access green loans. […] First introduced by the European Investment Bank in 2007, green bonds are expected to play an important role in financing the transition to a carbon-neutral and resilient Europe and the EU’s next generation recovery plan. The EU Green Bond Standard, recommended by the High-Level Expert Group on Sustainable Finance, will provide transparency and certainty over the green credentials of investments.”
(European Environment Agency, Nature-based solutions in Europe: Policy, knowledge and practice for climate change adaptation and disaster risk reduction, EEA Report No 01/2021, § 5.4, p. 93)
“The public sector needs to create a supportive enabling environment with efficient and effective incentives, standards, and regulations and to provide data and concessional finance […] Multilateral development banks (such as the World Bank Group) can play an important role in bringing the public and private sectors together – including through de-risking and scaling projects.”
(The World Bank Group, Mobilizing Private Finance for Nature, 2020, p. 11)
“The Wyre Catchment Natural Flood Management Project (Wyre NFM Project) will deliver more than 1,000 targeted measures to store, slow and intercept flood water and prevent peak flow in a catchment in England. […] The Wyre NFM Project aims to use nature-based solutions to reduce flood risk […] using a blend of public and private finance. […] Discussions on this concept began in 2016 after Storm Desmond flooded hundreds of properties in the Wyre catchment […] The estimated costs of the Project comprise £1.5 million of capital expenditure, and £50,000 a year in running costs, including the land manager payments and maintenance costs of the interventions. To cover these costs, the Project identified beneficiaries to pay for the ecosystem services that these interventions generate. The five buyers identified were Flood Re, United Utilities, the Environment Agency, Wyre Council and the Northwest Regional Flood and Coastal Committee (RFCC). […] It was estimated that the aggregated value of the ecosystem services being delivered outweighs the cost of creating and maintaining these interventions several times over. A total of £2m in ecosystem service payments is scheduled over the nine-year period.”
(Green Finance Institute, The Wyre Catchment Natural Flood Management Project – https://www.greenfinanceinstitute.co.uk/gfihive/case-studies/the-wyre-river-natural-flood-management-project/ )
“Water quality protection represents one of the most important sources of payment for ecosystem schemes […] For example, Perrier-Vittel, the world’s largest bottler of mineral water, entered into a land management agreement with farmers upstream from its water source to safeguard water quality. Because of changes in agricultural practices, the company was facing water pollution risk. Perrier contracted with landowners to increase the use of agroforestry practices that would contribute to improved water quality. These programs remain difficult to invest in because they tend to be tailored to the specific needs of a single company and are not easily scaled up – the Perrier-Vittel project covers only 1,000 ha. However, replication and aggregation may be possible.”
(The World Bank Group, Mobilizing Private Finance for Nature, 2020, p. 50)
Mobilising Investments for Protecting and Restoring Biodiversity by Harnessing Innovative Financial Solutions and Advanced Geospatial Analytics.
A widely adopted solution for addressing the limited size of a single source of revenue is to use a ‘stacking process’, whereby projects utilise multiple-source revenue streams, such as commodity and carbon credit sales, joined up with other PES, such as watershed protection provided by land managers through reforestation, which can be paid for by local municipalities and/or by water utilities.
Inadequate economies of scale also threaten the economic viability of NbS: not only at the level of the single project, but in terms of their ability to address the systemic dimension of the ecosystem crisis. From this perspective, a meaningful nature-positive impact can often be achieved only if carried out at landscape level by bundling single NbS projects into larger units, enabling a scale up of the potential investment (usually subject to minimum institutional fund thresholds) as well as of other critical factors such as the technology deployed.
Whereas a commodity & service sales (CSS) business model generates revenue through the sale of commodities, ecosystem services and other services, a cost-benefit (CB) business model generates revenue by capturing a portion of the operational or capital costs potentially caused by negative natural events, such as storms, through enhancing the resilience of ecosystems such as investments in forests to prevent soil erosion and flooding.
CB models currently account for a smaller share of the total NbS market since they depend on the specific physical features of a local project, such as nutrient removal from a water course, whereas CSS models can often access international markets, such as those for forestry products, to generate revenues.
Yet, CB models are those which often best tackle directly the cost to society of the depletion/degradation of limited natural resources.
“Given the delay in impacts often seen for NBS interventions and activities, in part because it takes time to get to full implementation scale, and in part because interventions and activities may take time to mature, it is often valuable to also measure impacts locally in early implementation. […] Understanding the temporal categories (short, medium and long term) associated with the NBS of interest is critical for investors who have set time-based goals or commitments. Investors need to have realistic expectations of when NBS actions will become fully effective, and consequently, when benefits will accrue and can be claimed.”
(United Nations Global Compact CEO Water Mandate, Benefit Accounting of Nature-Based Solutions for Watersheds. Guide, pp. 53, 56)
“Ecosystem goods and services accrue across multiple scales, ranging from local (e.g. within a property boundary) to landscape levels (e.g. watershed scale). To effectively provide benefits, NBS activities must be strategically deployed across these multiple scales, with significant benefits accrued at the landscape scale.”
(United Nations Global Compact CEO Water Mandate, Benefit Accounting of Nature-Based Solutions for Watersheds. Guide, p. 55)
“… a process known as ‘stacking’, whereby projects utilise multiple revenue streams to produce the optimum financial returns and impact outcomes. 15% of the transactions identified stacked revenues from both sales revenues and from capturing cost benefit, whilst 43% of the transactions identified had stacked revenues from within the same category (for example, stacking multiple sales revenue streams, such as commodities and carbon credit sales).”
(Finance Earth, A Market Review of Nature-Based Solutions: An Emerging Institutional Asset Class, p. 13)
Investors in NbS projects and their managers need to evaluate the efficacy of projects. This can be often achieved only by adopting advanced technical solutions for measuring natural phenomena and processing data.
Some technologies are increasingly being developed with a growing potential for their adoption which, in turn, is driving an acceleration in direct investments. Remote-sensing technologies are among those recognised to have a vast potential, but other technologies are also emerging i.e., in proximity-sensing, such as biosensors. In most cases, AI solutions are required in order to provide actionable information for NbS project managers, sponsors and investors.
“Any NBS project should begin and end with a clear understanding of the complexity of the biophysical, chemical, hydrological, hydrogeological, ecological and social conditions and challenges of the watershed in which the project is located.”
(United Nations Global Compact CEO Water Mandate and Pacific Institute, Benefit Accounting of Nature-Based Solutions for Watersheds: Guide, 2021, p. 55 – https://ceowatermandate.org/nbs/wp-content/uploads/sites/41/2021/03/guide.pdf )
“Nature-based solutions (NbS), specifically conservation and restoration of forests, are essential for tackling the climate and biodiversity crises – and nature tech will play a crucial role in enabling, scaling up and accelerating these solutions […]
A pressing challenge for NbS today is therefore to transform them from a solution that is scientifically compelling and increasingly demanded, into one that is operational, scalable, cost-effective, transparent and trustworthy. This is where technology and new data solutions to support business workflows play a critical role.
Today, high-quality remote-sensing technologies – made possible thanks to significant advances in sensor technology, computational and data processing capacity, as well as machine-learning and artificial intelligence capabilities – have the potential to transform the development and monitoring of NbS, and unlock unprecedented transparency.”
(Florian Reber, 5 ways nature tech can bring integrity and scale to nature-based solutions, World Economic Forum, 15 Dec. 2022 – https://www.weforum.org/agenda/2022/12/nature-based-solutions-are-essential-for-tackling-the-climate-and-biodiversity-crises/ )
The deterioration of Nature and the transition to a sustainable society and economy, based on circularity and enabling activities for the protection, restoration and sustainable use of Nature, pose unprecedent financial challenges and systemic risks, as increasingly recognized by central banks and supervisory authorities. This implies also the need for a credible financial regulatory framework. By providing valuable and accurate information, tools, and metrics, such a framework would allow investors, corporates and financial institutions to form decision-making processes based on reliable, consistent and standardised data.
The EU Commission is currently developing a taxonomy which defines the technical screening criteria that describe the conditions under which an economic activity qualifies as contributing to climate change mitigation or adaptation without conflicting against other environmental objectives. The widespread adoption and sharing of such a taxonomy could act as a fundamental catalyst for unlocking financial flows towards investments in Ecosystem Services and NbS.
Investors also need to be able to calculate the risk-return profile of an investment. In this regard, regulatory frameworks such as the “System of Environmental-Economic Accounting” (SEEA) have recently been designed by the UN for measuring ecosystem assets and their services in both physical and monetary terms.
Ultimately, a correct allocation of resources in a renewed regenerative and economically sustainable relationship with Nature can only emerge together with an institutional and public consensus recognising it as a natural stock of capital which yields a myriad of goods and ecosystem services.
In future, such a consensus could lead to the establishment of a global standardised reporting framework for Nature such as Natural Capital Accounting (NCA), in addition to the traditional frameworks of IFRS or US GAAP.
Within this perspective, investments in Ecosystem services and NbS could be on the cusp of emerging as a potential and new global financial asset class.
“The point is that the more we invest with foresight, the less we will regret in hindsight. Financial stability risks will be minimized if the transition begins early and follows a predictable path, thereby helping the market anticipate the transition to a two-degree world.
And that requires the right information. On this front, there has also been considerable progress in a short period of time.
[…] In late 2015, at the request of G20 Leaders, the FSB established an industry-led Task Force, under the leadership of Michael Bloomberg. It is developing recommendations for voluntary, consistent, comparable, reliable and clear disclosures around climate-related financial risks for companies to provide information to lenders, insurers, investors and other stakeholders.”
(Mark Carney, Resolving the climate paradox, Text of the Arthur Burns Memorial Lecture by Mr Mark Carney, Berlin, 22 September 2016, p. 9)
“Bringing the economic system back within Earth’s ‘sustainability limits’ […] involves much more than marginal changes in the pricing and accounting systems, and could entail re-evaluating the notion of endless economic growth itself.”
(Bank for International Settlements, The green swan: central banking and financial stability in the age of climate change, 2020, § 4.5 Integrating sustainability into corporate and national accounting frameworks, p. 63)
“Nature-based solutions (NBS) have the potential to combat pressing global problems, including climate change, water security and biodiversity loss. […] The primary challenge for corporations is that there is no standardized method to identify, estimate and monitor the benefits that NBS can provide, making it hard to build the case for investments in these solutions.”
(United Nations Global Compact CEO Water Mandate and Pacific Institute, Benefit Accounting of Nature-Based Solutions for Watersheds: Guide, 2021, p. 6 – https://ceowatermandate.org/nbs/wp-content/uploads/sites/41/2021/03/guide.pdf )
“In March, 2020, ASN Bank, along with a group of five other Dutch financial institutions, launched the Partnership for Biodiversity Accounting Financials (PBAB), which aims to develop a common accounting measure for the positive biodiversity impacts of investments. In 2016, ASN committed to having a net positive biodiversity impact by 2030 and has measured its biodiversity footprint every year since. ASN uses the ReCipe methodology developed by the Dutch National Institute of Public Health and Environment. The methodology generates a parameter that shows the fraction of species lost in a certain area during a certain time – the potentially disappeared fraction of species (PDF). The unit is then translated into hectares.”
(The World Bank Group, Mobilizing Private Finance for Nature, 2020, p. 66)
“The EU Taxonomy is an important piece of the puzzle to enable and scale up sustainable investment and thus to implement the European Green Deal. The Taxonomy aims to channel capital towards activities that substantially contribute to reaching the objectives of the European Green Deal, such as climate neutrality, zero pollution, preservation of biodiversity. […] This framework coherent with the European Green Deal will help limit the risk of greenwashing and avoid market fragmentation.”
(European Commission, Commission Delegated Regulation (EU) 2080/852, p. 1)
“Green loans are any type of loan instrument made available exclusively to finance or re-finance, in whole or in part, new and/or existing eligible Green Projects.
The green loan market aims to facilitate and support environmentally sustainable economic activity. The Green Loan Principles (GLP) have been developed by an experienced working party, consisting of representatives from leading financial institutions active in the global syndicated loan markets, with a view to promoting the development and integrity of the green loan product.
The GLP build on and refer to the Green Bond Principles (GBP) administered by the International Capital Market Association, with a view to promoting consistency across financial markets. The GBP are the internationally recognised voluntary issuance guidelines that promote transparency, disclosure and reporting in the green bond market.”
(Loan Syndications and Trading Association (LSTA), Loan Market Association (LMA), Asia Pacific Loan Market Association (APLMA), Green Loan Principles, Supporting environmentally sustainable economic activity, p. 2 – file:///Users/john/Downloads/Green-Loan-Principles-Feb2021-V04.pdf )
“The Partnership for Biodiversity Accounting Financials (PBAF), a partnership of financial institutions initiated in 2019, is developing the ‘PBAF Standard’. The PBAF Standard aims to provide guidance to financial institutions on biodiversity impact and dependency assessment and to define what is needed for these assessments to deliver the right information to financial institutions. In the development of its Standard, PBAF aligns and cooperates with other key initiatives. This includes (but is not limited to) the Taskforce of Nature Related Financial Disclosures (TNFD), the European Align initiative and the Finance for Biodiversity Pledge.”
(PBAF, Taking biodiversity into account. PBAF Standard v 2022. Biodiversity impact assessment – Overview of approaches, p. 7)
“A country’s natural capital accounts constitutes a system that records the state of the economy’s natural capital. The idea is to impute an accounting value to each type of natural capital and then add the values to reach the accounting value of the entire stock of natural capital to which the economy has ‘claim’.”
(P. Dasgupta, The Economics of Biodiversity: the Dasgupta Review Full Report, 2021, p. 117)
“The principles for recording stocks and flows, that are applied in ecosystem accounting can be used to organize data expressed in both physical and monetary terms. The use of common principles encourages the combined use of physical and monetary data. For entries in monetary terms, the SEEA EA applies the concept of exchange values wherein ecosystem services and ecosystem assets are valued at the prices at which they are exchanged, or would be exchanged if markets were present. This approach supports comparison of ecosystem accounting monetary values with those recorded in conventional economic and financial accounts.”
(United Nations, System of Environmental-Economic Accounting-Ecosystem Accounting (SEEA EA), p. 7)