Unconventional ideas to make biodiversity finance tangible

Ivo Mulder14 November 2008

The Nature of Economy and the Economy of Nature

Our presentation

1. What is Triple E and what do we do?

2. The biodiversity business case: underlying cause & current situation Ecological context Political context Financial context

3. The challenge to make biodiversity finance tangible Triple E’s FEDS model The investment approach to nature conservation

i. Landscape Auctionsii. Your Good Natureiii. For-profit: The challenge to structure ES into for-profit investment assets

4. How to further expand the biodiversity business market

1. What is Triple E and what do we do?

Triple E was set up in October 2006

12 employees / still very much a start-up company

Knowledge-driven company

The ecological and financial landscape is changing: Triple E is in the business of developing cutting edge financial mechanisms that better visualize and commercialize the economic value of nature.

Active in research, advisory and investment

Triple E

Investment Research Advisory

1) Landscape Auction& Your Good Nature (

www.yourgoodnature.com)

4 Business plans for nature areas – Public Private

Partnerships

5) Market analysis biodiversity-friendly

investments

3) FEDS Model: Economic valuation using standard

accounting

2) Biodiversity Investments-Banking-Brokerage-Fund manager

2. The biodiversity business case: macro level

Ecological context1) Take things for granted:

hardly price biodiversity in global economic system

2) Recognize the problem too late: Major debt with the global planet

3) Need for radical and coordinated effort to halt further destruction

Financial context1) Take things for granted:

Savings & economic growth

2) Recognize the problem too late: Iceland / Lehman Brothers, others

3) Need for radical and coordinated effort to halt further destruction

140% increase in CSR reporting by FIs in the G250 over 3 years (KPMG, 2005)

The business case climate change well established

Biodiversity has characteristics of becoming “the next climate change”

Biodiversity: 30% decline compared to 1970 (WWF Living Planet Index)

Several direct and indirect drivers leading to degradation & loss (Millennium Ecosystem Assessment)

FIs that are not able to identify companies with large footprints/dependency on ecosystems can become exposed to biodiversity business risks themselves

2. The biodiversity business case: company level

Shifting consumerpreferences

Increasedinvestor

expectations /Shareholder

value

Liabilities

Regulatoryconstraints

Poor staff morale /Reduced

productivity

Growing relevanceof biodiversity to

businesses

Reputation risk

Vulnerability ofassets to natural

disasters

Disruption of supply chain /

Increase in costsof inputs

2. The biodiversity business case: current situation

1. The ecological / scientific / NGO context Portraying the (economic) value of nature in terms of goods and services Developing the business case through looking at corporate risks & opportunities

PES is a promising approach – However, so far few successful pilots / cases The WBCSD is working with 20 multinationals

2. The political context After carbon markets, politicians starting to warm up to biodiversity markets

UNEP’s Green Economy Initiative TEEB – The Economics of Ecosystems and Biodiversity Legislation on biodiversity offsets (USA, Australia, Canada – Alberta)

3. The financial context The financial crises poses both threats and opportunities

1. A new approach to economic valuation: FEDS model Regard nature areas as ‘firms’: calculate all nature-related cash-flows Contribution to the (local) economy: € and jobs Not a perfect method: but provides a realistic picture to policy makers

2. The investment approach to nature conservation Landscape auctions:

i. voluntary payments to guarantee protection and capital stream for conservationii. Tapping into market nice to make corporate CSR commitments tangible

Your Good Nature: i. online market place to meet demand to directly and tangibly conserve biodiversity

For-profit investments: i. investments in businesses that deliver value for biodiversity and provide a ROIii. Structure ecosystem services into for-profit investment assets

3. The challenge to make biodiversity finance tangible

For

pro

fitN

ot-f

or p

rofit

4. Further expanding markets for biodiversity finance

How to move from philanthropy to business focus?

Are national laws in combination with voluntary business initiatives sufficient or do we need a global treaty?

Role of different stakeholders to stimulate investors to pilot a number of commercial funds / projects?

Governments: Relatively less attention has been placed on public pension funds, bonds, etc. There is a special obligation from a government’s perspective to take biodiversity into account

Non-governmental organizations: more a role as watchdog or cooperator?

Business / finance sector: how to increase the business rationale to integrate and account for biodiversity in full business models?

Thank you! Hartelijk dank!

Contact:+41 76 438 1570ivo@tripleee.nl

FEDS model Calculate nature-related cash flows using

traditional accounting principles Show how much capital is being generated

by nature areas and how many jobs are created and sustained

+/- 20 studies carried out in the Netherlands

Research

Landscape Auction Non-profit investment tool to generate

extra revenue stream to land owners 9 auctions held, 2 outside the

Netherlands 7 proposals with potential clients

Your Good Nature On-line marketplace to match demand to

contribute to nature conservation with supply from landowners

Looking for companies to ‘adopt’ the website

1 proposal with potential client

Not-for profit investment

Structuring into for-profit investment assetsInterest to set up a fund that invests in businesses with a positive impact on biodiversity, while being profitable on the long run.

Focus:- Organic agriculture, aquaculture- Sustainable forestry- Biocarbon- Biodiversity offsets- Investment in leasing ecosystem services

Challenge: For-profit investment

Useful sources:1. Bishop et al 2008: Building Biodiversity Business2. Mulder, 2007: Biodiversity, the Next Challenge for

Financial Institutions?