Intel / North America
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Nature as equity
Summary
The discussion centers on the concept of nature credits and shares, exploring how to finance nature conservation, particularly in the global south. Current voluntary carbon markets face challenges, including high transaction costs and issues with measuring the effectiveness of projects. A proposal suggests treating nature as equity, allowing investors to earn dividends based on the ecological benefits generated by projects.
The proposal emphasizes the need for a shift from transactional credits to equity shares, where investors retain a portion of the benefits generated by nature projects. This model aims to ensure long-term sustainability and community involvement in conservation efforts. However, the effectiveness of this approach depends on the willingness of investors to prioritize ecological benefits over short-term profits.
Mangroves serve as a case study, highlighting their importance in preventing coastal erosion and maintaining clean water. The shift to a share model for mangrove projects could enhance community engagement and project durability, addressing the challenges faced by small agricultural producers in meeting compliance standards.
The discussion also touches on the role of governments in nature conservation, emphasizing that financial markets alone cannot address the public good nature represents. Public investment is essential to ensure societal benefits from nature and access for future generations, as well as to eliminate harmful subsidies that undermine conservation efforts.
Perspectives
short
Proponents of Nature as Equity
- Advocate for treating nature as equity to ensure long-term sustainability
- Propose a shift from transactional credits to equity shares for better community engagement
- Highlight the importance of public investment in nature conservation
- Emphasize the need for a robust regulatory framework to support nature credits
- Argue that ecological benefits should be prioritized over short-term profits
Skeptics of Market-Driven Solutions
- Question the assumption that financial markets can adequately address nature conservation
- Highlight the risks of prioritizing short-term profits over ecological sustainability
- Raise concerns about the effectiveness of nature credits without eliminating harmful subsidies
- Point out the complexities of ecological interdependence that financial markets often overlook
Neutral / Shared
- Acknowledge the challenges faced by small agricultural producers in compliance with standards
- Recognize the need for credible financial instruments in nature markets
- Discuss the importance of monitoring and verification in ensuring project success
Metrics
transaction_costs
40%
percentage of payments to projects going to intermediaries
High transaction costs hinder the scalability of nature credit markets.
our estimates about 40% of what somebody pays to these projects actually goes in the pockets of the various intermediaries.
carbon_reduction
50 tons
amount of carbon retained in the project
This retention is crucial for maintaining project viability and ecological benefits.
Imagine like a hundred tons of carbon say it's going to keep maybe 50
current_transactions
below one million dollars USD
total volume of transactions in nature credits
This indicates a severe underfunding of nature credit markets.
the total volume of transactions in nature credits in 2024 was below one million
harmful_subsidies
$500 billion USD
annual harmful nature harming subsidies to be eliminated
Eliminating these subsidies could free up significant resources for ecological projects.
we need 500 billion in harmful nature harming subsidies to be eliminated
other
a project in the voluntary carbon market can be anyone
accessibility of projects in the voluntary carbon market
This indicates a low barrier to entry for new projects.
a project in the voluntary carbon market can be anyone
other
we have mangrove. We want to restore mangrove over our entire territory.
scope of restoration plans for mangroves
This highlights the potential for large-scale ecological restoration efforts.
we have mangrove. We want to restore mangrove over our entire territory.
soil_health
70 percent %
health of soils in the EU
Poor soil health affects agriculture and biodiversity.
70 percent of soils are unhealthy.
bird_species_status
40 percent %
conservation status of bird species
Reflects the decline in biodiversity.
40 percent of bird species have a poor or bad conservation status.
Key entities
Timeline highlights
00:00–05:00
Estelle discusses the challenges of scaling finance for nature in the global south, emphasizing the limitations of current voluntary carbon markets. She proposes a shift towards viewing nature as equity, allowing investors to earn dividends based on the benefits generated by projects.
- Estelle discusses nature credits and shares, highlighting the need to scale finance for nature in the global south. She explains that the current system involves voluntary carbon markets where projects that absorb carbon can generate credits, but concerns about their effectiveness and potential leakage persist
- The impermanence of nature presents challenges, as environmental factors like droughts can reverse project benefits, releasing carbon back into the atmosphere. This unpredictability complicates the establishment of a sustainable market for nature credits
- Transaction costs in the current market are high, with estimates suggesting that 40% of payments to projects go to intermediaries. Estelle proposes viewing nature as equity, allowing investors to buy shares in projects and earn carbon dividends based on generated benefits
05:00–10:00
The proposal advocates for treating nature as equity, allowing investors to buy shares in projects that generate natural benefits. This approach aims to retain a portion of the benefits within the project, similar to corporate profit retention strategies.
- The proposal shifts the perspective from nature credits as transactional items to viewing nature as equity, allowing investors to buy shares in projects that generate natural benefits. This approach retains a portion of the benefits within the project, similar to how companies retain profits for future stability
- Relying solely on foundations or governments for nature credits is insufficient; broader demand from pension funds and financial portfolios is necessary. These funds are increasingly required to align with carbon reduction goals, making shares from nature projects a cost-effective option
- Valuing nature alongside financial resources highlights the costs of ecosystem services currently ignored in economic measurements like GDP. This oversight leads to the destruction of natural resources without accounting for associated costs, resulting in greater environmental degradation
- Nature credits and shares provide financial incentives for conserving ecosystems by compensating landowners for preserving or restoring natural habitats. This mechanism addresses the opportunity costs of not exploiting natural resources, helping to maintain essential ecosystem services
10:00–15:00
Mangroves are crucial for preventing coastal erosion and maintaining clean water, yet they face destruction from development. A shift to a share model for mangrove projects could enhance community engagement and project durability in the global south.
- Mangroves prevent coastal erosion and maintain clean water for fishing, yet they are often destroyed for development. Restoration requires funding for planting and ongoing care, which can be challenging to secure over time
- Transitioning to a share model for mangrove projects can enhance durability and community engagement, especially in the global south. One-off transactions for planting mangroves are unreliable, as they do not guarantee long-term survival or community involvement
- A functioning market for nature credits requires credible supply and sufficient demand. Philanthropic contributions alone are insufficient, as the global biodiversity pledges estimate a need for $200 billion annually to finance nature, while current transactions in nature credits are below one million dollars
- Governance structures for equity in nature projects differ from traditional companies. Shareholders may not have voting rights but can influence dividend distribution based on scientific assessments of environmental risks
15:00–20:00
The primary market for nature shares involves countries proposing projects, with expansion funds buying shares. A secondary market must be established to ensure liquidity and prevent value destruction for investors.
- The primary market for nature shares involves countries proposing projects, with expansion funds buying shares. A secondary market must be established to ensure liquidity and prevent value destruction for investors
- Unlike carbon credits, there are no immediate barriers for projects seeking to sell nature shares. This allows for jurisdiction-level projects that enable larger scale and better risk sharing
- Jurisdiction-level projects align governance with local authorities, increasing the likelihood that restoration and conservation plans will be effectively implemented
- A jurisdiction could propose a comprehensive restoration plan for mangroves, emphasizing community involvement and local governance in environmental projects
- The financial markets perception of assets reflects expectations about their future value, influenced by community beliefs and regulatory pressures
- Despite ongoing profitability, the demand for carbon-intensive activities is projected to decline as renewable energy becomes more viable, indicating a shift towards sustainable finance
20:00–25:00
The financial returns from nature positive activities are often perceived as minimal due to the assumption that nature is free and perpetually available. This perception can deter investment in sustainable practices, despite the increasing risks associated with nature loss.
- The prices for nature harming activities versus nature positive activities reflect the financial returns generated by those activities. Nature positive activities often do not generate significant financial returns because they are perceived as free and perpetually available. This perception can hinder investment in sustainable practices
25:00–30:00
Governments must play a crucial role in nature conservation, as financial markets alone cannot address the public good nature represents. Public investment is essential to ensure societal benefits from nature and access for future generations.
- Governments must play a key role in nature conservation, as financial markets alone cannot address the public good nature represents. Public investment is necessary to ensure societal benefits from nature and access for future generations
- There is a misconception that private sector initiatives, like nature credits and shares, can replace government funding for biodiversity. While these initiatives may raise additional funds, they will not meet the actual financial needs for nature conservation
- Pension funds and financial institutions need to incorporate nature-positive assets into their portfolios to manage risks associated with ecosystem service loss. This approach balances portfolios to sustain economic activities that depend on nature
- Funding nature restoration in the global south requires a shift from privately governed markets to publicly governed ones. Establishing public governance, including monitoring and verification, is essential for building trust among investors
- Investors may hesitate to allocate funds for nature restoration projects abroad due to the lack of immediate financial returns. However, the benefits of nature, such as carbon sequestration and biodiversity, are measured in physical dividends rather than direct financial gains
- Trust in funding mechanisms for nature restoration can be enhanced by involving reputable multilateral organizations, such as the World Bank or the UN. These institutions provide legitimacy to encourage investor participation in global nature conservation efforts