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A presentation by Ivo Mulder at TBLI CONFERENCE EUROPE 2008.
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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 [email protected]
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?