Finance Research Theme
Scaling finance and investment for rapid nature recovery at a global scale.
As we develop scenarios and pathways for nature recovery, how can they be sufficiently resourced? Providing sufficient financial resources and prioritisation is among the greatest challenges facing nature recovery. The challenge of obtaining capital investment from funders and investors to projects and programmes that deliver measurable nature recovery outcomes at the scale and pace required, and yet also incorporate adequate consideration of social safeguards, is far from being solved. At the same time, allocating monetary values to nature and profiting from nature can raise philosophical, cultural and moral questions.
We will draw on our expertise in finance to systematically conceptualise, pilot, assess, and then scale a flexible architecture for funding nature recovery outcomes. Critically, this architecture will be designed to be financeable, investable, and insurable. We will work closely with finance researchers and practitioners to understand the requirements of financial institutions so that capital can be mobilised to enhance nature recovery at the scale and pace required.
In addition to our core work, we will also undertake three complementary projects that will draw on expertise and work being undertaken in the other themes, particularly in Scale and Integration. These include:
- Reducing information asymmetries – we will design and pilot technologies and tools that are able to reduce information asymmetries between providers of capital seeking investment opportunities and nature recovery projects and programmes. Originating investable projects and programmes efficiently is a major impediment to scaling nature recovery financing at scale.
- Optimising public and philanthropic funding – we will develop approaches for assessing how to optimise the use of public and philanthropic funding to leverage private funding and finance into nature recovery. The effective optimisation of finite public and philanthropic funds will allow these resources to go further across different sub-national, national, and regional scales.
- Nature recovery-linked finance – we will create metrics that could underpin new sustainability-linked loans and bonds for nature recovery. Sustainability-linked instruments are new and experiencing rapid growth. Vital to their success are appropriately designed key performance indicators and incentive structures and we will design these for nature recovery outcomes, working with major financial institutions as we do so.
The potential contribution of revenue from Biodiversity Net Gain offsets towards nature recovery ambitions in Oxfordshire
There is a major funding gap for delivering the UK’s nature recovery ambitions, including meeting the national and international ‘30×30’ target (30% of land protected and managed for nature by 2030). This work aimed to investigate the potential revenue that could be generated over the next ten years through purchase of Biodiversity Net Gain (BNG) offsets by developers in Oxfordshire, and the extent to which this could contribute to the estimated costs of nature recovery.
We compare potential BNG revenue with the costs of creating sufficient areas of semi-natural habitats in strategic locations (e.g. within Oxfordshire’s Nature Recovery Network) to meet the 30×30 target, and maintaining those habitats for 30 years. These costs are estimated at £800 million, but this excludes the costs of protecting and monitoring the sites, and any additional costs for organisations that wish to purchase land or compensate landowners for lost opportunity costs. Also, these are not the full costs of nature recovery in its broadest sense, as they do not take account of the cost of restoring species populations to sustainable levels. In particular, this analysis does not consider the cost of recovering any species and habitats lost as a result of the development that gives rise to the BNG revenue, i.e. it is assumed that the compensatory habitats created through BNG will successfully replace those lost and will prevent any loss of associated species. The estimates are simply intended to help organisations involved in nature recovery to understand the potential size of the BNG market, to inform future investment plans.
The Economist coverage of the Combinatorial auction for turtle dove habitat project.
Daily Telegraph coverage of the Combinatorial auction for turtle dove habitat project.