Investing in Nature-Based Solutions

EXECUTIVE SUMMARY

Developing and investing in solutions that respect the systems and cycles of nature will be a defining paradigm shift of our generation. The emerging nature-based solutions space and growing investor interest is promising. One source calls for $11 Trillion of investment in nature-based solutions by 2050 [1] and notes that increasingly asset owners and managers believe that biodiversity will be one of the most important topics in the investment community by 2030. [2] To drive meaningful private sector investment, there is a need for nature-based criteria, tangible examples in the marketplace, and a pipeline of high-impact high-return investment opportunities. As a starting point, we can develop an approach to investing in nature-based solutions that draws from disciplines like biomimicry (which leverages or mimics biological principles to find innovative solutions to contemporary challenges).

INVESTING IN NATURE IS THE ANSWER

It's deceptively easy to think of humanity as distinctly separate from nature – a force to be harnessed or tamed. We create boundaries from the natural world with concrete and glass, extract natural resources, and enjoy the conveniences of technology. Many of us have lost sight of how innately intertwined we are with the Earth. From the highly visible survival requirements of water, air, and nourishment, to the less obvious impacts on our gut bacteria, cortisol levels, and immune systems – we are inextricably linked to, and part of, the systems and cycles of nature. [3]

Unfortunately, our symbiotic relationship with the natural world is broken. The consequences of this broken relationship are evident–depleted topsoil leaves us an estimated 60 remaining harvests in the United States, toxins and microplastics in the water, pesticides in kids’ bodies, and increased rates of chronic preventable disease.

We often address these issues (e.g., declining populations of honeybees or carbon emissions) with reactive solutions (e.g., plant-based honey and carbon markets). We less frequently evaluate root causes and consider how to restore or enhance natural systems and processes.

The good news is that nature already provides elegant, balanced solutions to many challenges we face. We can learn from disciplines like biomimicry – which studies and emulates nature’s forms, processes, and ecosystems – to make wise investments in nature-based solutions across sectors.

THE FUTURE OF NATURE-BASED SOLUTIONS

Defining Nature-based Solutions (NbS)

A literature review published in December 2022 [4] provided a brief history of the term “nature-based solutions”, first used in 2008. They noted that the application of the term has been challenging in part because it draws on multiple disciplines and does not yet have a single definition or set of criteria. The authors screened 200 papers, analyzed 64 in detail, and identified 20 definitions. They summarized their findings as follows:

"...the NBS concept refers to actions/interventions comprising four core ideas: (1) are inspired and powered by nature (used in 13 definitions); (2) address (societal) challenges or resolve problems (11 definitions); (3) provide multiple services/benefits, including biodiversity gain (11 definitions); (4) are of high effectiveness and economic efficiency (10 definitions)."

Without getting bogged down in the precise combination of terms, actionable investment opportunities in technologies and products can be shaped with a nature-based lens across sectors such as agriculture, the built environment, and apparel.

Tangible Investment Opportunities

Practically speaking, what does this look like for investors? It could mean applying a nature-based lens to investing systemically in tech, tools, and infrastructure that support regenerative sustainable agriculture practices, building materials that mimic nature, and nature-inspired sustainable textiles.

Consider the global textile market. This industry produces an estimated 1.2 billion tons of CO2 equivalent per year and is responsible for 20% of global wastewater and 35% of global microplastic pollution. To address some of these challenges in a nature-inspired way, teams are working with protein structures like the red fluorescent protein found in a coral relative, growing fibers reliant on these proteins, and creating textiles without toxic dyes, finishes, and petroleum based synthetics.[5]

Fiiba, a London based sustainable textile startup, has developed luxury ready-to-wear fabric made from banana tree agricultural waste that is usually burned. Not only does the fiber have 1/10 the carbon footprint of conventional cotton or viscose, but crucially, it uses no additional land, water, or pesticides. In comparison, it takes 7,000-10,000 liters of water to grow a kilo of cotton (about 4 t-shirts)[6], with crops guzzling up to 16% of the globe’s poisonous insecticides [7] leading to biodiversity loss and soil degradation. Fiiba is also responsible for zero deforestation (whereas 300 million trees are felled annually, 30% from endangered forests, to produce viscose for fashion[8]).

This is just one practical solution that thoughtfully addresses a real problem in a global industry by using circular based principles and a nature-based lens.

Market for NbS

There is a growing market for nature-based solutions. Per the 2023 Annual Report published by the Forest Investor Club, there is an estimated $11 Trillion investment needed in nature-based solutions by 2050 and 86% of asset owners and asset managers interviewed cited concerns about biodiversity loss on financial performance by 2030. That report also projects that investments in nature could generate $3.6 Trillion in annual business opportunities and 191 million jobs by 2030.

Engaging Diverse Stakeholders

Developing and investing in solutions that leverage and unlock nature inherently requires drawing on multiple disciplines and working across sectors. For instance, designing truly sustainable products and technologies that address soil health and the future of agriculture requires expertise and knowledge from scientists, biomimicry researchers, farmers, and local communities; and securing public sector support and private sector investment.

Measuring Success

For investing in nature-based solutions to be sustained in the market, it must have the potential to generate compelling returns for investors. Working with the timelines and cycles of nature may admittedly require a longer time horizon for returns in some instances (i.e., agroforestry projects). However, applying a thoughtful nature-based lens to designing and scaling products and technologies should generate real, measurable financial value in your target industry.

Nature-inspired solutions should generate environmental benefits (e.g., increased biodiversity, soil health, and carbon capture; decreased erosion and drought, etc.), human health benefits (e.g., decreased exposure to microplastics in the water and toxins in the soil; decreased healthcare costs, increased physical and mental health for kids in school, etc.), and real financial returns for investors.

The case of the textile start-up, Fiiba, provides a strong example of how taking this approach can enable positive environmental, social, and profit outcomes simultaneously. In addition to environmental benefits, the business model benefits local communities economically by paying for waste, as well as providing organic fertilizer (the natural by-product of fiber extraction) to its network of local farmers. Due to consumer demand and incoming emissions regulations [9], brands are under pressure to ensure equitable and transparent supply chains for genuinely green products. The rising demand for sustainable raw materials is expected to exceed the existing supply by 133 million tons by 2030 [10]. This creates a huge financial opportunity for start-ups like Fiiba, and of course, for investors.

Time for a shift

The status quo isn’t working for the environment or for human health. We need a paradigm shift. In contrast to investing reactively to solve downstream problems, we can learn from the way nature works and make wise investments in nature-based solutions across sectors.

About the lead author: Natalya Wallin brings over a decade of experience in investor relations and strategic partnerships spanning corporations, government, and civil society to address complex issues like forced labor risks in supply chains and the intersection of environmental and social innovation in the apparel industry.

Her current focus is engaging global networks to identify high potential nature-based start ups and building partnerships across disciplines to support the future of nature-based solutions.

Natalya has a background in biology and molecular genetics and earned her MPP at UChicago and Executive MBA at Duke, where she was named a Forte Fellow for women in leadership. She is also a LifeTime Foundation athlete, a top 30 female finisher at the Leadville 100 mile trail race in the Rocky Mountains, and has previously blogged about parallels between ultrarunning and career pursuits.

[1] https://www.wbcsd.org/contentwbc/download/17004/240100/1

[2] https://www.wbcsd.org/contentwbc/download/17004/240100/1

[3]? https://www.sciencedirect.com/topics/social-sciences/biophilia

[4]https://www.sciencedirect.com/science/article/pii/S2772411522000015#:~:text=The%20concept%20of%20nature%2Dbased,for%20both%20nature%20and%20society.

[5] https://biomimicry.org/solutions/#fashion

[6] https://www.soilassociation.org/media/11662/coolcotton.pdf

[7] https://sustainfashion.info/the-worlds-dirtiest-crop-pesticide-use-in-cotton-production/

[8] https://canopyplanet.org/campaigns/canopystyle/

[9] https://environment.ec.europa.eu/topics/circular-economy/reset-trend/how-eu-making-fashion-sustainable_en

[10] https://www.bcg.com/press/25october2023-sustainable-raw-materials-133-million-tons-2030