My three takeaways from the UBS Nature Finance Conference

I was delighted to participate in the Nature Finance Conference at UBS’s London office last week. A series of academics, investors, experts and advisers offered our some of our clients and us some enthralling views on how better to embrace the support of nature in our global economy.

Make no mistake, there’s a lot of work to be done. The global population is currently estimated to be consuming nature stock at 1.7 times the available rate. Nations across the world need to design ways to reduce this, and to better embrace the essential role that nature plays in our global economy. However, I’m a big believer in the power of capital markets to help find answers to big problems, and I think events such as this help nudge us forwards towards the solutions we need.

I had a few particular takeaways from what we heard. I hope you’ll find them as interesting as I did!

Embracing nature assets – no free riders allowed!

First, as we know the world’s nature reserves are broadly recognized as being essential to all life and, according to proprietary UBS research , they underpin about 60% of global GDP. However, as Professor Partha Dasgupta, emeritus professor of the University of Cambridge and author of ‘The Economics of Biodiversity ’ report for the UK government told the audience, today’s economies are still consuming them at a dangerously unsustainable rate.

In his opening discussion with me he called this attitude the ‘free rider’ effect. Essentially, companies and governments worry about missing economic opportunities so they hope others will spend time and resources to solve big, complicated issues like protecting the rainforests. In that manner they can spend minimal resources of their own, while benefiting from any positive outcomes.

Dasgupta believes it will require collective action to overcome this behavioral bias. For example, all nations could agree that nature’s stocks have an integral value to our global economy and sign up to steps to protect these assets, including taxes, financial incentives and fines.

Assign a value to nature

Another essential takeaway is the opportunity to recognize nature stocks in our economic models and charge for their usage.

Currently the opposite is happening. As Professor Dasgupta noted, the International Institute for Sustainable Development has estimated that the world offered USD 1.7 trillion in subsidies to fossil fuel industries in 2023, while the consequences of damaging our rainforests, oceans and biodiversity is barely recognized in traditional economics.

Even switching to renewable energy sources will have environmental costs that need to be measured. That’s why UBS and Planet Tracker announced the launch of the ‘Climate meets Nature ’ report at the event, which delved into this very topic.

Improving our nature stocks can also offer financial opportunities. For example, Professor Dasgupta noted that a study from 2004 estimated that cleaning up the Ganges river in India could yield an internal rate of return of 15% due to increased tourism, agriculture, mental and physical health, and fish stocks.

I believe tomorrow’s financial markets will increasingly feature nature-related products and financial solutions that target such benefits.

Delivering more data analysis

As several panellists at the conference noted, governments, regulators and companies often identify insufficient data for their lack of progress on measuring their impact on nature. However, data availability has improved.

David Craig , co-chair of the Taskforce for Nature-related Financial Disclosures (TNFD) told the audience that researchers in the field can actually access quite a lot of information about nature. “The shortage is not in data but in interpretation,” he said.

Essentially, the market needs to improve the availability of data on nature and how it interacts with supply chains. The adoption of TNFD by companies is a material key driver for this, and UBS announced at the World Economic Forum this year that we will publish our first TNFD-aligned disclosures alongside our financial statements from the 2024 financial year.

But, in addition to this, the world will also increasingly need more ecologists and nature researchers to help sort through this growing mountain of information and find the patterns that matter.