What Is Nature Fintech?

Nature fintech, also known as nature-based finance, is a rapidly growing field that combines financial technology (fintech) with nature conservation and restoration.

It aims to address the pressing issue of environmental degradation by leveraging technology to create innovative financial solutions that incentivise sustainable practices and protect natural ecosystems.

The urgent need to align financial flows with nature positive outcomes has been cemented in the landmark Kunming Montreal Global Biodiversity Framework (GBF). We have new frameworks for valuing nature and embedding and responding to nature-related risks.

The Taskforce for Nature-related Financial Disclosures (TNFD) published its framework last year enabling businesses to place nature onto their balance sheet, and the Science Based Targets Network released its first set of corporate science-based targets for nature, equipping companies to set targets to both reduce their negative impacts and increase positive ones for nature and people.

COP16 in Cali underscored not just the need for urgent action but also an insurance that those local communities and people of indigenous birthright would become the leader to drive nature positive outcome.

All of this is driving the business case for nature, but there is a need for urgent speed and action. There is still a gap in turning these targets and frameworks into investment in nature, and recognising nature-positive business actions.

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Key Concepts and Applications:

Nature Equity: This concept treats natural resources as assets, allowing them to be valued and traded in financial markets. By assigning economic value to ecosystems, nature equity encourages investment in conservation and restoration projects.

Blockchain Technology: Blockchain can be used to track the origin and impact of investments in nature-based solutions, ensuring transparency and accountability. It can also facilitate the creation of digital tokens representing ownership of nature-based assets.

Artificial Intelligence and Machine Learning: AI and ML can analyse vast amounts of data to identify areas in need of conservation, assess the impact of different interventions, and optimise resource allocation.

Remote Sensing and Satellite Imagery: These technologies enable monitoring of ecosystems and tracking changes over time, providing valuable data for decision-making and impact assessment.

Impact Investing: Nature fintech platforms can connect investors with projects that generate both financial returns and positive environmental impact, such as reforestation, sustainable agriculture, and ecosystem restoration.

Green Bonds and Loans: Financial institutions can issue green bonds and loans specifically earmarked for nature-based projects, mobilizing capital for conservation and restoration efforts.

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Benefits of Nature Fintech:

Financial Innovation: Nature fintech creates new financial instruments and markets, attracting investment to nature-based solutions.

Environmental Impact: By incentivising sustainable practices, nature fintech helps protect biodiversity, mitigate climate change, and improve ecosystem health.

Economic Opportunities: Nature-based solutions can create jobs and stimulate economic growth in rural and underserved communities.

Risk Management: Investing in nature-based solutions can help mitigate financial risks associated with climate change and environmental degradation.

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Challenges and Future Directions:

Data and Standardisation: Developing reliable and standardised data on natural capital is crucial for accurate valuation and investment decisions.

Regulatory Framework: Clear and supportive regulations are needed to facilitate the growth of nature fintech and ensure compliance with environmental and financial standards.

Public Awareness and Education: Raising awareness about the importance of nature-based solutions and the role of finance in their implementation is essential for widespread adoption.

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Investing into the Sector

Nature fintech represents a promising frontier in the intersection of finance and environmental sustainability.

By harnessing the power of technology, it has the potential to revolutionise the way we value, invest in, and protect our planet's natural resources.

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The Nature Fintech Ecosystem

The Nature Fintech Sector Map is a valuable resource that provides a comprehensive overview of the emerging nature fintech sector.

It categorises and defines key sub sectors, helping to clarify the landscape and identify potential opportunities for innovation and investment.

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Key Insights from the Nature Fintech Sector Map:

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Diverse Range of Companies: The map includes a growing database of over 400 nature fintech companies from around the world, showcasing the increasing interest and activity in this field.

Focus on Natural Capital: Many of the companies are focused on valuing and managing natural capital, recognising the importance of ecosystems and biodiversity for economic and social well-being.

Leveraging Technology: The map highlights the use of various technologies, including blockchain, AI, and remote sensing, to address environmental challenges and drive sustainable finance.

Collaboration and Innovation: The nature fintech sector is characterised by collaboration between financial institutions, technology providers, and environmental organisations, fostering innovation and the development of new financial products and services.

The Benefits For All?

Attract Investment: Showcase the potential for investment and growth in this emerging sector.

Foster Innovation: Encourage the development of new and innovative solutions to environmental challenges.

Promote Collaboration: Facilitate partnerships and collaborations between different stakeholders.

Inform Policymakers: Provide insights to policymakers to shape supportive regulatory frameworks.

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To access the full Nature Fintech Sector Map and its detailed insights, you can visit the link below:

Closing the Gap

?Nature fintech is poised to revolutionise the way we finance nature-based solutions, addressing the significant $700 billion annual funding gap.

?By leveraging technology, nature fintech can unlock new sources of capital and create innovative financial instruments that incentivise investment in nature.

?One key area of focus is the development of nature-based assets and markets.

?By assigning economic value to natural resources like forests, wetlands, and oceans, nature fintech can enable their trading and investment.

?This can attract private capital to conservation and restoration projects, driving substantial financial flows towards nature-based solutions.

?Additionally, blockchain technology can enhance transparency and traceability in nature-based investments, boosting investor confidence and facilitating the creation of impact-driven financial products.

?Furthermore, nature fintech platforms can connect diverse stakeholders, including investors, governments, and NGOs, to foster collaboration and knowledge sharing.

?By streamlining processes and reducing transaction costs, these platforms can accelerate the deployment of nature-based solutions and contribute to a more sustainable future.

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Africa

Africa is particularly vulnerable to the impacts of climate change, facing increasing droughts, floods, and extreme weather events. Nature fintech can play a crucial role in helping Africa adapt to and mitigate these challenges.

By unlocking new sources of finance and innovative solutions, nature fintech can empower African nations to build resilience and transition to a sustainable future.

For instance, nature-based solutions like reforestation, sustainable agriculture, and ecosystem restoration can help mitigate climate change and protect biodiversity.

Nature fintech can facilitate investment in these projects by creating financial instruments that attract private capital and incentivize sustainable practices.

Additionally, by leveraging technology to monitor and verify the impact of these projects, nature fintech can enhance transparency and accountability, ensuring that investments are used effectively.

Furthermore, nature fintech can support the development of climate-resilient infrastructure and sustainable businesses in Africa.

By providing access to finance and innovative technologies, nature fintech can help African countries build resilient economies and improve the livelihoods of their populations.

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The Tipping Point

The Living Planet Index (LPI) is a measure of the state of the world's biological diversity based on population trends of vertebrate species from around the world.

It tracks the average abundance of wildlife populations over time.

Key findings from the 2024 Living Planet Index:

Global Decline: The global LPI shows an average 73% decline in monitored wildlife populations between 1970 and 2020.

Regional Variations:

* Latin America and the Caribbean: 95% decline

* Africa: 76% decline

* North America: 66% decline

* Europe and Central Asia: 61% decline

* Asia-Pacific: 55% decline

* Freshwater Decline: The freshwater LPI shows an 85% decline in monitored freshwater fish, birds, mammals, amphibians, and reptiles.

These declines are primarily driven by factors such as habitat loss and degradation, overexploitation, pollution, climate change, and invasive species.

The LPI serves as a crucial indicator of the health of our planet and highlights the urgent need for conservation efforts.

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Reversing The Trend

Nature fintech can play a crucial role in addressing the alarming decline in wildlife populations highlighted by the Living Planet Index.

By providing innovative financial solutions and incentivising conservation efforts, nature fintech can help protect biodiversity and restore ecosystems.

One key approach is to value and finance ecosystem services.

By assigning economic value to the benefits provided by nature, such as clean air, water, and pollination, nature fintech can attract investment to conservation projects.

This can help fund habitat restoration, species protection, and sustainable land use practices. Additionally, by leveraging technology to monitor biodiversity and track the impact of conservation efforts, nature fintech can enhance transparency and accountability, ensuring that investments are used effectively.

Furthermore, nature fintech can support the development of sustainable supply chains and consumer-driven conservation initiatives.

By providing financial tools and platforms, nature fintech can empower consumers to make informed choices and support businesses that prioritize sustainability.

This can drive demand for sustainably sourced products and services, incentivizing companies to adopt environmentally responsible practices.

Step Up.

As we wrap up for Christmas, just a thought and a wish. At Indelible we have arrived through a culmination of factors and circumstances.

As the founder of a startup we build our value around people, partnerships as well continue to strive to build a product that connects this entire ecosystem of actors to investors and ultimately building modern payment rails that enable flow of funds to reach critical projects focusing on nature.

My wish is that more corporate partners, especially those that have the capitalisation, can divert sufficient funding towards our platform.

Ready to make a splash in 2025?

Merry Christmas and a Peaceful period ahead to you all.

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