EU nature restoration plans need private market backing

The Nature Restoration Law proposals from the European Commission are a mark of leadership in charting a nature-positive future.

As the first proposals in 30 years to tackle catastrophic wildlife loss and degraded natural ecosystems, they will set in motion the systems-level change required to rebuild the natural capital we depend on so critically – including soil, water and pollinators.

And therein lies the opportunity – these proposals create a level playing field with ‘rules of the game’, an enabling environment for investment and appropriate financial mechanisms to develop. The proposals, when policy, send an unequivocal signal to corporates and financial institutions to invest in nature, and there is an imperative because public finance will only go so far.

Private sector investors can take shared responsibility and enormous benefit from supporting resilient and sustainable economic growth in the decades ahead.

Wider societal and economic benefits

One of the wider benefits of the proposals and the action they will catalyze is in improving understanding of how investing in and restoring our natural ecosystems will underpin the more resilient future we need.

Taking a two-pronged approach of halting environmental harm by reducing the use of chemical pesticides and second, focusing on restoration and regeneration, will put us in a position to rebuild of our natural capital. It will be through innovative investments supporting this approach that will enable us to genuinely turn the dial.

The future of agriculture and fisheries, and their contribution to sustainable economic growth, are dependent on that restoration. For example, free-flowing rivers will provide enormous benefits. Not only are they full of life and nutrients as well as fish, they are also rich in sediments that support fertile soil which is vital to successful farming and healthy crops.

As the global food crisis intensifies, the importance and urgency of restoring degraded soils and enhancing fertility of those soils cannot be underestimated. Neither can the interconnectedness of nature to our food and fiber systems, or the risk exposure of companies dependent on them.

Globally, analysis by the Food and Land Use Coalition estimates that the transformation of our food and fiber could unlock up to $4.5 trillion in new business opportunities by 2030 and could create as many as 120 million new jobs.

A new investment landscape

The transformation of agriculture is providing a new value proposition for investment, with ‘real assets’ along with natural capital becoming a profound way for investors to meet their own financial and non-financial risks and value creation needs. The opportunity is wide-ranging – private capital markets, financial institutions, public funds and philanthropic investors all have a role to play.

Whether via investment in farms themselves or in the food and fiber companies that support and are dependent on sustainable farming communities, or in the very supply chain infrastructure that connects these goods to the market, the signal from the EU is that the world is moving towards a nature-positive framework.

Stakeholders should be ready to contribute to this change and benefit from it. In fact, we are at a point whereby the cost of inaction on nature and natural capital is greater than the cost of action.

Taking the EU proposals forward will require engagement and support from the private sector. While public finance may focus on areas where the commercial return is less obvious, such as in technical assistance or first-loss capital, private may be deployed when the transition is already underway to spur those solutions forward.

Financing of different types in support of farmers, along with what city planners require to support the necessary green infrastructure and built environment demands, all need to be discussed and explored.

The EU policies are impressive in that they cover urban, marine and land-based environments. In terms of agriculture, and with such a fundamental transformation of our relationship with the natural world emerging, the impact on lives and livelihoods must be carefully managed.

The dialogue with farmers is particularly important – this has to be a just transition. As the ultimate custodians of much of our natural capital, farmers must be aided with technical support alongside safety nets to ensure the sector is not taking on all the risk associated with such profound changes, as well as being given access to alternatives where reduction in chemicals is legislated, for example. It requires constant vigilance and nimbleness of policy as it rolls out to allow for any necessary shift.

Tracking progress 

Measurement and tracking of the outcomes with a robust evaluation framework is central to scaling this.

There are strong frameworks emerging to prioritize and track progress on tangible outcomes for nature and climate across corporate and financial sectors (and in terms of policy outcomes) such as the SBTi, SBTN, TCFD and TNFD. There are also more and more systems for tracking progress on the ground such as the Sustainable Food Trusts Global Farm Metric, and the Savory Institute’s Ecological Outcomes Verification.

These will also provide essential positive feedback loops, driving investment with tangible and measurable outcomes. In this way, Europe becomes a model with very clear data points and proof of concept for other jurisdictions to follow – particularly when it comes to demonstrating return on investment.

The policy will enable a paradigm shift to a safe and just operating space for humanity. A win-win scenario is created by not only rebuilding natural capital, but also providing healthy food and livelihoods that will be resilient in the face of climate change. It’s about building a new way of producing our food and fiber so that we are all in the strongest position to avoid and mitigate future crises – and an investment ecosystem which drives that forward.