Investing in nature: Money does grow on trees

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  Quantumrun Foresight
• December 13, 2024

Insight summary

Investing in nature is gaining attention as a way to protect ecosystems while also generating economic value. As businesses adopt nature-positive strategies, there may be rising costs for goods and new opportunities in sustainable industries like conservation and eco-tourism. Governments could play a crucial role through stricter regulations and international cooperation, driving large-scale restoration projects and reshaping policies to support environmental goals.

Investing in nature context

Investing in nature is an emerging initiative that seeks to protect ecosystems while generating economic benefits. Governments, companies, and investors increasingly recognize that human and economic well-being is directly tied to the health of natural systems. According to financial service firm Morgan Stanley, nature provides more than USD $44 trillion in economic value annually. This value is over half of the world's GDP (gross domestic product), but ongoing environmental degradation threatens this stability. Since 1970, wildlife populations have declined by 69 percent, and over a million species are currently at risk of extinction, according to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services. As ecosystems deteriorate, the risk to global economies becomes clearer, driving increased interest in investments that preserve nature's essential services.

Investing in nature is similar to climate finance, focusing on projects that protect biodiversity and enhance ecosystem resilience. For example, nature-positive investments aim to increase biodiversity and the health of ecosystems over time. However, challenges remain, such as the lack of a universal definition for "nature-positive" outcomes and the long timeframes required to see financial returns. The World Wildlife Fund and 27 organizations are working to develop standardized metrics for nature-positive investments, while the Taskforce on Nature-related Financial Disclosures is helping investors better understand the risks associated with ecosystem collapse. Additionally, carbon offset projects, such as reforestation, are being linked to both climate and nature benefits, potentially providing a pathway for increased investment in nature-based solutions.

Recent developments indicate growing momentum in nature investing. The Kunming-Montreal Global Biodiversity Framework, adopted at the 15th Conference of the Parties (COP15), calls for mobilizing USD $200 billion annually by 2030 to fund biodiversity restoration. However, estimates from organizations like the Paulson Institute suggest that the gap in financing nature is much larger, with an annual shortfall of USD $711 billion. Encouragingly, a survey conducted by Pollination found that two-thirds of institutional investors plan to increase their investments in nature-related projects. 

Disruptive impact

As nature-based solutions like reforestation projects scale up, people may experience improved air quality and access to cleaner water, enhancing public health. Additionally, these investments may create new job opportunities in sectors focused on conservation, sustainable agriculture, and eco-tourism. However, individuals may face increased costs for goods and services as companies pass on the expense of adopting nature-friendly practices. In the future, the broader shift toward nature-positive strategies may influence everyday choices like food sourcing or energy consumption.

Companies that rely heavily on natural resources, such as agriculture and manufacturing, may be required to adopt more sustainable practices to mitigate biodiversity loss. This shift could drive demand for new technologies and business models centered around resource efficiency and nature preservation. Furthermore, businesses that fail to account for nature-related risks may face financial losses, regulatory challenges, or damage to their reputations. Companies that adapt early may find competitive advantages by aligning their brands with sustainability and tapping into growing consumer demand for eco-friendly products.

Meanwhile, governments may play a key role in driving the success of nature investments through policies, regulations, and incentives. For example, countries may introduce stricter environmental regulations, such as requiring companies to disclose their nature-related risks or mandating conservation efforts. Additionally, governments could invest in large-scale restoration projects, such as restoring wetlands or protecting forests. International cooperation may also become more critical, as nations work together to manage shared ecosystems like oceans and rainforests. 

Implications of investing in nature

Wider implications of investing in nature may include: 

• Companies shifting towards nature-positive business models, leading to the creation of new industries focused on conservation and sustainable technologies.
• Governments establishing financial incentives for businesses that protect ecosystems, potentially reshaping tax structures and public spending priorities.
• Increased investment in renewable resources reducing dependence on fossil fuels, influencing global energy markets and trade relations.
• Technological advancements in resource monitoring, such as satellite-based tracking of biodiversity, improving environmental transparency and accountability.
• Political debates intensifying around balancing economic growth with environmental preservation, impacting election platforms and policy priorities.
• Rural populations benefiting from job opportunities in conservation and nature restoration projects, possibly reversing urban migration trends.
• Rising pressure on industries like agriculture and fishing to adopt more sustainable practices, leading to regulatory changes and higher operational costs.
• Nature-based solutions being integrated into climate action plans, prompting global cooperation and international agreements on environmental protection.
• Increased public awareness of biodiversity loss driving shifts in education systems, with environmental literacy becoming a core focus in schools and universities.

Questions to consider

• How could nature-positive investments improve the quality of life in your community?
• What changes in your daily habits could help support the preservation of ecosystems?