Nature-Based Solutions + Verifiable Results
Finance for Nature-Based Solutions
Environmental consequences from the consumption of fossil fuels, natural weather events, and climate change can be mitigated in a variety of ways. Anthropogenic solutions such as renewable energy or sustainable drainage systems, have relatively well-defined cost and benefit profiles that allow financial managers to match financing to assets either through general corporate finance or traditional structured financing mechanisms. Hundreds of billions of dollars have flowed into anthropogenic solutions to environmental problems from both the private and public sectors through debt and equity financing. In contrast, nature-based solutions have several challenges that inhibit adoption by financial managers and create impediments to procuring financing from institutional capital providers.
Nature-based solutions often require recurring capital investment and have an enduring but less defined and more variable benefit profile:
- Benefits require extensive on-site assessment and monitoring that requires specialized coordination and diverse financial and ecological skills that are difficult to establish as in-house resources.
- Business operators and capital providers require verifiable metrics to supplement their standard tools of assessing risk and reward to make investment decisions, determine the cost of capital, and meet strict reporting requirements to stakeholders and regulators.
- Because the costs and benefits of nature-based solutions are more difficult to quantify - both in terms of carbon sequestration and biodiversity - business operators and capital providers need a packaged solution that includes tailored financing with verifiable metrics for their impact investments.