A roundtable on ‘Investing in biodiversity’ in Melbourne last week was told that leading banks and investors actively support finance for conservation. But rolling changes to state environment laws have created uncertainty which isn’t good for investors.
The event brought together business, government and NGOs with the aim of galvanising investment in conservation in Australia according to the roundtable organiser Amanda Cornwall.
Governments provide the main driver of financial incentives for conservation through regulations protecting native vegetation and threatened species. By requiring developers to offset unavoidable impacts on biodiversity the laws create an incentive for landholders to create biodiversity credits by setting aside land for conservation.
Amanda Cornwall told the roundtable that recent changes to those laws in Victoria and Queensland, and recommended in a 2014 review in NSW, could make investment in biodiversity credits more attractive. ‘Key trends are prioritising conservation at strategic landscape scale, and expanding biodiversity credit registers to facilitate trading’, she said.
But roundtable participants weren’t optimistic that these changes will improve biodiversity markets or make them attractive to investors. And with governments in most states planning further changes in 2015 investors will be deterred by the uncertainty.
Rosemary Bissett of National Australia Bank told the roundtable that banks and investors are more interested in how businesses manage risks.
NAB, the country’s biggest agribusiness lender, has recognised that running down the world’s natural assets such as water, soil and forests is a material risk to the economy and businesses should treat it as a financial risk.
To reflect this NAB has changed its policies so that credit assessments put more weight on the sustainability of customers’ business practices. Eventually, borrowers who manage their natural resources more sustainably might expect to receive a credit rating upgrade.
NAB has signed the Natural Capital Declaration, an international finance sector initiative to integrate natural capital considerations into loans, equity, fixed income and insurance products. It’s developing a method to account for impacts on natural capital that can ultimately apply to a financial institution’s own balance sheet and a disclosure and reporting framework.
Businesses that adopt superior natural asset management are likely to deliver improved productivity. And they can use their leadership to set themselves apart from the competition.
Having sound scientific information on the condition of the landscape and marine environments is crucial to planning and monitoring the success of conservation actions.
Trust for Nature CEO Victoria Marles told the roundtable how they had used the Victorian government’s scientific information and mapping tools to develop a conservation plan for private land in Victoria. The plan provides the first statewide analysis of conservation priorities on private land, which makes up two thirds of the state. TFN has used the plan to engage with philanthropists and landholders.
Unfortunately the environment departments of state and federal governments have lost considerable expertise and staff resources in recent years and it’s not clear if it will be restored.
Wayne Wescott, CEO of Greenfleet advocated finding ways to quantify the multiple environmental benefits of carbon sequestration projects. Australian regulations on biodiversity and carbon credits effectively preclude multiple environmental credits being recognised together because of ‘additionality’ rules. That means landholders and investors have no financial incentive to deliver biodiversity benefits alongside carbon credits even though it requires extra work and expense, and would be better for the environment.
He said the Gold Standard in the voluntary carbon market demonstrates how projects can have multiple, verifiable benefits including improving water quality, biodiversity and carbon offsets.
Last but not least, the roundtable briefly considered financial products that might be useful to raise funds for conservation projects or changes in business practice to manage natural capital risk.
Green bonds or climate bonds are suitable because investors in green bonds expect to hold on for the longer term, and they’re in it for more reasons than return on investment.
Another suggestion was ‘environmental upgrade agreements’ as a model for raising finance to support farmers moving to more sustainable land management practices. EUAs have successfully encouraged retrofitting of commercial buildings in Melbourne and NSW to improve energy and water efficiency, which reduces costs in the long term.
Participants in the roundtable included Department of Environment, Land, Water, and Planning Victoria, bankmecu, Department of Environment Australia, National Australia Bank, Hancock Victorian Plantations, Trust for Nature, Greenfleet Australia, Parks Victoria, CDP, Norton Rose Fulbright, Biosis, Flora and Fauna International, Ashurst, Corangamite Catchment Management Authority, Allens Linklaters and Green Collar consulting.
See the full report on the roundtable here