Multiple aligned global initiatives are forging connections between investors with the aim to decarbonize. This means that more and more capital is expected to be unlocked to low-carbon opportunities.
The development and adoption of corporate responsibility reporting and sustainability accounting – in both public and private sectors – has underlined the need for transparency and positive outcomes when making investments. As more capital is unlocked, investors must also ensure that they invest finance not just in low-carbon opportunities, but also those that deliver wider benefits to communities and the environment.
Environmental, social, and governance (ESG) criteria are an increasingly popular way for investors to evaluate companies in which they might want to invest. First, environmental criteria consider how a company performs as a steward of nature. Questions related to, e.g., carbon emissions, biodiversity and waste management are addressed in this context. Secondly, social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Thirdly, governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.
Under these contexts, an increasing number of investors are looking to finance low-carbon, or better yet, carbon sequestrating, technologies that also do no harm or even are a benefit to social cohesion and environmental resilience. Investors are looking at nature to achieve this.
With potentially more capital flows to landscapes, it is essential to create a financial environment whereby a spectrum of sustainable land-use activities are those that are most attractive to different investors.
Land-use and conservation policies impact the development of the bio-economies. Policymakers have to consider carefully what policies can encourage greater financial flows to nature. They should understand the implications of this for investors seeking to scale up investments in nature.
Especially, the future land-use and conservation policies should ensure that the financial flows generate the greatest additional benefits to the environment and people. Policymakers can play an important role in setting long-term, reliable and predictable signals to investors of the intention to de-risk certain elements of land-use investments.
Dr. Pentti Hyttinen
PenTen Ltd
(The text is based on a report prepared for the Chatham House together with the World Bioeconomy Forum.)
