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Speaker 1: ESG is constantly evolving. Over the years, it has shifted from socially responsible investing to impact to sustainable finance. While the terminology continues to change, what hasn't changed are the underlying science, market pressures, and tangible physical and financial impacts of the climate crisis, increasing regulatory scrutiny, and rising consumer expectations. We aim to filter out the noise by speaking with industry experts to identify what is really driving value. Welcome to ESG Currents, brought to you by Bluemeg Intelligence. I am Grace Osborne, the ESG Integration Analyst.
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Speaker 2: And I'm Chris Raddy, Senior ESG Credit Analyst, and we're your hosts for today's episode. Today, we're joining with Ruben Menikara, Global Lead of WWS Carbon Finance and Market Task Force and John Morton, Executive Managing Director of Nature Finance and Investment at WWF explore the future of natural capital. With an estimated seven hundred billion dollar annual biodiversity finance gap, mobilizing capital for nature has never been more urgent. Reuben brings his expertise in carbon markets, serving in serving on the UN Aviation Body's Advisory Panel and previously leading Singapore's negotiation on Article six at the UN Climate Talks. John has been his career bridging government finance and conservation, including being the first Climate Counselor for US Treasury Secretary Janet Yellen and previously a Senior director for Energy and Climate Change at the White House. We're excited to dive into how WWF is helping close the nature finance gap and driving innovative solutions for people, climate, and biodiversity. So John will start with you. Why should in'tvestors care about nature as an asset class? What's driving this shift and what challenges do you see an unlocking new capital?
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Speaker 3: Yeah, well, thanks for the question and thanks for the opportunity to be with you today. I think nature should investors should see nature as an asset class and something to be protected because at the end of the day, over sixty percent over fifty percent of global GDP is highly or moderately dependent upon nature. In other words, without nature, without functioning ecosystems, without lands that produce, without waters that can sustain, we don't have a global economy. And we are beginning to see I think corporates and financial institutions recognize that in addition to a climate crisis which has frankly turned into I think an economic opportunity for many many companies. We have a nature crisis. We have a crisis of nature that is being lost at a rate that has bearing and importance not just for environmental reasons and arguably for moral and social reasons, but for economic reasons. So over the last five years we've seen just a tremendous growth in the understanding of and the actions of companies who understand that investing in nature is critical for their long term economic sustainability as well. And I think that's the tide that has turned and changed, is that we now are part of so many conversations where nature and investing in nature and protecting nature is seen as an economic imperative, both because of losses that will be incurred if we don't protect nature, but importantly gains that can be achieved when we invest in nature effectively. We get better productivity, we get better economic resilience, we get better climate resilience if you're talking about agricultural products, pharmaceutical products, and so there's a real business case now to be made for investing in nature that didn't really exist. I'd say ten to fifteen years ago, really compelling proposition.
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Speaker 4: Yeah.
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Speaker 5: Absolutely seen that shift that investing in nature is an economic imparative and as you mentioned, both for the opportunities that it brings, but also these rests around nature loss. John, you've been leading the launch of WWF's new Nature Finance and Investment function. What's the core ambition of the strategy and what is the opportunity here for investors?
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Speaker 3: Yeah. Look, so we announced our new Nature Finance and Investment strategy this week here during Climate Week, and it's an exciting strategy which is new but also really builds off of WWF's a great track record over the last many many decades globally in working to identify and try to address some of the conservation the world's highest conservation priorities. And what this new strategy says is that we are going to double down, enhance, really lift up our efforts to dry have private capital solutions, private capital investment opportunities for our clients, for our partners, and we have a deep set of corporate partnerships globally. We have a great set of relationships with financial institutions as part of our partnership program. And what we see is an opportunity to very nimbly and in a targeted way blend finance from public sources and philanthropic sources that those have been our traditional sources of conservation finance over the last many decades, but do that in a way that enables private capital to begin accessing what we consider to be some of the most exciting and important conservation efforts globally. So WWF will essentially use our global brand, our science expertise, our scientific expertise, our community relationships with communities you know throughout the world to ida identify the highest priority conservation efforts and to look for ways of mobilizing private capital to address those those opportunities. And the reason that's important as twofold one, as was mentioned in the lead in the finance gap required for us to get to a sustainable nature positive economy runs to the tune of seven to eight hundred billion dollars a year annually in additional flows that need to happen, and those won't come from public or philanthropic sources alone. Right, so there's an imperative for us to find more money. That's the how shall I say, that's that's the pull signal. The push signal that we see is that there are increasingly and perhaps we'll talk about it later in the program, opportunities for private companies to make profits in supporting more sustainable investment opportunities and conservation opportunities around the world. So I think there's a you know, there's an imperative to drive more capital, and then there's an opportunity for that capital to actually profit from more sustainable investment practices.
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Speaker 5: Absolutely so interesting, and I think, as you mentioned, blended finance is going to be really key going forward. I think, particularly in the nature space, we're really bridging expertise here within the technicalities and knowledge needed on the ground for nature, and of course kind of the financial expertise to mobilize as you said, that private capital into the space. And obviously in an exciting time, there's lots of really interesting going work going on. And Ruben, you've actually just launched the mangrove carbon program. Can you tell us a little bit more about this and what role mangroves are playing in carbon markets and from your perspective, why is nature, whether it's mangroves, forests, or other ecosystems not just conservation but also a smart investment.
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Speaker 4: Thanks so much for the question, Greece, and very happy to share about the Mangrove program. And it's called the Blue Catalyst, which is the first initiative and it's part of a strategic partnership between ww and Singapore and the Singapore Government's Economic Development Board, which is essentially the economic arm of the Singapore government. And these two trusted entities are coming together to unlock high quality, a stream of high quality supply of blue carbon credit to the market, but not only just carbon credit, but carbon credit projects that have benefits beyond carbon for biodiversity and communities as well. And I think a grace before I can go into the program itself, it's useful to explain why mangrowth, why blue carbon, because that sort of sets the context right and to really take if I can two steps back. And it's something that's often forgotten, is that we are we isn't collective. We are well behind climate action as to where it needs to be right. We have emitted too much into the environment that we not only need to stop the flow, but we need to remove what's already in the environment in terms of the emissions, right, and that's where the focus in mangrove comes in. It is well recognized that the mangrove forests are biodiversity banks, right. I think there are various studies, but those studies put a number close to like, mangrove forests housing a collective of one five hundred species, of which about twenty percent of them are already threatened or at risk. But beyond that, mangroves are also super spongous when we call, when we talk about them in a car will remove all perspective. And that's quite well known. But just to give you some perspective, right, just losing one percent of man growth globally is the equivalent of fifty million of emissions of fifty million cars, So that that gives you a perspective of how good a job mangroves do in terms of removing carbon. And it's often spoken about that mangroves soak up to forty five times more carbon than terrestrial forests. But one important fact that's often not emphasized enough is that they do it at a at a rate of sequestration there's ten times faster than terrestrial forests. Right, So we're not just talking about amount of carbon, we're talking about how fast the forest can remove the carbon as well, and it's it's putting all those aspects together and recognizing that the superhero effect, thank call it is such that mangroves can play right in helping to accelerate climate action. And then there's the second context of what why this program. I mean, as John alluded to, WWF is a global brand and an organization and has close one hundred offices globally. But this particular program was launched in Asia and as part of the b of Singapore because Asia is ground zero four mangroves. The region holds over half of the world's mangroves, and to give you a perspective, one Asian country, Indonesia alone holds about thirty percent of the world's magrove. So it gives you a sense of perspective of why that regional focus and why this is being launched in Asia. But that's not going to the problem itself, and that's what this program aims to solve. The problem is that Asia, and if I can drill down deeper into Southeast Asia has lost over a third of its mangroves in the last forty years, and the restoration efforts that have happened in recent decades have not kept pace, largely because they are led by psilanthropy, and you know, they are rashly small scale, so they haven't been able to happen at the scale that's required to reverse the effects that have happened over the last forty years. Right, And part of that reason is because private finance or even concessual finance has not flown into these projects. And to give you a sense of the numbers, right, and just purely just using as a proxy, if you look at the voluntary carbon market as it is, which is a source of private finance towards carbon projects, less than one percent of all credits come from blue carbon. That gives you a sense of perspective as to how much finance is flowing into this ecosystem and this critical ecosystem that we need to get right. So then we can dive deeper into why is that the case? And I refer to to a couple of studies, but one of it estimated that and it surveyed mangrove restoration projects over the last forty years, and it found that almost fifty percent of mangro restoration projects have failed to achieve their targets, right and if you were that Now the hat of a investor, why would investors invest private capital in a mango project? Is half of every dollar that they invest is probably going to go into a failed project. Right. So, recognizing this context and the ecosystem as well as the problem that I've just identified, that's what led to the development of this program by the Way of Singapore in collaboration with Simple Government. And the objective of the program is to improve the success rate of mangro restoration projects. How there are many ways to do it, and in no means this program mems to be that silver bullet, but it does it true one way, which is by leveraging technology. So the program will essentially start with a call for problem statements from carbon project developers to identify railroad problems that lead to these project failures. And you will also call for an application for emerging or current technologies that can provide solutions to these technologies. So WWF together without Open Innovation partner Hatch Blue well then match those solutions and provide those solutions to the projects. And it's not only just a matching service. WWF which has existing mangroveth reservation projects as part of the portfolio of activities that we do globally, so where needed, we would open up those sites to further refine those technologies to make sure that what's deployed in investable carbon projects is actually fit for purpose and can lead to a genuine increase in terms of you know, originating as self has full mang growth project. So I think, Grace, it's a long window answer to your Christians, but I thought that gives you a good context and of the program and what the program aims.
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Speaker 5: Yeah, incredibly interesting and I love that term superspongers. I just think some of those starts that just really highlight the importance of financing mangroves and making those dollar investments really maximizing them, I think, very very interesting work.
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Speaker 2: I mean, I totally agree. I mean, the fact that you said ten times what a terrestrial forest can can kind of do in terms of carbon removal is kind of shocking. So, I mean, I think it's just amazing you know how important that mangroes really are towards the carbon removal removal. One of the things I wanted to touch on is kind of resiliency. Now that that's a theme really that's popping up all over the place. You know, not just you know, for place is that get hit by storms or wildfires or or things of that nature, but just in general, you know, a lot of governments, municipalities, you know, they're looking at the differences between you know, being resilient and you know, adapting towards the change in climate changes that we've seen. I wonder, Reuben beyond beyond just carbon capture, if mangroves and kind of nature more broadly are a powerful tool that could be used for nature based resilience. You know, can you share how nature based solutions could really improve resiliency?
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Speaker 4: Thanks so much, Chris. Yeah, and you absolutely pointed right. And I think there's two aspects of resilience here that we can unpack. The first is and if I can also focus on mangroves, right, it is an often understated function of mangroves that they are nature is essentially hidden infrastructure.
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Speaker 3: Right.
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Speaker 4: The function of mangrove to protect coastal communities from floods cannot be understated. I mean that in a global study, for example, it was estimated that fifteen million or more people would face floods on a yearly basis if mangro forests were lost, and that's just the people, the impacts of the people. If we calculate the economic impact, that would be absolutely disastrous. And many economic hubs of countries are in low lying areas that are protected by magrowth, right, so it's not just a function of a protection, but it's protecting livelihoods, economic activities and essentially way of life as it is right, And it's not only mangroves in isolation. Mangroves where twinned with physical infrastructure, can have a multiply effect to increase resilience. And that, I guess is the more visual and physical aspect of the important role that mangroves playing resilience. But an equally important aspect is the role that mangroves play in economic resilience and and this in particular to coastal communities as well as the role that mangroves play for fisheries. Right, mangroves, as we know, are nature's nurseries. That's where fishes grow and and and that has an effect on fish stocks right in the in the adjacencies to to mangro forests, but also beyond that as well, and and and it has a direct impact on on fisheries.
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Speaker 3: Right.
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Speaker 4: So for example, one study says that the globally, the mangrove forest keeps about four million small scale fishes in business. Right, So if we if we think about that in scale, you're not just having a physical resilience aspect, You're having an economic resilience from protecting cities and economic hubs, but also directly to certain industries as well. So I think that's where blue carbon and in in this particular case, mangrove ecosystems player outside role as well in terms of building resilience across these sectors.
00:19:13
Speaker 2: Yeah, thanks for that, Rubert. I mean, I think when we look at a lot of these projects of the next question that I have for John then focuses on well, how do we finance it? I mean, I think there's a lot of examples of evolving ways that financing is being used to fund projects, to fund resiliency, and I just hope that maybe you could walk us through some examples of vehicles. I mean, deferent nature swaps pops right to my head. There's also sustainability link loans, blue financing. Maybe you could expand on the financing aspect.
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Speaker 3: Happy to do that. Maybe maybe I could just pick up quickly on on the tail end of something Reuben was saying about the about about nature and natural capital and natural ecosystems as infrastructure briefly, and you know, I've spent this has been a busy week of meetings obviously here at Climate Week. So many of the conversations I've been part of have been conversations with insurers, with credit rating agencies, with state insurance commissioners, et cetera, who see the imperative for a infrastructure development, the cost of that uh UH development that will occur over the next decades in their respective jurisdictions, and the role that carefully placed nature preservation and restoration can can can play in reducing some of the infrat some of the hard infrastructured UH investment requirements. And we've seen this, you know, in in New York with UH you know, decisions that were made decades ago to uh you know, to to UH restore habitats and eco systems up you know, upstream in your in your on your water supply system that filter water, and you know, UH save hundreds of billions of dollars that would otherwise be spent on hard infrastructure. So if you start from the premise that I think Reuben laid out that that nature, that nature, mangroves, forests are a form of infrastructure which themselves are providing really unpold benefits. UH from a from a from a climate resilient standpoint, from a natural capital standpoint, I think you you you your your infrastructure, your hard infrastructure development costs can be significantly tempered. In other words, let's protect nature. Let's not tear it down, because if we tear it down, we're going to have to build a whole lot of things to replace it, and it's going to be a lot more expensive. Some of the things you asked for some data points around around the state of the industry today. You know, I think, as with many stories in the kind of conservation climate space, there's good news and bad news. Right the the bad news is that that nature finance gap runs the tune of hundreds of billions of dollars annually that we need to we need to find and address and mobilize in order to stabilize the world's not just ecosystems, but ultimately the world's economies. Right because if GDP is tied to functioning ecosystems, then we need it's our imperative to drive capital to preserve that infrastructure. But here's some good news right in the last this year, we expect that the sustainability link bonds space, so another the bond issuances that are dedicated to green, clean, or otherwise sustainable purposes, will likely grow to about a trillion dollars this year. Now, not all of that goes to nature per se, but it's certainly a significant increase over past years, about a twenty percent year on year growth, right, and in finance, twenty percent year on your growth is a pretty impressive number, So watch the space as the sustainability link bonds sector continues to grow. We've also seen sustainability link loans provided by financial institutions to corporates to support their efforts to become more sustainable in their supply chains also have also grown by about a twenty five percent rate over last year to also around trillion dollars. So across those two sectors, sustainability link loans sustainabile link bonds got about two trillion dollars worth of issuances or capital flows that ten years ago were a fraction of that the impact investing space right, impact investing, in other words, investors that are looking for both financial returns but also an impact or a mission oriented alignment in their portfolios. Now, that's a one point six trillion dollar assets under management sector. Nature, of course is only about ten percent of that, but it's the fastest growing sub segment in the impact investing space. So we see funds being raised for nature at a clip that we haven't seen historically. And then I would just say this, you know, you mentioned debt swaps. You know, there's a history. Now probably about a dozen countries over the years have worked with organizations like WWF. We did our first debt for nature swap in two thousand and two in Peru, but to restructure their sovereign debt in order to free up fiscal headroom for conservation objectives. And that's a very attractive way of kind of a win win situation where we can achieve you know, critical conservation outcomes desired by a country and provide fiscal headroom for country for countries in the process. And we're working in coalition with a number of our partner organizations like TNC and PEW and Conservation International and others on a debt code effort to kind of combine our efforts and drive that practice further over the years ahead.
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Speaker 2: And if I could just jump in for a second, Typically different nature swaps have been aimed at countries that are in some kind of financial stress maybe and designed to kind of cut the cost of funding for them. Do you see the program maybe expanding into just developed nations doing more some type of swap to where they could even get a little bit lower but also do something good for the environment.
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Speaker 3: Sure, I mean I think yeah. As this sector I think emerges, you're going to see more and more. I think most of these, by the way, most of the issuances, the bond issuances that are done on the back of these of these sovereign dead swaps are oversubscribed because there's a real demand in the market from investors to invest into things that are kind of certifiably sustainable, that have an in prima tore of of high integrity and so as to your point, I think, as we look for countries that are looking to fund to support sustainable conversions, whether it's in their energy sector or in their agricultural sectors, et cetera, both at the sovereign level, but importantly at the corporate level as well. I think we see a huge opportunity to kind of support those new issuances and to help companies understand how they can finance their transitions. An agricultural company, a big global agricultural company, knows that it needs to find some way of securing long term off long term sustainable off take for products that are increasingly under the threat of nature loss of climate change and of resilience a threat. And if we can help finance the supply chain conversions at the farm level, as we do in in many countries around the world, that's an activity that produces long term economic stability and benefit both for the farmers on the ground but also for the corporate that needs to transition its supply chains. So there's lots of these opportunities now that we're seeing for the sustainable use of loans of dead conversions.
00:27:24
Speaker 5: I think it's very encouraging to hear some of those statistics you've put out, the headline growth rates that we're seeing in some of these products. I think you said twenty percent yarin near growth on SLBs. So the clear kind of momentum in the space is really encouraging to see, and I think as you highlighted, the scale of the opportunity both at the corporate level sovereign level is huge. And of course we've seen the role of blended finance play quite important role in mobilizing some of this capital, and WWF obviously does really plays a really key role in bringing together different stakeholders help mobilize this capital. Can you tell us a little bit more about vended finance and how it's helping bringing together different types of capital for conservation and resilience projects.
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Speaker 3: Sure, maybe I'll start just by defining what it is when I say blended capital what I mean, because I think blended capital has become such a such a it's kind of the term of the moment, if you will, a lot of people talking about blended finance. So when I say blended finance, I'm talking about how do we use the smallest amount possible of concessional resources, right, And that's concessional meaning non commercial market return seeking capital to de risk and mobilize the largest amount possible of commercial seeking returns into a sector. And so that blend is the blend of concessional money, public or philanthropt like with some amount of private money. Now, clearly you want that ratio to be as high as possible, right, in other words, the lowest amount of public or concessional money to the highest amount of private money. But that ratio will depend upon the sector, the region, the country that you're operating in. The more challenging, the less track record there is in a country or a sector or an investment structure, the lower the blend of private capital you'll achieve. I think where WWF has a really comparative advantage in this world is that we work with As a matter of course, we work with governments around the world, we work with multilateral development banks, with development finance corporations, with the Green Climate Fund, with the Global Environment Facility. So we have a very long standing trusted relationship with the with the purveyors of the concessional capital that is so required in order to de risk private capital entry. And then we have great corporate relationships and you know, partners that have that are looking to us to help them understand how best to identify and and and and invest into conservation efforts consistent with standards that WWF has established, oftentimes in concert with many of our partner organizations. So as I think about the nature finance challenge, it's a it's a it is a challenge of finding the right type and the right blend of capital in the right place at the right time for key conservation objectives. And that is a role that we I think are ideally situated to play as a global nonprofit where we can do a lot of that hard work, you know, without worrying about the profit return on one side, and then present investment packages out to the market that have a blend of returns in them depending upon the type of player that we've brought together in those transactions. So to me, that's the exciting part. Right right, right type of capital, right blend in the right place at the right time for you know, globally important conservation efforts.
00:31:21
Speaker 2: Yeah, and I'm actually reminded of something Rubin said when he was talking about the Mangroes, just the number of projects that kind of failed because exactly what you're saying, maybe it wasn't the right time, in the right place, the right support even from from governments or the like. But but Rubin, maybe turning back to you, you know, from your work on mangroves, and coastal resilience. You know, are there types of financial models that you've seen are making these projects viable now? Or you know, is an investment continued to fall short? So maybe maybe you can provide some examples of where blended finance is working or or hasn't really worked and the reasons why.
00:32:01
Speaker 4: Thanks so much, Chris, And maybe I'll start with answering the question that you had, which is it falling short? Yes, I think, as Chris or other as you mentioned, and also as John mentioned, we are far away from where financing te nature needs to be, so it is definitely falling short. But I think that's good context to understand why. And you spoke about mangroves. I'll use that as an example, but also to carry out the WWF force across different landscapes mangroves, forests, oceans as well. But I think mangroves is a good example to illustrate some of the fundamental structural problems that we have when it comes to financing nature and with mangroves. One of the problems when it comes with financing is a timing gap. If we look at mangrove and we look at mangrove restoration projects, for example, more than fifty percent typically more than fifty percent of the capital that we go into the project is required in the first three to five years of the project, right, because if you're doing a mango restoration, you need to set up your nurseries, you need to do you need to plant uh and that's currently value labor intensive. And then you also need to do your monitoring activities, which are fairly intensive in the early years.
00:33:20
Speaker 1: Right.
00:33:21
Speaker 4: But within and if you look at how mangro projects are typically structured, within the first that same period, within the first three or five years, there's virtually no finance flows throwing out of the project, right because the mangroes are being restored, being rehabilitated. And if you put that to an investor, you you would wouldn't find many investors that are willing to wait patiently to see no returns at all coming from the investment for you know, three to five years. And then so then shift gears to look at what solutions can be provided to solve this problem, and there are a few, right. John spoke about the unique role that angos play and the unique role that angos like that were play in terms of mobilizing finance. And one aspect is the critical and catalytic role that philanthropic capital can play right in terms of providing that bridge for financing that can make the project investible and then whether returnable or not. That philanthropic capital can be a way to mobilize and tie over that financing gap, and angios can have a role to play as a trusted as a nonprofit entity to mobilize that philanthropic capital to bridge that specific problem. Another way is to rely on non carbon workstreams right, and that's fairly well established and WURF is working a long time in this field on areas such as can we do sustainable aquaculture in areas surrounding the microths that being rehability, can we do sustainable seabed farming? Chris I was just in in in Indonesia surveying a possible project and due to the mangrove degradation that has happened in that particular area and the local committees there are traditional seaweed farmers, the quality of the seaweed that has produced has dropped so much that the price of seaweeds is now thirty percent of what they use to sell.
00:35:20
Speaker 3: It for right.
00:35:22
Speaker 4: So there's a huge economic opportunity in terms of transforming those activities as the rehabilitation is happening to provide an additional economic incentive and an additional revenue stream that can bridge that finance gap. So I think the quick answer is that there isn't one solution to it, and it's really, as John alluded to, how we find the right solution for the right region, for the right project that can bridge the specific problems and hopefully then we can make a more concerted effort and make more determined effort towards bridging that nature financing gap we've been speaking about.
00:36:01
Speaker 5: I think it's so interesting to here just I guess in terms of things like investors or really hemming focused on that kind of short term returns on demand and actually some of these things taking forward to five years and that timing having implications for kind of creating that financing gap and needing kind of enduos to step in or filmthropic finance in that interfering period to make these projects investable. John to just turn to you curious kind of what you think is needed to plug this gap more broadly, Is it new instruments, better policy. Is it this investor mindset shifts? Maybe should they have a longer term approach? And do you think on the whole the gap I feel actually listening to both of you, it feels like we're seeing positive momentum. But do we feel that the gap is growing or we are going in the right direction? And also have things like FED cuts made it necessary to plug any additional gaps in the space.
00:37:03
Speaker 3: Yeah, A lot of a lot of good questions, Eric Grace. Let me let me just say that I think I think we need all of all of what you said right, And it's not a question of one thing uh over another, but but we need we need, we need to see, we need to see better policy. We need to see more regulations. We need to see we need to see more standards and harmonization of what it what constitutes a you know, sustainability uh an eligible use of proceeds? You know, it's interesting we there's been a lot of talk over this week as nature has has really risen, I think in prominence during Climate Week. Many many, if not most, of the conversations that I've been focused on here have been have been related to kind of nature, conservation and financing nature. In addition to uh, you know, the climate conversation that that is so so dominant throughout this week as well. There's a lot to be learned from the climate conversation, I think, and and how over the last ten years, you know, a combination of policy, regulation, declining cost curves on technologies that have been you know, spurred in part by but not only by, you know, government incentives have really changed the conversation around around climate. Where we now have you know, eighty five percent of new energy electricity being or electricity being added to the global energy grid annually is renewable now, and that's because of economic imperatives assisted by policy. So I do think there's a clear role for policy and for regulation around key aspects of nature and conservation going forward, which are going to be necessary in order for us to get to the speed and scale of financing that's required to close that again, close that kind of nature gap. And again, closing that nature gap is something we should all care about because if we don't do it, our global economy will not succeed, right, Like, that's what we're talking about here. We're not doing it for you know, to save a zebra, although we are doing that as well. We're doing this because at the end of the day, the global economy requires functioning ecosystems and strong biodiversity to succeed. So there's definitely a role for policy and regulation, and I don't think we're going to see, you know, a lot of that coming out of the US for the next couple of years. We do see Europe and other jurisdictions, including in Asia, moving forward with recognition that nature conservation and preservation is a key part of their national priorities and policies. That's really important. In the same way that we've seen the carbon markets, both on the compliance and on the voluntary side emerge with some i would say, some hair some volatility in recent years, we will see and we are beginning to see the emergence of a kind of a shadow nature market where people are beginning to price uh nature loss and understand that that that they should be willing to pay a premium within their business, business lines and supply chains for long term resilient nature positive practices. So policy and regulation of course very very important. Standards and harmonization are important as well, because the space is big right now. When you say nature, what does that mean? You're talking about water, are you talking about a you're talking about soil health, are you're talking about air quality? You're talking about what is the metric that you're seeking to to to to maximize and to conserve. And of course WWF has strong opinions on this, but there's a lot of there's there's not coherence in the market, I would say, around around those issues, unlike with carbon, where there's a molecule that you can count and you can reduce, and you can you can price. So so I think there's you know, we've got a we've got a ways to go. But the sustainability imperative and the economic imperative that large companies are realizing now is the driving force of why we are having so many companies come to us at WF and say, help us understand what it means to transition to a nature positive posture in our supply chain. And this is where our team comes in, help us figure out how to finance that transition.
00:41:24
Speaker 4: Right.
00:41:25
Speaker 3: Rubin made the point there's a timing issue. There's always a timing issue in nature conservation because you have to do things that then produce results, you know, five ten years later, if we can help bridge that financing gap through our relationships with philanthropies and governments and other things help private companies get on that journey. You know. That's what we see as our role in this new new strategy. Yeah.
00:41:49
Speaker 5: Absolutely, I think we've definitely seen that chef where people are realizing the value of nature and the economic comparative of financing nature, not only because I think the start you gave us at the beginning, John, that it's you know, contributes to fifty percent of GDP, but also that you know it's fundamental for human life. It's the water we drink, the air we breathe. So it's pretty critical going forward. And I think this conversation with underpin that there is fantastic momentum going on, but there's still lots more to do, and whether it's an increased drive in regulation and policy to facilitate further progress as well. I think just kind of shifting gears and looking forward, A question to both of you would be kind of what does success look like if we actually really managed to invest in nature a scale that is required and maybe a fun one really to finish off. If nature was a stock and you could pitch it on the trading floor in one sentence, what was you pitch to get everyone buying inub?
00:42:56
Speaker 3: Why don't you go first? And I'll learn, I'll learn from your your comments and then close.
00:43:04
Speaker 4: Well, I'll take us have addictionon so grace and I think, what to me, what success would look like? Right? Requires success around free fronts, And first is on efficiency. I spoken about that, right, I think it's very important, and especially because we're talking about investments in nature, to not see finance as a proxy for impact.
00:43:28
Speaker 3: Right.
00:43:29
Speaker 4: Just because we scale finance doesn't mean we're going to achieve more impact. And what needs to happen is a more efficient deployment of the right financing tools to achieve the right impact.
00:43:39
Speaker 3: Right.
00:43:39
Speaker 4: So that's the first measure of success, like are we more efficient in how we're deploying finance. The second measure of success is effectiveness. Is every dollar that we're putting in achieving real measurable outcomes. And that's why initiatives like the Blue Catalysts that Singapore is working on in terms of improving that effectiveness and that measure of success. And the third, and I think this can't be understated, is empowerment. We can't view projects and nature projects as carbon farms. They're not carbon factories. Nature projects are projects. They sit in communities. So that's where if you have weak land rights, inequality, corruption, all these kill investments. We need to fix it right. And how we fix it we build projects that embed human rights, community benefits, and put communities at the heart of projects.
00:44:38
Speaker 3: Right.
00:44:39
Speaker 4: And when communities are empowered, if you're doing a carbon project, the project can stop in twenty years that the people will still be there. By empowering those communities, you can also make sure the impact and deals beyond the project itself. So longly that answer, Grace, But I think these three e's in terms of the EFFICI, effectiveness, and empowerment is how a majure success for nature scale.
00:45:04
Speaker 5: And there's three very good good measures and actually reframing some of some of the ways people might initially think about success.
00:45:12
Speaker 3: And I would say, maybe, Grace to your question, I maybe I'll just I'll throw out two, which is that, uh, what we're aiming for here again for economic reasons as much as for any other reason at this point, is we success looks like halting and reversing the really shocking and I would say almost shameful. Loss of biodiversity and key ecosystems that we've experienced over the last several several generations. And that's the goal, right is to restore the you know, the world's ecosystems and biodiversity to a position that supports not just their own livelihoods, but but human lively going forward. And at the moment, we're not we're not doing that. We're not treating our our planet that way, and it and it is already having and will continue to have long term you know, economic consequences that that I think we and our children will will be dealing with it unless we take this seriously. The way to get there is through ultimately pricing environmental markets. And you know, unless you put a value on something in price it, it will be overused and depleted. And we've seen that happen with you know, with you know, with ecosystems and by diversity around the world. So I think we're moving in the right direction. We need to expedite our efforts. And I think the good news again here is that companies understand now in ways they did in five or ten years ago, that their long term economic success is inextricably linked to the health of natural ecosystems around the world. And the last thing I'd say is you know your your question or if you know, if we were pitching this on the on a trading floor, what would I say about about nature? I'd say, by now, it will never be a better deal to invest in nature. As something becomes scarcer, the prices go up. Right, So now is the time to invest in nature. Do it now. It's in your long term interest and watch it. Watch, you know, watch your portfolio over time. If you wait ten years, you'll have missed the opportunity to buy on the dip.
00:47:22
Speaker 4: I like that a lot.
00:47:24
Speaker 2: Well, I'd just like to thank you both. I mean, I hope our listeners have learned as much as I have today from talking about nature investment and mangroves, how it can reduce carbon and provide resiliency benefits, to just the benefits and the expanding need for more nature related investment. It's just so important to practice patients, you know, when it comes to a lot of these projects. But it will take time to see results and returns. But thank you.
00:47:51
Speaker 4: Both, thank you, thank you.
00:47:53
Speaker 2: As we turn to our outro here, I'd just like to say, you know, thank you again to both of you. But if any of our listeners would like to find more information on nature capital or other related sustainable topics, you could do so by going to b I ESG or using nature go on the Bloomberg terminal. If you haven't any other ESG quandary or burning question you would like to ask our BI experts, please send us an email at ESG Currents at bloomberg dot net. Thank you
Speaker 1: ESG is constantly evolving. Over the years, it has shifted from socially responsible investing to impact to sustainable finance. While the terminology continues to change, what hasn't changed are the underlying science, market pressures, and tangible physical and financial impacts of the climate crisis, increasing regulatory scrutiny, and rising consumer expectations. We aim to filter out the noise by speaking with industry experts to identify what is really driving value. Welcome to ESG Currents, brought to you by Bluemeg Intelligence. I am Grace Osborne, the ESG Integration Analyst.
00:00:42
Speaker 2: And I'm Chris Raddy, Senior ESG Credit Analyst, and we're your hosts for today's episode. Today, we're joining with Ruben Menikara, Global Lead of WWS Carbon Finance and Market Task Force and John Morton, Executive Managing Director of Nature Finance and Investment at WWF explore the future of natural capital. With an estimated seven hundred billion dollar annual biodiversity finance gap, mobilizing capital for nature has never been more urgent. Reuben brings his expertise in carbon markets, serving in serving on the UN Aviation Body's Advisory Panel and previously leading Singapore's negotiation on Article six at the UN Climate Talks. John has been his career bridging government finance and conservation, including being the first Climate Counselor for US Treasury Secretary Janet Yellen and previously a Senior director for Energy and Climate Change at the White House. We're excited to dive into how WWF is helping close the nature finance gap and driving innovative solutions for people, climate, and biodiversity. So John will start with you. Why should in'tvestors care about nature as an asset class? What's driving this shift and what challenges do you see an unlocking new capital?
00:02:00
Speaker 3: Yeah, well, thanks for the question and thanks for the opportunity to be with you today. I think nature should investors should see nature as an asset class and something to be protected because at the end of the day, over sixty percent over fifty percent of global GDP is highly or moderately dependent upon nature. In other words, without nature, without functioning ecosystems, without lands that produce, without waters that can sustain, we don't have a global economy. And we are beginning to see I think corporates and financial institutions recognize that in addition to a climate crisis which has frankly turned into I think an economic opportunity for many many companies. We have a nature crisis. We have a crisis of nature that is being lost at a rate that has bearing and importance not just for environmental reasons and arguably for moral and social reasons, but for economic reasons. So over the last five years we've seen just a tremendous growth in the understanding of and the actions of companies who understand that investing in nature is critical for their long term economic sustainability as well. And I think that's the tide that has turned and changed, is that we now are part of so many conversations where nature and investing in nature and protecting nature is seen as an economic imperative, both because of losses that will be incurred if we don't protect nature, but importantly gains that can be achieved when we invest in nature effectively. We get better productivity, we get better economic resilience, we get better climate resilience if you're talking about agricultural products, pharmaceutical products, and so there's a real business case now to be made for investing in nature that didn't really exist. I'd say ten to fifteen years ago, really compelling proposition.
00:03:57
Speaker 4: Yeah.
00:03:57
Speaker 5: Absolutely seen that shift that investing in nature is an economic imparative and as you mentioned, both for the opportunities that it brings, but also these rests around nature loss. John, you've been leading the launch of WWF's new Nature Finance and Investment function. What's the core ambition of the strategy and what is the opportunity here for investors?
00:04:23
Speaker 3: Yeah. Look, so we announced our new Nature Finance and Investment strategy this week here during Climate Week, and it's an exciting strategy which is new but also really builds off of WWF's a great track record over the last many many decades globally in working to identify and try to address some of the conservation the world's highest conservation priorities. And what this new strategy says is that we are going to double down, enhance, really lift up our efforts to dry have private capital solutions, private capital investment opportunities for our clients, for our partners, and we have a deep set of corporate partnerships globally. We have a great set of relationships with financial institutions as part of our partnership program. And what we see is an opportunity to very nimbly and in a targeted way blend finance from public sources and philanthropic sources that those have been our traditional sources of conservation finance over the last many decades, but do that in a way that enables private capital to begin accessing what we consider to be some of the most exciting and important conservation efforts globally. So WWF will essentially use our global brand, our science expertise, our scientific expertise, our community relationships with communities you know throughout the world to ida identify the highest priority conservation efforts and to look for ways of mobilizing private capital to address those those opportunities. And the reason that's important as twofold one, as was mentioned in the lead in the finance gap required for us to get to a sustainable nature positive economy runs to the tune of seven to eight hundred billion dollars a year annually in additional flows that need to happen, and those won't come from public or philanthropic sources alone. Right, so there's an imperative for us to find more money. That's the how shall I say, that's that's the pull signal. The push signal that we see is that there are increasingly and perhaps we'll talk about it later in the program, opportunities for private companies to make profits in supporting more sustainable investment opportunities and conservation opportunities around the world. So I think there's a you know, there's an imperative to drive more capital, and then there's an opportunity for that capital to actually profit from more sustainable investment practices.
00:07:08
Speaker 5: Absolutely so interesting, and I think, as you mentioned, blended finance is going to be really key going forward. I think, particularly in the nature space, we're really bridging expertise here within the technicalities and knowledge needed on the ground for nature, and of course kind of the financial expertise to mobilize as you said, that private capital into the space. And obviously in an exciting time, there's lots of really interesting going work going on. And Ruben, you've actually just launched the mangrove carbon program. Can you tell us a little bit more about this and what role mangroves are playing in carbon markets and from your perspective, why is nature, whether it's mangroves, forests, or other ecosystems not just conservation but also a smart investment.
00:07:57
Speaker 4: Thanks so much for the question, Greece, and very happy to share about the Mangrove program. And it's called the Blue Catalyst, which is the first initiative and it's part of a strategic partnership between ww and Singapore and the Singapore Government's Economic Development Board, which is essentially the economic arm of the Singapore government. And these two trusted entities are coming together to unlock high quality, a stream of high quality supply of blue carbon credit to the market, but not only just carbon credit, but carbon credit projects that have benefits beyond carbon for biodiversity and communities as well. And I think a grace before I can go into the program itself, it's useful to explain why mangrowth, why blue carbon, because that sort of sets the context right and to really take if I can two steps back. And it's something that's often forgotten, is that we are we isn't collective. We are well behind climate action as to where it needs to be right. We have emitted too much into the environment that we not only need to stop the flow, but we need to remove what's already in the environment in terms of the emissions, right, and that's where the focus in mangrove comes in. It is well recognized that the mangrove forests are biodiversity banks, right. I think there are various studies, but those studies put a number close to like, mangrove forests housing a collective of one five hundred species, of which about twenty percent of them are already threatened or at risk. But beyond that, mangroves are also super spongous when we call, when we talk about them in a car will remove all perspective. And that's quite well known. But just to give you some perspective, right, just losing one percent of man growth globally is the equivalent of fifty million of emissions of fifty million cars, So that that gives you a perspective of how good a job mangroves do in terms of removing carbon. And it's often spoken about that mangroves soak up to forty five times more carbon than terrestrial forests. But one important fact that's often not emphasized enough is that they do it at a at a rate of sequestration there's ten times faster than terrestrial forests. Right, So we're not just talking about amount of carbon, we're talking about how fast the forest can remove the carbon as well, and it's it's putting all those aspects together and recognizing that the superhero effect, thank call it is such that mangroves can play right in helping to accelerate climate action. And then there's the second context of what why this program. I mean, as John alluded to, WWF is a global brand and an organization and has close one hundred offices globally. But this particular program was launched in Asia and as part of the b of Singapore because Asia is ground zero four mangroves. The region holds over half of the world's mangroves, and to give you a perspective, one Asian country, Indonesia alone holds about thirty percent of the world's magrove. So it gives you a sense of perspective of why that regional focus and why this is being launched in Asia. But that's not going to the problem itself, and that's what this program aims to solve. The problem is that Asia, and if I can drill down deeper into Southeast Asia has lost over a third of its mangroves in the last forty years, and the restoration efforts that have happened in recent decades have not kept pace, largely because they are led by psilanthropy, and you know, they are rashly small scale, so they haven't been able to happen at the scale that's required to reverse the effects that have happened over the last forty years. Right, And part of that reason is because private finance or even concessual finance has not flown into these projects. And to give you a sense of the numbers, right, and just purely just using as a proxy, if you look at the voluntary carbon market as it is, which is a source of private finance towards carbon projects, less than one percent of all credits come from blue carbon. That gives you a sense of perspective as to how much finance is flowing into this ecosystem and this critical ecosystem that we need to get right. So then we can dive deeper into why is that the case? And I refer to to a couple of studies, but one of it estimated that and it surveyed mangrove restoration projects over the last forty years, and it found that almost fifty percent of mangro restoration projects have failed to achieve their targets, right and if you were that Now the hat of a investor, why would investors invest private capital in a mango project? Is half of every dollar that they invest is probably going to go into a failed project. Right. So, recognizing this context and the ecosystem as well as the problem that I've just identified, that's what led to the development of this program by the Way of Singapore in collaboration with Simple Government. And the objective of the program is to improve the success rate of mangro restoration projects. How there are many ways to do it, and in no means this program mems to be that silver bullet, but it does it true one way, which is by leveraging technology. So the program will essentially start with a call for problem statements from carbon project developers to identify railroad problems that lead to these project failures. And you will also call for an application for emerging or current technologies that can provide solutions to these technologies. So WWF together without Open Innovation partner Hatch Blue well then match those solutions and provide those solutions to the projects. And it's not only just a matching service. WWF which has existing mangroveth reservation projects as part of the portfolio of activities that we do globally, so where needed, we would open up those sites to further refine those technologies to make sure that what's deployed in investable carbon projects is actually fit for purpose and can lead to a genuine increase in terms of you know, originating as self has full mang growth project. So I think, Grace, it's a long window answer to your Christians, but I thought that gives you a good context and of the program and what the program aims.
00:15:10
Speaker 5: Yeah, incredibly interesting and I love that term superspongers. I just think some of those starts that just really highlight the importance of financing mangroves and making those dollar investments really maximizing them, I think, very very interesting work.
00:15:27
Speaker 2: I mean, I totally agree. I mean, the fact that you said ten times what a terrestrial forest can can kind of do in terms of carbon removal is kind of shocking. So, I mean, I think it's just amazing you know how important that mangroes really are towards the carbon removal removal. One of the things I wanted to touch on is kind of resiliency. Now that that's a theme really that's popping up all over the place. You know, not just you know, for place is that get hit by storms or wildfires or or things of that nature, but just in general, you know, a lot of governments, municipalities, you know, they're looking at the differences between you know, being resilient and you know, adapting towards the change in climate changes that we've seen. I wonder, Reuben beyond beyond just carbon capture, if mangroves and kind of nature more broadly are a powerful tool that could be used for nature based resilience. You know, can you share how nature based solutions could really improve resiliency?
00:16:37
Speaker 4: Thanks so much, Chris. Yeah, and you absolutely pointed right. And I think there's two aspects of resilience here that we can unpack. The first is and if I can also focus on mangroves, right, it is an often understated function of mangroves that they are nature is essentially hidden infrastructure.
00:16:57
Speaker 3: Right.
00:16:57
Speaker 4: The function of mangrove to protect coastal communities from floods cannot be understated. I mean that in a global study, for example, it was estimated that fifteen million or more people would face floods on a yearly basis if mangro forests were lost, and that's just the people, the impacts of the people. If we calculate the economic impact, that would be absolutely disastrous. And many economic hubs of countries are in low lying areas that are protected by magrowth, right, so it's not just a function of a protection, but it's protecting livelihoods, economic activities and essentially way of life as it is right, And it's not only mangroves in isolation. Mangroves where twinned with physical infrastructure, can have a multiply effect to increase resilience. And that, I guess is the more visual and physical aspect of the important role that mangroves playing resilience. But an equally important aspect is the role that mangroves play in economic resilience and and this in particular to coastal communities as well as the role that mangroves play for fisheries. Right, mangroves, as we know, are nature's nurseries. That's where fishes grow and and and that has an effect on fish stocks right in the in the adjacencies to to mangro forests, but also beyond that as well, and and and it has a direct impact on on fisheries.
00:18:36
Speaker 3: Right.
00:18:36
Speaker 4: So for example, one study says that the globally, the mangrove forest keeps about four million small scale fishes in business. Right, So if we if we think about that in scale, you're not just having a physical resilience aspect, You're having an economic resilience from protecting cities and economic hubs, but also directly to certain industries as well. So I think that's where blue carbon and in in this particular case, mangrove ecosystems player outside role as well in terms of building resilience across these sectors.
00:19:13
Speaker 2: Yeah, thanks for that, Rubert. I mean, I think when we look at a lot of these projects of the next question that I have for John then focuses on well, how do we finance it? I mean, I think there's a lot of examples of evolving ways that financing is being used to fund projects, to fund resiliency, and I just hope that maybe you could walk us through some examples of vehicles. I mean, deferent nature swaps pops right to my head. There's also sustainability link loans, blue financing. Maybe you could expand on the financing aspect.
00:19:50
Speaker 3: Happy to do that. Maybe maybe I could just pick up quickly on on the tail end of something Reuben was saying about the about about nature and natural capital and natural ecosystems as infrastructure briefly, and you know, I've spent this has been a busy week of meetings obviously here at Climate Week. So many of the conversations I've been part of have been conversations with insurers, with credit rating agencies, with state insurance commissioners, et cetera, who see the imperative for a infrastructure development, the cost of that uh UH development that will occur over the next decades in their respective jurisdictions, and the role that carefully placed nature preservation and restoration can can can play in reducing some of the infrat some of the hard infrastructured UH investment requirements. And we've seen this, you know, in in New York with UH you know, decisions that were made decades ago to uh you know, to to UH restore habitats and eco systems up you know, upstream in your in your on your water supply system that filter water, and you know, UH save hundreds of billions of dollars that would otherwise be spent on hard infrastructure. So if you start from the premise that I think Reuben laid out that that nature, that nature, mangroves, forests are a form of infrastructure which themselves are providing really unpold benefits. UH from a from a from a climate resilient standpoint, from a natural capital standpoint, I think you you you your your infrastructure, your hard infrastructure development costs can be significantly tempered. In other words, let's protect nature. Let's not tear it down, because if we tear it down, we're going to have to build a whole lot of things to replace it, and it's going to be a lot more expensive. Some of the things you asked for some data points around around the state of the industry today. You know, I think, as with many stories in the kind of conservation climate space, there's good news and bad news. Right the the bad news is that that nature finance gap runs the tune of hundreds of billions of dollars annually that we need to we need to find and address and mobilize in order to stabilize the world's not just ecosystems, but ultimately the world's economies. Right because if GDP is tied to functioning ecosystems, then we need it's our imperative to drive capital to preserve that infrastructure. But here's some good news right in the last this year, we expect that the sustainability link bonds space, so another the bond issuances that are dedicated to green, clean, or otherwise sustainable purposes, will likely grow to about a trillion dollars this year. Now, not all of that goes to nature per se, but it's certainly a significant increase over past years, about a twenty percent year on year growth, right, and in finance, twenty percent year on your growth is a pretty impressive number, So watch the space as the sustainability link bonds sector continues to grow. We've also seen sustainability link loans provided by financial institutions to corporates to support their efforts to become more sustainable in their supply chains also have also grown by about a twenty five percent rate over last year to also around trillion dollars. So across those two sectors, sustainability link loans sustainabile link bonds got about two trillion dollars worth of issuances or capital flows that ten years ago were a fraction of that the impact investing space right, impact investing, in other words, investors that are looking for both financial returns but also an impact or a mission oriented alignment in their portfolios. Now, that's a one point six trillion dollar assets under management sector. Nature, of course is only about ten percent of that, but it's the fastest growing sub segment in the impact investing space. So we see funds being raised for nature at a clip that we haven't seen historically. And then I would just say this, you know, you mentioned debt swaps. You know, there's a history. Now probably about a dozen countries over the years have worked with organizations like WWF. We did our first debt for nature swap in two thousand and two in Peru, but to restructure their sovereign debt in order to free up fiscal headroom for conservation objectives. And that's a very attractive way of kind of a win win situation where we can achieve you know, critical conservation outcomes desired by a country and provide fiscal headroom for country for countries in the process. And we're working in coalition with a number of our partner organizations like TNC and PEW and Conservation International and others on a debt code effort to kind of combine our efforts and drive that practice further over the years ahead.
00:25:07
Speaker 2: And if I could just jump in for a second, Typically different nature swaps have been aimed at countries that are in some kind of financial stress maybe and designed to kind of cut the cost of funding for them. Do you see the program maybe expanding into just developed nations doing more some type of swap to where they could even get a little bit lower but also do something good for the environment.
00:25:32
Speaker 3: Sure, I mean I think yeah. As this sector I think emerges, you're going to see more and more. I think most of these, by the way, most of the issuances, the bond issuances that are done on the back of these of these sovereign dead swaps are oversubscribed because there's a real demand in the market from investors to invest into things that are kind of certifiably sustainable, that have an in prima tore of of high integrity and so as to your point, I think, as we look for countries that are looking to fund to support sustainable conversions, whether it's in their energy sector or in their agricultural sectors, et cetera, both at the sovereign level, but importantly at the corporate level as well. I think we see a huge opportunity to kind of support those new issuances and to help companies understand how they can finance their transitions. An agricultural company, a big global agricultural company, knows that it needs to find some way of securing long term off long term sustainable off take for products that are increasingly under the threat of nature loss of climate change and of resilience a threat. And if we can help finance the supply chain conversions at the farm level, as we do in in many countries around the world, that's an activity that produces long term economic stability and benefit both for the farmers on the ground but also for the corporate that needs to transition its supply chains. So there's lots of these opportunities now that we're seeing for the sustainable use of loans of dead conversions.
00:27:24
Speaker 5: I think it's very encouraging to hear some of those statistics you've put out, the headline growth rates that we're seeing in some of these products. I think you said twenty percent yarin near growth on SLBs. So the clear kind of momentum in the space is really encouraging to see, and I think as you highlighted, the scale of the opportunity both at the corporate level sovereign level is huge. And of course we've seen the role of blended finance play quite important role in mobilizing some of this capital, and WWF obviously does really plays a really key role in bringing together different stakeholders help mobilize this capital. Can you tell us a little bit more about vended finance and how it's helping bringing together different types of capital for conservation and resilience projects.
00:28:15
Speaker 3: Sure, maybe I'll start just by defining what it is when I say blended capital what I mean, because I think blended capital has become such a such a it's kind of the term of the moment, if you will, a lot of people talking about blended finance. So when I say blended finance, I'm talking about how do we use the smallest amount possible of concessional resources, right, And that's concessional meaning non commercial market return seeking capital to de risk and mobilize the largest amount possible of commercial seeking returns into a sector. And so that blend is the blend of concessional money, public or philanthropt like with some amount of private money. Now, clearly you want that ratio to be as high as possible, right, in other words, the lowest amount of public or concessional money to the highest amount of private money. But that ratio will depend upon the sector, the region, the country that you're operating in. The more challenging, the less track record there is in a country or a sector or an investment structure, the lower the blend of private capital you'll achieve. I think where WWF has a really comparative advantage in this world is that we work with As a matter of course, we work with governments around the world, we work with multilateral development banks, with development finance corporations, with the Green Climate Fund, with the Global Environment Facility. So we have a very long standing trusted relationship with the with the purveyors of the concessional capital that is so required in order to de risk private capital entry. And then we have great corporate relationships and you know, partners that have that are looking to us to help them understand how best to identify and and and and invest into conservation efforts consistent with standards that WWF has established, oftentimes in concert with many of our partner organizations. So as I think about the nature finance challenge, it's a it's a it is a challenge of finding the right type and the right blend of capital in the right place at the right time for key conservation objectives. And that is a role that we I think are ideally situated to play as a global nonprofit where we can do a lot of that hard work, you know, without worrying about the profit return on one side, and then present investment packages out to the market that have a blend of returns in them depending upon the type of player that we've brought together in those transactions. So to me, that's the exciting part. Right right, right type of capital, right blend in the right place at the right time for you know, globally important conservation efforts.
00:31:21
Speaker 2: Yeah, and I'm actually reminded of something Rubin said when he was talking about the Mangroes, just the number of projects that kind of failed because exactly what you're saying, maybe it wasn't the right time, in the right place, the right support even from from governments or the like. But but Rubin, maybe turning back to you, you know, from your work on mangroves, and coastal resilience. You know, are there types of financial models that you've seen are making these projects viable now? Or you know, is an investment continued to fall short? So maybe maybe you can provide some examples of where blended finance is working or or hasn't really worked and the reasons why.
00:32:01
Speaker 4: Thanks so much, Chris, And maybe I'll start with answering the question that you had, which is it falling short? Yes, I think, as Chris or other as you mentioned, and also as John mentioned, we are far away from where financing te nature needs to be, so it is definitely falling short. But I think that's good context to understand why. And you spoke about mangroves. I'll use that as an example, but also to carry out the WWF force across different landscapes mangroves, forests, oceans as well. But I think mangroves is a good example to illustrate some of the fundamental structural problems that we have when it comes to financing nature and with mangroves. One of the problems when it comes with financing is a timing gap. If we look at mangrove and we look at mangrove restoration projects, for example, more than fifty percent typically more than fifty percent of the capital that we go into the project is required in the first three to five years of the project, right, because if you're doing a mango restoration, you need to set up your nurseries, you need to do you need to plant uh and that's currently value labor intensive. And then you also need to do your monitoring activities, which are fairly intensive in the early years.
00:33:20
Speaker 1: Right.
00:33:21
Speaker 4: But within and if you look at how mangro projects are typically structured, within the first that same period, within the first three or five years, there's virtually no finance flows throwing out of the project, right because the mangroes are being restored, being rehabilitated. And if you put that to an investor, you you would wouldn't find many investors that are willing to wait patiently to see no returns at all coming from the investment for you know, three to five years. And then so then shift gears to look at what solutions can be provided to solve this problem, and there are a few, right. John spoke about the unique role that angos play and the unique role that angos like that were play in terms of mobilizing finance. And one aspect is the critical and catalytic role that philanthropic capital can play right in terms of providing that bridge for financing that can make the project investible and then whether returnable or not. That philanthropic capital can be a way to mobilize and tie over that financing gap, and angios can have a role to play as a trusted as a nonprofit entity to mobilize that philanthropic capital to bridge that specific problem. Another way is to rely on non carbon workstreams right, and that's fairly well established and WURF is working a long time in this field on areas such as can we do sustainable aquaculture in areas surrounding the microths that being rehability, can we do sustainable seabed farming? Chris I was just in in in Indonesia surveying a possible project and due to the mangrove degradation that has happened in that particular area and the local committees there are traditional seaweed farmers, the quality of the seaweed that has produced has dropped so much that the price of seaweeds is now thirty percent of what they use to sell.
00:35:20
Speaker 3: It for right.
00:35:22
Speaker 4: So there's a huge economic opportunity in terms of transforming those activities as the rehabilitation is happening to provide an additional economic incentive and an additional revenue stream that can bridge that finance gap. So I think the quick answer is that there isn't one solution to it, and it's really, as John alluded to, how we find the right solution for the right region, for the right project that can bridge the specific problems and hopefully then we can make a more concerted effort and make more determined effort towards bridging that nature financing gap we've been speaking about.
00:36:01
Speaker 5: I think it's so interesting to here just I guess in terms of things like investors or really hemming focused on that kind of short term returns on demand and actually some of these things taking forward to five years and that timing having implications for kind of creating that financing gap and needing kind of enduos to step in or filmthropic finance in that interfering period to make these projects investable. John to just turn to you curious kind of what you think is needed to plug this gap more broadly, Is it new instruments, better policy. Is it this investor mindset shifts? Maybe should they have a longer term approach? And do you think on the whole the gap I feel actually listening to both of you, it feels like we're seeing positive momentum. But do we feel that the gap is growing or we are going in the right direction? And also have things like FED cuts made it necessary to plug any additional gaps in the space.
00:37:03
Speaker 3: Yeah, A lot of a lot of good questions, Eric Grace. Let me let me just say that I think I think we need all of all of what you said right, And it's not a question of one thing uh over another, but but we need we need, we need to see, we need to see better policy. We need to see more regulations. We need to see we need to see more standards and harmonization of what it what constitutes a you know, sustainability uh an eligible use of proceeds? You know, it's interesting we there's been a lot of talk over this week as nature has has really risen, I think in prominence during Climate Week. Many many, if not most, of the conversations that I've been focused on here have been have been related to kind of nature, conservation and financing nature. In addition to uh, you know, the climate conversation that that is so so dominant throughout this week as well. There's a lot to be learned from the climate conversation, I think, and and how over the last ten years, you know, a combination of policy, regulation, declining cost curves on technologies that have been you know, spurred in part by but not only by, you know, government incentives have really changed the conversation around around climate. Where we now have you know, eighty five percent of new energy electricity being or electricity being added to the global energy grid annually is renewable now, and that's because of economic imperatives assisted by policy. So I do think there's a clear role for policy and for regulation around key aspects of nature and conservation going forward, which are going to be necessary in order for us to get to the speed and scale of financing that's required to close that again, close that kind of nature gap. And again, closing that nature gap is something we should all care about because if we don't do it, our global economy will not succeed, right, Like, that's what we're talking about here. We're not doing it for you know, to save a zebra, although we are doing that as well. We're doing this because at the end of the day, the global economy requires functioning ecosystems and strong biodiversity to succeed. So there's definitely a role for policy and regulation, and I don't think we're going to see, you know, a lot of that coming out of the US for the next couple of years. We do see Europe and other jurisdictions, including in Asia, moving forward with recognition that nature conservation and preservation is a key part of their national priorities and policies. That's really important. In the same way that we've seen the carbon markets, both on the compliance and on the voluntary side emerge with some i would say, some hair some volatility in recent years, we will see and we are beginning to see the emergence of a kind of a shadow nature market where people are beginning to price uh nature loss and understand that that that they should be willing to pay a premium within their business, business lines and supply chains for long term resilient nature positive practices. So policy and regulation of course very very important. Standards and harmonization are important as well, because the space is big right now. When you say nature, what does that mean? You're talking about water, are you talking about a you're talking about soil health, are you're talking about air quality? You're talking about what is the metric that you're seeking to to to to maximize and to conserve. And of course WWF has strong opinions on this, but there's a lot of there's there's not coherence in the market, I would say, around around those issues, unlike with carbon, where there's a molecule that you can count and you can reduce, and you can you can price. So so I think there's you know, we've got a we've got a ways to go. But the sustainability imperative and the economic imperative that large companies are realizing now is the driving force of why we are having so many companies come to us at WF and say, help us understand what it means to transition to a nature positive posture in our supply chain. And this is where our team comes in, help us figure out how to finance that transition.
00:41:24
Speaker 4: Right.
00:41:25
Speaker 3: Rubin made the point there's a timing issue. There's always a timing issue in nature conservation because you have to do things that then produce results, you know, five ten years later, if we can help bridge that financing gap through our relationships with philanthropies and governments and other things help private companies get on that journey. You know. That's what we see as our role in this new new strategy. Yeah.
00:41:49
Speaker 5: Absolutely, I think we've definitely seen that chef where people are realizing the value of nature and the economic comparative of financing nature, not only because I think the start you gave us at the beginning, John, that it's you know, contributes to fifty percent of GDP, but also that you know it's fundamental for human life. It's the water we drink, the air we breathe. So it's pretty critical going forward. And I think this conversation with underpin that there is fantastic momentum going on, but there's still lots more to do, and whether it's an increased drive in regulation and policy to facilitate further progress as well. I think just kind of shifting gears and looking forward, A question to both of you would be kind of what does success look like if we actually really managed to invest in nature a scale that is required and maybe a fun one really to finish off. If nature was a stock and you could pitch it on the trading floor in one sentence, what was you pitch to get everyone buying inub?
00:42:56
Speaker 3: Why don't you go first? And I'll learn, I'll learn from your your comments and then close.
00:43:04
Speaker 4: Well, I'll take us have addictionon so grace and I think, what to me, what success would look like? Right? Requires success around free fronts, And first is on efficiency. I spoken about that, right, I think it's very important, and especially because we're talking about investments in nature, to not see finance as a proxy for impact.
00:43:28
Speaker 3: Right.
00:43:29
Speaker 4: Just because we scale finance doesn't mean we're going to achieve more impact. And what needs to happen is a more efficient deployment of the right financing tools to achieve the right impact.
00:43:39
Speaker 3: Right.
00:43:39
Speaker 4: So that's the first measure of success, like are we more efficient in how we're deploying finance. The second measure of success is effectiveness. Is every dollar that we're putting in achieving real measurable outcomes. And that's why initiatives like the Blue Catalysts that Singapore is working on in terms of improving that effectiveness and that measure of success. And the third, and I think this can't be understated, is empowerment. We can't view projects and nature projects as carbon farms. They're not carbon factories. Nature projects are projects. They sit in communities. So that's where if you have weak land rights, inequality, corruption, all these kill investments. We need to fix it right. And how we fix it we build projects that embed human rights, community benefits, and put communities at the heart of projects.
00:44:38
Speaker 3: Right.
00:44:39
Speaker 4: And when communities are empowered, if you're doing a carbon project, the project can stop in twenty years that the people will still be there. By empowering those communities, you can also make sure the impact and deals beyond the project itself. So longly that answer, Grace, But I think these three e's in terms of the EFFICI, effectiveness, and empowerment is how a majure success for nature scale.
00:45:04
Speaker 5: And there's three very good good measures and actually reframing some of some of the ways people might initially think about success.
00:45:12
Speaker 3: And I would say, maybe, Grace to your question, I maybe I'll just I'll throw out two, which is that, uh, what we're aiming for here again for economic reasons as much as for any other reason at this point, is we success looks like halting and reversing the really shocking and I would say almost shameful. Loss of biodiversity and key ecosystems that we've experienced over the last several several generations. And that's the goal, right is to restore the you know, the world's ecosystems and biodiversity to a position that supports not just their own livelihoods, but but human lively going forward. And at the moment, we're not we're not doing that. We're not treating our our planet that way, and it and it is already having and will continue to have long term you know, economic consequences that that I think we and our children will will be dealing with it unless we take this seriously. The way to get there is through ultimately pricing environmental markets. And you know, unless you put a value on something in price it, it will be overused and depleted. And we've seen that happen with you know, with you know, with ecosystems and by diversity around the world. So I think we're moving in the right direction. We need to expedite our efforts. And I think the good news again here is that companies understand now in ways they did in five or ten years ago, that their long term economic success is inextricably linked to the health of natural ecosystems around the world. And the last thing I'd say is you know your your question or if you know, if we were pitching this on the on a trading floor, what would I say about about nature? I'd say, by now, it will never be a better deal to invest in nature. As something becomes scarcer, the prices go up. Right, So now is the time to invest in nature. Do it now. It's in your long term interest and watch it. Watch, you know, watch your portfolio over time. If you wait ten years, you'll have missed the opportunity to buy on the dip.
00:47:22
Speaker 4: I like that a lot.
00:47:24
Speaker 2: Well, I'd just like to thank you both. I mean, I hope our listeners have learned as much as I have today from talking about nature investment and mangroves, how it can reduce carbon and provide resiliency benefits, to just the benefits and the expanding need for more nature related investment. It's just so important to practice patients, you know, when it comes to a lot of these projects. But it will take time to see results and returns. But thank you.
00:47:51
Speaker 4: Both, thank you, thank you.
00:47:53
Speaker 2: As we turn to our outro here, I'd just like to say, you know, thank you again to both of you. But if any of our listeners would like to find more information on nature capital or other related sustainable topics, you could do so by going to b I ESG or using nature go on the Bloomberg terminal. If you haven't any other ESG quandary or burning question you would like to ask our BI experts, please send us an email at ESG Currents at bloomberg dot net. Thank you
