Catalysts helping to boost private investment in green projects
Private investment could hold the key to closing the gap between the amount of cash needed to help control climate change and the amount actually available. This is according to the CEO of a leading conservation organisation, who has written a piece on the subject for Forbes and the Huffington Post.
Mark Tercek, the CEO and President of the Nature Conservancy, claims, in his article entitled ‘Who Will Pay For Nature? How to Catalyze Private Investment in Sustainability’, that private investment, whether it be via a pension fund, an insurer, an institution or a sovereign wealth fund, accounts for as much as US$90 trillion currently under management. These investors are growing increasingly open to the idea of investing in projects that can offer strong returns on investment while also helping to mitigate the impact of climate change.
Forestry investment is an obvious example of this kind of alternative investment. Tercek claims that, with the right ‘catalysts’, a greater percentage of private investment will flow into projects that can boost sustainability.
He cites government policy as being one of the central ‘catalysts’ that can help to encourage responsible and sustainable investment. An example is Brazil’s Forest Code, which has led to a change in attitudes towards the value of forests as forests. The Code ensures that landowners maintain native vegetation on 80 per cent of their land. An offshoot of this has been increased investment into carbon-offsetting biomass initiatives, an example being GWD Brazil’s Rapid Growth Biomass Project.
Alongside government policy shifts, Tercek also talks about how smarter use of data is allowing those who run green investment projects to provide the evidence needed to convince investors that there is, indeed, money to be made from environmentally sound alternative investments.
Tercek uses the example of Coca-Cola FEMSA’s investment in the forests near the firm’s bottling plants. Using data, the Nature Conservancy was able to demonstrate the financial benefits of investing in these forests as a means through which to ensure the water supply to the regions where the business operates. GWD Brazil’s James Barrett commented: “This is the perfect example of how forests should, themselves, be viewed as a commodity that can generate income. Investors are learning that trees hold value, both in financial and environmental terms.”
The third ‘catalyst’ detailed by Tercek is the growing popularity and availability of financial products, such as ‘green bonds’, which can act as financial accelerators. They make it easier for people to invest in sustainable projects that can help reduce deforestation, or help to encourage habitat conservation or even the development of green technologies.
Tercek concludes that a major shift in attitudes towards investment in green projects is required to close the funding gap that currently still exists. He states: “A prosperous and healthy future is within our grasp—but only if we can close the funding gap of a few trillion dollars that’s standing in our way. At the end of the day, moving big pools of capital will require leaders—from governments, businesses, and NGOs alike—to stick their necks out and try something new. ‘Business as usual’ just isn’t going to cut it.”