Green finance is gaining momentum. More and more private investors consider investing in nature an opportunity to combine economic interests with social and environmental responsibility.
Blog written by Jan Willem den Besten, Senior Expert Ecosystems and Climate, IUCN National Committee of The Netherlands
IUCN, both in the Netherlands and as a worldwide union, has been active in this field from the start. Although it is still at its dawn, the pieces of the puzzle called green finance are starting to fall in place more and more. One thing that is crystal clear: it is about bridging worlds.
Bridging worlds, even those as diverse as conservation and finance is something that is in IUCN’s DNA. As the world’s most diverse environmental network, we unite stakeholders from governments, NGOs, scientists, businesses, local communities, indigenous peoples groups, faith-based organisations and others to work together to forge and implement solutions to environmental challenges.
So how can we play a role in furthering the field of green finance in order to reach our goal: securing healthy ecosystems that benefit all? The potential is huge: If we invest 1% of worldwide investments into nature conservation projects, we can mobilize 300 billion dollar to protect and restore endangered ecosystems. How to tap into this potential?
Giving green finance a push
IUCN NL together with IUCN Secretariat organized the “Green and Inclusive Finance Dialogue” in The Hague to test the waters on this question. Using our network in the Netherlands as a sound-board, we asked them to give critical input on what is needed to give green finance a push.
This helped us to identify three gaps that need to be filled.
The first is the need for bankable projects. Put simply: there aren’t enough projects that have the scale that is required to be considered for investment. IUCN is excellently positioned to help fill the project pipeline by scouting, nurturing and incubating new projects. After all, the many NGOs in our worldwide network are amazing sources for potential projects. For example, in our SUSTAIN Africa project in Sumbawanga (Tanzania) we support the development of alternative business solutions. By investing in beehive fences, sugar outgrowers can protect their crops against elephants (yes, elephants are afraid of bees!). These type of nature-based solutions attract investors who are combining a long-term investment in nature with an economic profit.
Speaking the same language
But having a green project isn’t enough -- the real challenge is to successfully access private sector finance. This brings us to the second gap: the need for NGOs and companies to speak the same language, and that is a two-way street. On the one hand, we can help NGOs become more like entrepreneurs by applying business model thinking, like we do in our Green Finance Academy. This will help them to present their projects as bankable projects that generate financial returns for investors.
But at the same time, investors also need to broaden their horizon beyond economic value only, and start to integrate the social and ecological values of ecosystems. Fortunately, we already see movement in this direction. Investors increasingly realize that competition for, and overexploitation of, landscape resources leads to deterioration of resources and shortage of supply. Alignment of investments with social and environmental context can strengthen their reputation, reduce risks, and increase financial, social and environmental performance.
Finally, governments have a role to play to fill the third gap: the need for an enabling environment. Governments can help create the right environments for such projects to thrive. Governments can also provide seed money for project development in its early stage, and provide guarantees and risk management instruments that can help a project leap into the next stage of private sector involvement and investments.
That was perhaps the most profound outcome of the meeting: the realization that we have a unique community that unites all the necessary stakeholders. Together we can achieve one of IUCN’s greatest missions of all through green finance: to ensure that any use of natural resources is equitable and ecologically sustainable.
Originally published on IUCN NL website.
For more information, please contact the author Janwillem.denbesten[@]iucn.nl