The Scaling Climate Finance: Biodiversity Instruments report, suggests by seeing projects that aid biodiversity as financial instruments that can contribute growth to the economy, the financial services sector could have a key part to play in aiding the fight against climate change.

One of the co-authors of the report, David Hall, believes that investing in biodiversity is fundamental.

“Historically New Zealand has tended to treat natural resources as something to exploit, but there hasn’t yet been a counterbalance of investment.”

Though the interest to invest in biodiversity is there, Hall says that it is easier said than done.

“There is a lot of interest in sustainable investment. But biodiversity in particular is very challenging to invest in because it is so complicated. We need to do a lot of hard thinking to figure out how we create a system for biodiversity investment.”

One of the proposals of the report is a “Hauraki Gulf Blue Bond”. The use-of-proceeds of the bond would be linked to the protection, rehabilitation and enhancement of the mauri (or life force) of the Hauraki Gulf/Tīkapa Moana/Te Moana-nui-ā-Toi.

Hall says that the bond will promote biodiversity by investing in infrastructure that contributes to the health of the Hauraki Gulf.

“The bond might not directly invest in biodiversity. It might be invested in water infrastructure, which helps curb sedimentation and pollutants which is a major cause of harm. To invest in fixed assets that improve infrastructure we can produce outcomes that promote biodiversity indirectly.”

The Government's commitment to the TCFD shows how important climate will be in financial services in future. Hall believes that biodiversity could become similarly crucial.

“There is a risk angle to this as well, in the same way that climate risk has been increasingly appreciated by investors as a financial risk, so too is biodiversity and nature seen as a part of this equation.

“We have seen the TCFD being made mandatory by the Government. We are already seeing a process getting underway to create a task force for nature related financial disclosures. That is going to help companies to understand the sort of risks that are tied up in biodiversity.”

Above all Hall wants the report to encourage the financial services community to be open minded about what the future of financial instruments may look like.

“It would be great for the community to look at the kinds of outcomes that we want to create and to work backwards to reverse engineer the investment strategy we need to make those outcomes a reality.”

John Berry CEO and co-founder of Pathfinder believes that it is likely that we will see more biodiversity focused bonds come to market.

“If you look at the way we issue green bonds which are positive for the climate, or blue bonds which are positive for the ocean, it is highly likely that we will see bonds come to market that are focused on biodiversity. It is essentially an untapped measurement.”

Berry believes that biodiversity is a key way to measure the value and values of our planet.

"Intuitively we know biodiversity is a signal of healthy ecosystems and a healthy planet.  For humanity the importance of biodiversity also goes much further - biodiversity makes valuable, and often unseen, contributions to our food, water, resilience against natural disasters, raw materials for consumption and production, as well as having huge social and cultural significance."

While Berry agrees that these funds are a great idea, he does say that a consistent system of measurement is needed. “If you think about water quality, you have to be able to measure it to measure the impact that your investment is having. In principle it is a good idea, but you have to work out the mechanics for how you are going to do it.”

Barry Coates of Mindful Money believes that using financial instruments to effect real world change is already in progress.

“This isn’t far from reality because this is exactly what is happening with carbon sequestration. The Government is paying for ecosystem services, saying ‘your trees are sucking up carbon from the atmosphere, we will pay for that’.

“If you are paying for one kind of ecosystem service like sequestering carbon, then why aren’t you paying for another like marine productivity where biodiversity is an essential element of economic prosperity?”

Coates adds “I think the financial community should look at this as a real potential growth opportunity, we can leverage money from overseas, we can provide new forms of financial instruments and new forms of capital that will create new financial opportunities as well as improve biodiversity. The financial sector should be getting excited by it.

“The missing element,” according to Coates, “is a project like this won’t achieve widespread use until some government money goes into it.”