“This is… a space that is necessary, dynamic, and investable. Nature tech is critical to scaling and accelerating investment in nature-based solutions. While emergent, the nature tech space also has substantial opportunities for investors.”
So says Tony Lent, co-founder of Capital for Climate, a green investment company.
Research tells us that nature can be one third of the climate solution required by 2030, if we are to meet the Paris Agreement goals. It is scalable, affordable and available now.
Nature-based solutions (NbS) include green roofs, rain gardens, or constructed wetlands. They can minimize damaging runoff by absorbing stormwater, reducing flood risks and protecting fresh water supplies. Nature based solutions also include regenerative agriculture, tree planting, protecting forests and mangroves and seagrass, in fact any use of natural features and processes that help to tackle social and environmental challenges.
Nature tech is an emerging technological sector that is supporting the implementation and financing of high-integrity NbS. It’s defined as any technology that can be applied to enable, accelerate and scale up NbS, which are deployed to protect, restore and manage natural systems and ecosystems.
As the world looks for new solutions to the climate crisis, and with the benefits of “climate tech” and “cleantech” now widely understood, nature tech is set to play an increasing role in the next 10 years.
Capital for Climate has a new report out which predicts investment in nature tech will accelerate, providing bankable benefits for those who protect, restore, and manage natural systems, ecosystems, and landscapes.
The nature tech market
The report The Nature Tech Market: Necessary, Emergent, Dynamic, notes that the current nature tech market size is approximately US$2 billion (A$2.92b) and is estimated to grow to US$6 billion (A$8.83b) in less than ten years.
Many industry leaders are already involved: PitchBook investment platform reported that startups in the area of tech-led precision agriculture attracted more than US$2 billion (A$2.92b) in funding last year, a 46 per cent increase year-on-year. The market for agricultural drones has also skyrocketed, forecasted to reach US$5.9 billion (A$8.68b) by 2026.
Several high profile funds for land restoration have also sprung up – such as Mirova’s US$200 million (A$292m) Land Degradation Neutrality Fund, to acquire, protect, and restore forests in Latin America. Digital MRV 2.0 (remote monitoring, reporting and verifying for nature-based programmes) has been lauded by the World Bank for providing open source, low-energy support to users, working across platforms, and opening the market to everyone from big business to smallholder farmers.
Nature tech has a role in addressing some of the challenges and concerns about implementing NbS: difficulties in monitoring the results from NbS; the need to redirect finance flows to more sustainable practices; the need to mobilise millions of people; current tools and technology aren’t fit-for-purpose for NbS; and the investment ecosystem isn’t yet well structured to do NbS investing.
Solution providers, such as farmers and landowners, are being rewarded with more productive farms, forests, and landscapes, nature-based credits (e.g., carbon credits or biodiversity credits), and increasingly premium pricing for their products.
Some of the most important innovations in nature tech will come from the Global South as it takes advantage of the flow of capital from developing countries under loss and damage compensation post-COP27 in order to guarantee to investors that funds are going to where they are supposed to go.
So it is about providing trust and transparency for a new investment class.
As one investor, Ian Oxley, who contributes to the report, puts it, “This is helping companies and investors figure out new ways of working together to tackle climate change and biodiversity loss simultaneously.”
Not another COP
This week sees the start of the 15th annual UN conference of the parties on biodiversity in Montréal.
Biodiversity is deteriorating worldwide and this decline is projected to worsen with business-as-usual scenarios. The UN Biodiversity Conference will convene governments from around the world to agree to a new set of goals for nature over the next decade through the Convention on Biological Diversity post-2020 framework process.
The framework sets out an ambitious plan to implement broad-based action to bring about a transformation in society’s relationship with biodiversity and to ensure that, by 2050, the shared vision of living in harmony with nature is fulfilled.
As such, it is intimately connected to the UN efforts to tackle climate change and reduce the ecological footprint on the planet of the 8 billion people that it now has to support.
In my lifetime the population of the world has grown to this level from 3 billion, a truly staggering increase, during which time it is shocking to be told that more than 85 per cent of wetlands have been lost, as has one third of the world’s forests, the same amount of its topsoil degraded, and there has been a reduction of 83 per cent of the population of freshwater species.
It is hoped that nations will sign up to a Global Biodiversity Framework that is measurable, says Inger Andersen, the executive director of the United Nations Environment Programme, underscoring the need for scaling up the nature tech that will do the measuring.
US$384 billion (A$565b) per year
The UN has its own report out, the second edition of the State of Finance, which concludes that “climate, biodiversity, and land degradation goals will be out of reach unless investments into nature-based solutions quickly ramp up to US$384 billion [(A$565b) a] year by 2025, more than double of the current US$154 billion [(A$226.6b a] year.”
It adds that the public financing of destruction of nature needs to be reversed: “Nature-negative flows from public sources, which are three to seven times larger than investments into nature-based solutions, need to be phased out, repurposed or reformed,” it demands.
And it calls for private investment to step up to the mark.
“Private capital only represents 17 per cent of total investments into nature-based solutions. This will have to rise by several orders of magnitude in the coming years to finally start harnessing the power of nature to reduce and remove emissions, restore degraded land and seascapes and turn the tide on biodiversity loss. Private sector actors will have to combine ‘net zero’ with ‘nature positive’.”
Nature tech is all about combining net zero with nature positive. The one thing investors will need to be wary of is that the environmental footprint of the technological solution does not exceed the benefit it provides. Which is true of all technology-based solutions.
The ecological footprint of technology
The ecological footprint of technology is often overlooked. Of this footprint’s components, mainly the carbon footprint has been investigated. The carbon footprint of digital technology, for example, is around 4 per cent of the total global carbon footprint of humanity.
That’s quite a lot. What is causing it? The fact that we know it is streaming of movies and other large files tells us it’s the in-use phase of technology that has been investigated the most. But when purchasing technology we also need to be aware of the materials it is made from and what happens at the end of its life.
In other words, its life-cycle impact. Life-cycle analysis of technology – or any material object – is a young science which itself requires more investment to help us make more informed decisions. The best that investors and technology providers can do at this stage is to be aware of it. The simplest solution is often the least impactful, which usually avoids technology altogether.
