Over the past year at Taronga Ventures we have seen a rise of interest in nature and biodiversity, and the question we are now asking is whether biodiversity and nature are the next frontier for Real Asset technology – as climate tech has been in previous years.
Nature plays a critical role in providing systems and services that our community relies on. The assets that underpin our ecosystems are comprised of natural resources (i.e. land, water) and biodiversity (being a variety of plant and animal life) are often referred to as ‘natural capital’ due to the economic value they generate for societies.
This is why the UN Biodiversity Conference (COP15) met in December 2022 and established a new global framework that agrees to work towards halting the loss of biodiversity. It is anticipated that for the real estate industry, biodiversity and nature will become leading topics to be addressed in 2023 and beyond.
In our longer paper, we explore early applications of nature focused solutions through case studies in partnership with both CBRE, a leader in commercial real estate services and investments, and Ivanhoé Cambridge, a leading investor in real estate properties, projects and companies.
According to CBRE:
“Nature and natural capital are of increasing importance to CBRE and to our clients. There is so much dependence on natural capital in the real estate industry and therefore we are moving towards being nature positive. Building, preserving and managing natural capital and biodiversity will improve the productivity and sustainability of our assets, support economic prosperity for local communities and build resilience to climate change impacts.”
Su-Fern, Head of ESG – CBRE Pacific
A report by the World Economic Forum found that more than half the world’s GDP, equivalent to $44 trillion is dependent on nature; highlighting the economic risks of unchecked biodiversity loss.
Biodiversity, a concept that has been generally nascent in the ESG community, is now rising to prominence and is being considered and addressed by responsible real estate groups.
How is regulation driving nature-based decision making?
Empirically we know that nature and natural systems are critical to our ongoing prosperity, health and success, but what are our governments doing to address and control the risk?
Policy makers, investors and lenders are beginning to require the assessment of nature-based financial risks and business impacts on biodiversity. This is increasingly driven by the Task Force on Nature-related Financial Disclosure (TNFD) framework. As with climate related risk disclosure, TNFD is anticipated to become the global standard for nature-related disclosure.
France is a leader in this space. Today, Article 29 of the Energy and Climate Law requires disclosures of biodiversity and climate impact of companies and investors. Similarly, the European Union (EU) has launched a biodiversity strategy for 2030. The protection and restoration of biodiversity is one of the main objectives of the EU green taxonomy and Sustainable Finance Disclosure Regulation (SFDR) requirements. Plus, under EU SFDR regulation, impact on biodiversity is a key mandatory indicator that defines a ‘sustainable investment’.
In Australia, we have seen an evolution in nature and greening policy drivers. In 2023, The “Nature Positive Sydney” position paper was released by the committee of Sydney, committing the group to lobbying the government to taking action on mandating city greening and improvements in nature-based solutions on our buildings. Similarly, Melbourne hav launched the “Green our city strategic action plan” which has led to Amendment C376: Sustainable Building Design, mandating a proportion of new roof tops to host greenery and biodiversity.
We are also witnessing the development of a number of nature related frameworks to support the global community in tracking, prioritising and reporting on nature and biodiversity-related efforts.
“Biodiversity and nature considerations are of paramount importance to real asset organisations, not just because of the resources our ecosystems offer, but because the sector must take responsibility for the impacts of its operations, businesses, and assets. In addition, because investing in natural capital outcomes can have a positive, measurable impact, biodiversity and nature are an emergent priority for many investors looking to build sustainability into their investment portfolios.
For GRESB, being an industry-led and investor-driven organization means that we put the voice and priorities of our members at the forefront of our work. As such, the GRESB Foundation will consider and continue to build consideration of a company’s approach to biodiversity and nature protection and restoration in the current and future versions of the GRESB Standards.”
Ruben Langbroek, Head of Asia Pacific – GRESB
Relating biodiversity to real assets – practical steps
The benefits of flora and fauna biodiversity and their contribution to natural capital are extensive and should not be dismissed. Those that relate to cities and people include, but are not limited to:
- Reduced heat island affect
- Improved resources
- Cleaner and healthier air and water
- Improved wellness and happiness
- Protection and prosperity of flora and fauna
- Increase connection of people with the environment
- Environmental awareness
- Green premiums
Asset owners and managers can play a key role in preserving and restoring biodiversity, and are beginning to see this reflected in green building certification credits linked to biodiversity preservation and restoration. For example, GRESB, GRI, BOMA, the World Green Building Council, and other certifications have or propose to include biodiversity and nature related credits in their schemes moving forward.
“The question we must ask ourselves is how we can put more nature into cities, buildings and spaces we occupy. The ‘S’ in ESG can also play a role here too – where social factors such as wellness naturally intertwine with environmental improvements”
Nathalie Palladitcheff, President and Chief Executive Officer – Ivanhoé Cambridge
Ivanhoé Cambridge have worked to incorporate biodiversity into a project that is currently under development in Montreal. The Haleco project has been designed to celebrate the coexistence of nature and community, focusing on the natural synergies between sustainability and wellbeing with biodiversity at its core.
Risks, opportunities and key considerations
Many of the risks and opportunities associated with nature and action or inaction are similar to those associated with climate change as nature influences and is impacted by climate change, and vice versa.
Risks:
- Reputational
- Regulation
- Higher cost of capital, equity and debt
- Physical risks due to loss of resources and changing climate
- Brown discount on assets on contributing to biodiversity gain
Opportunities
- Market differentiation
- Green premium
- Tenant engagement, wellbeing and productivity
- Lower cost of capital
- Improved asset quality
Rapid urbanisation is leading to a change in land use and the reduction of biodiversity available globally. Negative impacts of urbanisation such as fragmentation, biodiversity loss and urban heat islands mean it has never been more important for our cities to consider the protection and restoration of natural assets. Buildings, building owners and communities have an incredible opportunity to drive a significant difference in global biodiversity and reap the many benefits that result from the inclusion and protection of nature in our cities and spaces. Like climate change and associated mitigation measures, regulations and expectations from stakeholders will balloon around nature; businesses and building owners will be required to contribute to nature-positive solutions or face being left behind.
Case study – CBRE / Alvéole
CBRE has also partnered with Alvéole, an urban beekeeping and green roof solution company across a number of their facilities.
Urban beekeeping offers value to the property and city including increased biodiversity and biodiversity insights, improved tenant engagement and tenant wellness through their engagement programs.
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To date, the Alvéole and CBRE partnership has resulted in 2.2 million honeybees being adopted across 44 hives and 29 separate locations.
As part of the program, Alvéole harvest honey from the colonies, on behalf of CBRE, resulting in 4,400 jars of local honey to date. From the data Alvéole collect form the beehives they have found that 366 square metres have been pollinated by the CBRE travelling bees.
Additionally, Alvéole provide education and engagement services to the participating CBRE properties and property communities. This is done through workshops and onsite engagement sessions with the hives, as well as through the Alvéole online portal which has reached over 235,000 people.
