3 min read

Nature: the next challenge for sustainable finance?


  • author-avatar

If there is one thing we’ve learnt from spending more time inside our homes over the last year, courtesy of these ‘unprecedented circumstances’, it is the importance of spending time outside.

The natural environment is a key part of our built environment. Access to green space has never been so desirable. And in our cities, where space is a premium and populations are growing, there are innovative ways to maximise our access to nature.

Encouraged by sustainable building certifications and a growing trend for biophilic design (the concept of increasing occupant connectivity to the natural environment), many buildings now incorporate additional greenery, with everything from your standard pot plant, to indoor trees and living walls and roofs.

The health and wellbeing benefits of increasing access to nature are well documented.

Improved air quality, increased productivity, and decreased stress are just a few of the most widely accepted. So it’s not surprising that research has also shown that increasing nature increases property values. We all know the rooms with the view attract a premium, and according to a report commissioned by the Natural Resources Defence Council, improved landscaping can add around 22% to the rental rates for retail buildings. And that’s before we account for the climate resilience impacts of incorporating green infrastructure – sustainable urban drainage systems help manage surface water flooding, living roofs can mitigate overheating and trees prevent soil erosion.

But we are realising the importance of nature at a critical time. Biodiversity is decreasing at an alarming rate. Between the combined pressures of climate change and humancentric land use, space for nature is dwindling and with it the enormous diversity of species on our planet. Indeed, scientists estimate that vertebrates have declined by an average of 70% in the last half-century.

Policy changes are moving in on the issue. The new London Plan brings with it the Urban Greening Factor, a measurement that will ensure London gets greener as it grows. On a larger scale, in the UK, the (much delayed and eagerly anticipated) Environment Bill will enshrine Net Biodiversity Gain into law, meaning that all new development must demonstrate an increase in nature compared to what was on site before.

In the investment space, we are seeing major changes too. Earlier this year France introduced a new disclosure regulation, Article 29, requiring French financial institutions to disclose biodiversity as well as climate-related risks. France’s Article 29 is a sign of what is to come in sustainable finance. Also established this year is the Taskforce on Nature-related Financial Disclosure. TNFD is a market-led initiative focused on standardising nature-related financial disclosures and mitigating biodiversity impacts. With TCFD we have seen a shift in climate-related financial disclosures, and TNFD is set to do the same for nature.

All this points to one thing: the next frontier in sustainable finance is nature.

If you would like to find out more, please get in touch with one of our ESG experts by contacting [email protected]