Nature finance needs to place greater emphasis on ecological and social outcomes, rather than focusing on market development and financial returns, according to a new paper by researchers from the University of Oxford and the University of Southampton.
According to the paper, Reimagining nature finance, which was published in the Global Environmental Change journal, natural capital markets remain a ‘small and specialised’ source of funding for conservation and restoration, despite decades of development and policy and research investment.
Economic systems
“Nature’s decline is driven by economic systems that still reward its degradation,” commented co-author Nathalie Seddon, professor of biodiversity at the Smith School of Enterprise and the Environment, University of Oxford.
“Natural capital markets have brought useful innovation, but they have attracted attention out of proportion to what they are likely to deliver. We need to start from the outcomes that matter: recovering, biodiverse ecosystems and the rights and wellbeing of the people who live with and care for them.”
‘Common flaws’
In conducting their research, the authors identified five ‘common flaws’ in natural capital markets: persistent barriers to scaling, an emphasis on compensation rather than restoration, the prioritisation of financial returns over environmental and social outcomes, difficulties in measuring results, and concerns about justice and equity
In addition, they highlighted how market incentives can potentially reinforce existing inequalities by marginalising local communities, Indigenous knowledge and participatory governance.
They also highlight the risk that market incentives can marginalise local communities, Indigenous knowledge and participatory governance, potentially reinforcing existing inequalities.
“Natural capital markets only deliver benefits when they satisfy the demands of the market,” added Dr Theo Stanley, lead author and Research Fellow at the University of Southampton. “Our research suggests that society has invested too much faith in the capacity of markets to deliver diverse and just nature restoration projects.
“We need to put ecological and social outcomes first and devote much more attention to the wider range of approaches capable of delivering them.”
Important role
As the authors note, while natural capital markets have limitations, it is important to stress their important role in funding projects on the ground, or the progress being made to improve them and enhance integrity.
“After more than 20 years working to bring finance to nature, I know these markets can be a lifeline for projects on the ground,” said Justin Adams, co-author, Circular Bioeconomy Alliance Fellow and Honorary Research Fellow at the Leverhulme Centre for Nature Recovery, University of Oxford.
But perfecting them won’t change the economic incentives driving nature’s destruction. We need to build on what works and find new ways for businesses, governments and communities to invest together in the health and resilience of the natural systems we all depend on.”
The paper was published to coincide with the COP17 UN Biodiversity Conference in Armenia. Read more here and here.
