an asset that is increasingly in demand

0

Christine Tonkin: It’s a good starting point. Well, is that how we should think about it? Should we consider natural capital as a kind of asset class in its own right? Or should we embed natural capital thinking across all the different asset classes that dominate the investment landscape?

Ben Krasnostein: I have thought about this question and if I had to, I would say the last one. It is definitely an asset. Our natural capital base is an asset that we need to value and understand, just like any other asset on our balance sheet.

To put it simply: if you have a limited amount of resources and a limited asset base on your balance sheet and you deplete them too quickly, you are going to have a problem. If you don’t use it in a regenerative way, you’re also going to have a problem. So that’s definitely an asset.

An example could be a carbon project on land: you are going to buy land that you are managing a carbon sequestration project and it is a regulating service when it comes to ecosystem services.

But the asset class itself is more like an agricultural investment, or even an infrastructure investment with land and infrastructure. And you generate a raw material called carbon through a levy.

For some investors, this is where they want to put their money. At the same time, you may be considering technology offerings – something you need to understand how these services and systems work.

If you look at it that way, now it’s a technology investment and you may be investing in start-ups.

Christine Tonkin: You work with many companies on their climate plans. Can you talk about that and the role of biodiversity protection and how that’s becoming more and more important?

Megan Flynn: It is certainly more and more important for people. There has been tremendous momentum in this space since we started two and a half years ago. It was dizzyingly brutal.

But now it’s more and more opportunities and I think that’s really exciting. This is the current opportunity with the things we are already monetizing. Carbon is a good example.

These leading organizations are the ones that are two steps ahead of where we are currently monetizing nature. They reflect on the origin of the increase in investments that they can make now in interesting opportunities.

Christine Tonkin: Rayne, I know your company maintained a natural capital report and insurance associated with that. What did you learn along the way developing this? And how has this influenced the strategy within your company?

What advice do you have for all viewers thinking about this issue of natural capital? How do you measure it and how do you value it?

Rayne van den Berg: For us, it was about measuring that value and changing the conversation about value. I was lucky when I came to the company, there were a lot of measurements of litres, hectares and tonnes etc. We have translated this into a common language of monetary dollars to put a conservative monetary value on nature.

And what we discovered was that we had more than three times the value in our natural capital assets than in our traditional balance sheet. It changed the conversation in our business about how we treated natural capital and how we viewed the role it played in our greatest value. It was a huge “a-ha” moment for us.

We started with just a handful of our most material ecosystem services and developed methodologies around that. I would suggest people try to keep it simple and not let the perfect get in the way of the good.

Many companies already measure important things. It’s just about telling that story in a different way and giving it relative importance.

Christine Tonkin: Damein, you talked about what nature means to your community and I wonder if you want to add something to that? How can we foster better connectivity between the vast wealth of knowledge that lies within the Indigenous community in Australia?

Lady Bell: I would say it’s not just about money with First Peoples. What is captured by the dominant community is to understand these natural features as their own entity.

We have examples in New Zealand of Australia Aurora. And here the Yarra River has had a form of recognition thanks to the work of the Wurundjeri and the state government.

How can we get more countries to take care of the beings that are there, to take care of this spirit, to take care of this history, to take care of this identity?

Over the past six months, we have had to develop a new master plan for the landscape of Budj Bim as it relates to our social and economic future. This time we not only included the business realities and aspirations of what we wanted to do, but also what we wanted to do.

We have linked our community results to our business results and this is the first time we have done so. As part of this planning process, we used the United Nations Sustainability Goals because they communicated with us.

Towards the end, we had to design new infrastructure for Tae Rak, Conda Lake, which is over 8,000 years old. It was amazing because they finally got to the point – after 20 years – of what to keep in mind when designing infrastructure on the country.

And I thought ‘ahh, finally they have it!’. But it wasn’t until I was preparing to speak with all of you today that I realized “no, I finally got it – an Indigenous voice at the table”.

We must be at the table. We have to understand that if you install a large renewable energy installation in our country, it will still take us time. It has to happen because we have to reduce emissions. We must do all of this, but don’t do it without us.

Don’t come to us as an afterthought or a requirement under the Native Title Act. Sit down with us in advance and there are plenty of tools to do so, including the United Nations Sustainability Goals.

That Indigenous voice at the table needs to be resourced, it needs to be heard, it needs to be there to help make decisions because it will impact our country.

Christine Tonkin: I think it’s super powerful. Proactivity to unlock the fabulous knowledge that has accumulated over thousands of years of running the country.

Ari Gorring: At the Pollination Foundation, we are beginning to think about how we put community at the heart of our solutions. Because the innovation and the knowledge of the country are deep and often absent when we design these solutions.

I was recently at a conference in Canberra, and throughout the conference there was this discussion of “what was it like before Captain Cook came to our shores?” What was the economy like here in Australia before the settlers arrived?

People cultivated the landscape using fire. Native cereals were predominant, the harvest was stored and used for cooking. There was this reciprocal relationship with nature and the seasonal indicators told people when they could harvest in the land and take resources from the land.

There were very strict rules about how resources were distributed within communities and families – who had the right to harvest what species. As well as the trade that occurred between nations and the rules and laws that governed it.

We need to think differently. We need to bring different people to the table. The Aborigines said ‘we know that if we put our fire back in the country it will reduce greenhouse gas emissions and stop forest fires’.

And thanks to collaboration with science, this method has now been proven and is part of the Australian Emissions Reduction Fund. This has generated over $50 million for Aboriginal communities in northern Australia each year. They then invest that money in paying the young and the old to come back to the country and set it on fire the right way.

Christine Tonkin: If you think about metrics, you can’t fix what you can’t measure. What do you think sustainability indicators should look like?

Rayne van den Berg: If you measure what matters, you can change things for the better. That’s probably what triggered our evaluation: measuring it, then evaluating it and presenting it. And having that conversation both internally and with our communities.

If we want financial markets to provide the solution to these grand challenges of climate change and biodiversity loss – and ensure they are inclusive for all of our communities – we need to start measuring.

Megan Flynn: Working with boards and management teams across Australia and the world. They really struggle with it because it’s a real alphabet soup. It is an extraordinary challenge for organizations to understand the plethora of standards, measures and things that are imposed on them.

I get really worried when this is considered a compliance exercise – something that sits in a corner of an organization because it won’t change anything. Writing another report, ticking another box will not suffice.

It does not address systemic issues. But metrics are absolutely critical because CFOs everywhere need to be able to measure and embed an understanding of evaluation and impact.

This is where I think the game changers have been; things like the Task Force on Climate-Related Financial Disclosures (TCFD).

Organizations shouldn’t sit this stuff in a sustainability team in a corner of a company. It must belong to those who make the strategic decisions. Hopefully the sustainability team is part of this strategic decision making.

Ben Krasnostein: We’re starting to measure carbon intensity per dollar of an organization’s revenue. If we don’t improve that as an investment manager, in the same way if we don’t improve their EBITDA, then we’re not actually getting the result we’re looking for.

Christine Tonkin: Totally agree. At ANZ, we aim to help customers make the transition and protect natural capital. That goal is $50 billion by 2025 and we’re on track. In our last reporting period, it was just over $30 billion. I would like everyone to join hands in thanking the panelists.

Share.

About Author

Comments are closed.