Putting the eco in economy

How mature environmental markets will save the planet

To truly stop, reverse and prevent a global climate emergency and unprecedented species loss, environmental initiatives need better financial investment solutions to make a lasting difference.

Message from Brendan Foran, CEO of Greening Australia

Imagine if, by 2020, the richest person in the world were the person who had restored the most land.

I don’t necessarily mean that the road to billionaire status is lined with saplings planted with our own hands. But wise investment in clear and measurable units of environmental improvement – like carbon credits – has the potential to sow significant profits, and save the planet.

What I am proposing is a mature, regulated environmental markets economy, akin to any stock or shares market, to realistically meet global environmental targets.

With the right investment models, nature-based solutions can shift the goalposts.

By now, we know the sobering statistics in the UN’s IPBES Global Assessment off by heart. Environmental decline across our planet is ‘unprecedented’, and Australia sits at the coalface (excuse the metaphor) of a climate and biodiversity emergency. The Murray–Darling River is in a distressed state, more intense annual cyclones pepper the East Coast, the Great Barrier Reef is facing multiple challenges and we are facing one of the most severe droughts in history. And in July, our country’s CO2 emissions skyrocketed to a record high of 561 million annual tonnes.

There is cause for hope – a recent study led by scientists at ETH Zurich stated that land restoration is “overwhelmingly more powerful than all of the other climate change solutions proposed” in its ability to tackle the global climate crisis. Other studies show that natural habitat restoration can provide one-third of the emissions reduction needed by 2030. And there are an estimated 2bn hectares of degraded land that could be restored, pending new investment models and landowner support.

Yet, land restoration receives a minimal amount of funding versus the scale of the challenge worldwide.

Here in Australia, government funding now only makes up around 10% of what’s realistically needed to keep habitats, species and landscapes alive, whilst hovering beneath the 1.5-degree warming target as set out in the Paris agreement. Small-scale grants are usually allocated for short periods of up to three years, with the total grant split amongst many groups of varying abilities and qualities of delivery, providing little accountability as to what is actually achieved. Philanthropic contributions, although revered, are also not tipping the scales fast enough.

So, from our proud origins as a national not-for-profit organisation that has been restoring Australia landscapes since 1982, we are shifting roles to become an environmental enterprise – an entity that solves bold and complex problems by encouraging large-scale investment in the creation of positive financial, environmental and other socio-economic returns.

As an organisation with more than 37 years of on-ground experience restoring Australia’s degraded landscapes, we have a rich heritage of working in partnership: with every government, state and federal, since our inception; with landholders and volunteers; and with organisations active in almost every sector of significance in this country that interacts with the land.

Now, more than ever, is the time to use this track record to bring everyone to the table around establishing better financial investment solutions for environmental initiatives.

The role of investors

There is no shortage of private capital available in the global pool. In fact, we’ve seen increasing awareness amongst investors around the need for climate action, and a strengthening global taskforce attracting private investment into green capital. There is, however, a shortage in the number of investable proposals to motivate further investment.

One of the main reasons is a lack of understanding of environmental outcomes and visibility into where your investment actually goes.

If the government invested in a new 1000km highway, for example, and provided only 10% of the money required to finish the project, the entire population would see the results. There would be a 100km stretch of unfinished highway leading to nowhere, and public outrage at the waste of taxpayer money. But you cannot see nuanced environmental improvement as you can see a highway that stops mid-journey.

We need to improve visibility into the returns on environmental investment – the species returning to habitat, the improving quality of the soil and water, the carbon sequestered from the atmosphere and the reversal of erosion and degradation in the surrounding landscape.

We need investors to see that by investing in large-scale environmental programs, they will get a significant financial return over time, with the ability to attract private capital of all kinds, from superannuation funds to large enterprises.

The role of government

The establishment of a carbon market is already in progress, with regulated carbon credits available for creation, audit, purchase and sale. Water quality and biodiversity credits for other environmental improvement works are also emerging across Australia. The investor will be remunerated by funding the creation of these credits and profiting from their sale.

The government’s role will be vital in terms of maturing the market for these credits via regulation and compliance. Just this year, the Carbon Disclosure Report revealed that two-thirds of European companies have no CO2 emission reduction targets whatsoever, and other countries pose similar realities. Long-term national climate goals will only be met if regulators increase their offsetting requirements for large emitters to be buying credits.

Under a mature environmental markets economy, the government can play the role of a cornerstone investor in large restoration and sequestration projects run by environmental enterprises – entering into eco-investment the same way that they would a public-private partnership to build a new tunnel. Rather than providing small grants, federal funds would be used to leverage additional private investment to build a solution that makes a lasting difference, with financial benefits for all involved.

The role of citizens

While individual Australians are unlikely to be able to plant trees at the scale needed to qualify as a carbon credit, individuals do have the power to put their money towards investments that provide both the best return for ourselves and make the most positive impact in the world. We can already, for example, adjust our superannuation to support funds who support the environment.

We must change the perception that conservation work is, and must remain, a labour of love and an area of predominantly voluntary action.

This is not about making a profit off the environment. It is about designing investable solutions that impact the landscape 10 times more than what we can currently afford to do under traditional funding models. In a thriving environmental market, governments, corporations and citizens alike will be financially motivated to improve landscapes and help the environment, as opposed to relying on charity and philanthropy to prevent what is now a global crisis.

Is it not the dream that investors make money off saving the planet? Why can’t we treat environmental credits as we would shares in an enterprise? Why do we attach so little value to the future of the land that sustains us? The financial incentive has been proven to progress change faster than any plea for donations, time and time again.

We need around 90% of sequestration efforts to be funded by private investors who are confident they will make a return on that investment. In the absence of this, we are restoring land or saving the Great Barrier Reef purely because ‘it’s the right thing to do’.

Greening Australia welcomes offers of partnership and support from solution-focused individuals, businesses and governments that share our vision for a low-carbon planet, have a demonstrable commitment to addressing and acting on critical environmental issues, and are ready to embrace new ways of working to create a sustainable future. If you’d like to talk to us about how we could work together, please contact us!

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