As firm advocates of the critical role the financial system has to play in supporting nature and reversing biodiversity loss, we’ve been encouraged to see the policy developments in recent months that are helping to drive a shift towards increased investment in nature-based projects.

Headshot of Tom Dyke
Tom Dyke, corporate finance manager

At an international level, December’s COP15 summit saw almost 200 countries agree to a new set of goals and targets to ‘halt and reverse’ biodiversity loss by the end of the decade.

A month later, the Mission Zero report – the result of an independent review on the UK Government’s plans to achieve net zero by 2050 – was published, emphasising the inextricable link between a thriving natural environment, protecting our climate and growing our economy. And making it clear that investing in nature restoration and protection must form part of plans for climate recovery and economic growth.

In the first couple of months of 2023, the Government had published further details of how its Environmental Land Management schemes (ELMs) will work. Replacing the EU Common Agricultural Policy, ELMs is being rolled out and will reward farmers for environmental benefits such as not using chemically-based fertilisers or pesticides and taking action to support nature, including peatland restoration and enhancing woodland.

Yet while such developments are certainly welcome, is this enough to drive greater investment in nature recovery and encourage sustainable consumption and production?

The role of the financial system

We know that banks have a key role in addressing the climate and ecological crisis as they have the capacity to finance organisations that are committed to tackling major social and ecological issues. Much of the current discussion centres on the enormous funding gap for nature recovery in the UK, but the broader challenge lies in designing, structuring and creating environmental markets to facilitate the investment needed. The current uncertainty around how these markets will be governed is often a blocker to investment, while leaving farmers and landowners feeling apprehensive.

The latest policy developments – particularly the recent announcement with more details on the structure and payments of ELMs – will help to drive momentum towards reflecting the true value of ecosystem services such as biodiversity gain. But we need to have clear standards and regulations in place that foster greater certainty among farmers and clarity for investors.

Restoring our depleted natural environment and reversing biodiversity loss is key to our future economic prosperity and wellbeing – as well as preventing and becoming more resilient to climate change – but the scale of investment needed is going to be huge. A recent estimate puts it at £44bn over the next 10 years for the UK to meet its nature-related outcomes.

It is vital that our financial system appreciates the true value of nature and we need to create investable business models connected to nature restoration. Banks and financial institutions need to intentionally put people and the environment at the top of their list of priorities, re-establishing the role of finance as an intermediary for broad societal wellbeing.

As One To Zero: Triodos Bank's net zero strategy

At Triodos Bank, investing in nature will play a key role in achieving our own target to reach net zero across our operations, loans and investments by 2035. Greenhouse gas emissions of all Triodos Bank's loans and funds’ investments will be greatly reduced, using a science-based targets approach. The remaining emissions will be balanced or ‘inset’ by investing considerably in nature projects that remove greenhouse gases from the air.

Taking a holistic approach that supports our mission to create positive impact on people and planet, our strategy is called As One to Zero. We’ll be releasing further details on specific plans and actions over the coming years, but our intermediate target is to reduce net emissions by 32% to 232 ktonne CO2e in 2030 across the entire loans and funds’ investments portfolios.

Catalysing nature-based investment

We know from supporting leading environmental organisations that different nature-based models are going to be needed for different areas and habitats, which will have a direct impact on what funding solutions are required.

The River Wyre re-meandering in Thornton-Cleveleys
Wyre Natural Flood Management: The River Wyre re-meandering in Thornton-Cleveleys (photo credit: Rivers Trust)

It has been encouraging to see the broad range of projects that have been supported by grant schemes such as the Natural Environment Investment Readiness Fund. Our work on new pilot business models connected to nature restoration such as the Wyre Natural Flood Management project in partnership with The Rivers Trust and Wyre Rivers Trust, plus the Poole Harbour Nutrient Management Scheme – a farmer-led project initiated by the NFU – have been focused on demonstrating that financially sustainable business models centred around the delivery of ecosystem services can be achieved.

Our Youtube video offers a simple explanation of how a nature-based business model can work, using the Wyre initiative as a practical example.

We know from our experience the amount of resource and time it takes to reach the point of being ‘investment ready’ – and this will only be more significant as projects scale, the investment requirement is orders of magnitude higher and there are even more stakeholders involved. Funding support from Government for this critical phase of work is still very much needed and we welcome the recent announcement from Defra on the future development funding rounds for the Landscape Recovery scheme.

Collaboration is going to be key to delivering positive landscape scale change and that is why we have joined the Blue Recovery Leaders Group run by the Wildfowl & Wetlands Trust. Bringing together purpose-minded organisations, the Group has the shared goal of creating 100,000 hectares of healthy wetlands across the UK, to help us fight the interlinked crises of biodiversity loss, climate change and human wellbeing.

Investing in nature

As a sustainable bank, we have closely supported the organic, biodynamic and permaculture movements for decades. Now to further restore biodiversity and protect nature in the UK – and to address the climate and ecological emergencies – we must find further ways of financing nature preservation and restoration.

Heal Rewilding invited the local community to visit the site to learn more about rewilding initiatives. Credit: Heal Rewilding CIO

At the start of the year, we provided a £3.75 million loan to rewilding charity Heal, which will be used to create Heal Somerset, the first in a series of nature reserves in every English county. Believed to be the first commercial loan of its kind in the UK – and our first direct loan to a nature restoration project – Heal Somerset will be co-designed and delivered with input from the local community. The lending will be paid down as quickly as possible with mass public land sponsorship, corporate donations and natural capital investment. We hope to be able to support similar initiatives nationwide that address climate change, adapt to its effects and promote biodiversity.

Inspiring action

Nearly half of Britain’s biodiversity has gone since the industrial revolution. In fact, the UK has lost more biodiversity than any G7 country and is in the worst 10% globally, according to scientists at the Natural History Museum.

For too long we have taken from our natural assets and threatened biodiversity and destabilised environments and communities. Ultimately, we risk bankrupting our greatest gift and asset.

A timely reminder of what’s at stake, the country’s wildlife is being captured in all its brilliance in the new BBC series hosted by Sir David Attenborough. Using the latest technology, Wild Isles features dramatic spectacles and aims to showcase the UK’s wildlife in the same way the Planet series has profiled the wildlife of the world. We’re excited to see this new series helping to galvanise action to protect our globally important natural habitats.

At Triodos Bank, we will continue to explore models for nature-based investing, with the aim of creating an economy that reflects and fully values the vital role that nature plays.