Net zero panel: Destruction of nature ‘greatest ever market failure’

An industry insider labelled the destruction of nature the “biggest market failure” that humanity has yet experienced.

Chris Hart, nature investment strategy lead at the Phoenix Group, the UK's largest long-term savings and retirement business, made this bold statement at Net Zero Investor’s first-ever Natural Capital Forum, during a panel discussion on allocation opportunities and challenges for institutional investors.

Of the challenges facing investment’s impact on the natural world, Hart said: “There has to better recognition across all stakeholders, but particularly within policymakers and regulators, that nature is foundational, and we have to think of it in those terms.

“Otherwise, we're not going to see the strength of response in the timeframe that we need in order to avoid significant damage to economic growth and significant financial destabilisation of the financial system.”

Also speaking at the panel was Bola Tobun, treasury & pensions manager at the London Borough of Harrow. 

Tobun stressed the importance of educating committee members on the fundamentals of responsible investing, and tying the approach to the UN Sustainable Development Goals (UN SDGs).

She also spoke of how the LGPS Pension pool “is not a philanthropic fund”, and a desire to protect biodiversity has to always be matched against providing the best risk-adjusted returns for members.

Nature-based investments

Also speaking during the Natural Capital forum was Olga Hancock, deputy head of responsible investment at the Church Commissioners for England.

Hancock noted that the Church of England is one of the largest landowners in the United Kingdom, enhancing its need to consider natural capital and biodiversity.

Of specific investments, Hancock referenced 100 acres recently purchased of Bartonsham Meadows, leased to the Hereford Wildlife Trust, specifically for the purposes of sustainable agriculture and to protect the floodplain.

“[The Church Commissioners] undertook a two year baseline assessment on both natural capital and climate change and has now brought in a head of sustainability and an environment manager for rural land. There’s now in place a strategy primarily looking at new leases and what we can do from a natural capital perspective”, she said.

Hancock was speaking at a panel discussion on policy, politics and the role for the financial sector in protecting the natural world. 

Also taking part in the debate was Eve Gleeson, research manager for biodiversity at ShareAction, who claimed that there is currently a “blind spot” for investors when it comes to biodiversity, and that ShareAction was pushing for greater awareness at both the investor and policymaker level.

The final event of the morning was a presentation by Stephanie Mielnik, director of research at the Anthropocene Fixed Income Institute, on biodiversity and nature-linked bonds.

Of the relationship between climate change and biodiversity, Mielnik gave an example of increasing temperatures leading to expanding woodland in the Chamonix. 

While such an event may initially seem a positive, it is in fact a threat to the existence of the bearded vulture, which depends on open spaces to spot and feed on carcasses.

Mielnik also claimed that sovereign backed sustainability linked bonds can be a “quick win” for biodiversity, which could match well with nations that have defined Biodiversity Action Plans such as the UK and France.

However, at an OMFIF Sustainable Policy Institute event held last month, on the topic of sustainability linked bonds, Jessica Pulay, co-head of policy and markets at the UK Debt Management Office, was insistent that the UK government had “no immediate plans” to launch such a bond.