Nature Finance has gone mainstream.
Is UBS standing up to the challenge?
In today’s rapidly changing world, the concept of Regenerative Design offers a powerful lens through which we can understand the cascading impacts of disruptions. This mindset goes beyond immediate effects, allowing us to delve into first, second, and even third-order consequences. By embracing regenerative design, we gain insights into how systems co-evolve, how feedback loops operate, and how various interventions can reshape entire ecosystems.
At its core, regenerative design draws from the principles and patterns inherent in living systems. These systems have honed their regenerative capabilities over millennia, offering us a blueprint for sustainable and resilient design. Through this approach, we can see the interconnectedness of different elements and the ripple effects of our actions.
A striking example of this can be seen in the reintroduction of wolves into Yellowstone National Park. This intervention, initially aimed at restoring the park’s ecological balance, triggered a series of feedback loops that transformed the entire ecosystem. The presence of wolves not only controlled the deer population but also allowed vegetation to recover, which in turn affected various other species and the landscape itself.
A disruption of similar magnitude occurred earlier this year when UBS published its “Bloom or Bust” report, courtesy of its Institute of Sustainability and Impact. Titled “Aligning Technology and Finance to Address Biodiversity Challenges,” the report sets the stage by stating, “Roughly 60% of GDP is at least moderately dependent on nature.” This acknowledgement marks a significant shift after decades of biodiversity neglect.
The report highlights that the global community has finally signed a landmark agreement called the Paris Agreement for Nature, presenting a comprehensive Global Biodiversity Framework (GBF). The GBF “aims to reverse global biodiversity loss by 2030 and achieve a nature-positive world by 2050”. This ambitious vision means doubling the amount of nature on land and quadrupling marine biodiversity within the next 25 years.
But it’s not just about numbers. The harsh reality is that in the past 50 years, we have lost 69% of terrestrial life and 50% of marine life in just the last 40 years.
UBS urgently states, “Now the challenge is delivery. And based on the targets, it will be a race against time, particularly to meet the 2030 deadline.”
This, my friends, is a mere five and a half years away.
Why is this paper so disruptive? It lies at the intersection of policy and finance, signaling a paradigm shift. UBS, a titan in the financial world, exemplifies this shift. Headquartered in Zurich, UBS operates across 50 countries with over 100 offices globally and plans to have $5 trillion in invested assets in the next five years, up from $3.85 trillion now. To reach that goal, it plans to bring in roughly $100 billion in net new assets a year through 2025 and then increase the pace to $200 billion annually through 2028.
With such vast reach and influence, UBS’s alignment with the commitments of the Montreal Agreement, which 196 countries have signed, highlights a profound awakening in the finance sector to the fragility of our biodiversity and the urgency to restore it.
The “Boost or Bust” report signifies a momentous convergence. Finance is not just acknowledging the problem; it’s becoming an active participant in the solution. This shift is crucial as financial entities with global outreach, like UBS, start leveraging their influence to foster sustainability and biodiversity. This is more than a nod to environmental concerns — it’s a call to reimagine how we design our systems, emphasizing regenerative processes over traditional, linear approaches.
An estimated $844 billion is needed annually for the next decade to protect and promote biodiversity. Nature finance is gradually emerging from the shadows of ESG investing. The evolution of climate finance offers a blueprint, but greater financial innovation is now essential. The World Economic Forum’s Biodiversity Finance Initiative seeks to align investor actions, tackling risk identification, measurement, and standardized reporting challenges. It’s increasingly clear that we need innovative financial products and mechanisms to address supply constraints and illiquidity, paving the way for a new era in Nature finance.
We find ourselves at a critical juncture. The danger now is that we might attempt to solve the problem with the same mindset that created it. As Albert Einstein famously said, “We cannot solve our problems with the same thinking we used when we created them.”
The loss of biodiversity is not a stand-alone issue; it’s one of nine Planetary boundaries, six of which we have already exceeded. Compounding this are the rapid advancements in exponential technologies like artificial intelligence and CRISPR. We are entangled in a complex web of multipolar traps and perverse incentives — a situation that Daniel Schmachtenberger calls a Metacrisis. This crisis demands a systemic and holistic perspective to harmonize and implement systemic solutions.
To tackle this, we must shift our approach fundamentally. We need to move away from the old reductionist, linear cause-effect mindset and adopt a systemic perspective. This challenge requires a regenerative design approach. We’re not talking about creating another product; we’re talking about designing a process. A process that understands and integrates the complex interdependencies of our natural world, and leverages them to build resilience and sustainability.
Finance until now has largely remained in a separate silo from environmental concerns. However, this detachment is no longer tenable. The urgency of our biodiversity crisis is underscored by the alarming rate of deforestation — 13 million acres per year, roughly the size of Switzerland.
Finance has been a great driver of inequality. The original intention of capitalism was that wealth would cascade down and distribute broadly across society. However, that has not been the case with our current financial system. Instead, global inequality is staggering: the richest 10% of the population controls 76% of the world’s wealth, while the poorest half owns just 2%.
Such disparities are a testament to a system that needs overhauling.
We cannot simply converge traditional finance with nature without a radical redesign.
This is where the concept of Nature Finance becomes pivotal. It’s about integrating financial systems with ecological restoration, creating a symbiotic relationship that sustains both economic and environmental health. This is not merely an add-on but a foundational shift towards regenerative design — a process-oriented approach that understands and harnesses the interdependencies within natural systems to build resilience and sustainability.
To achieve this transformation, we must first and foremost design this Global Biodiversity Framework regeneratively, with a systemic and holistic perspective.
A conventional approach to nature, akin to understanding a frog by dissecting it, misses the essence of “frogness.”
By separating the frog into parts, we kill its life force. Instead, we must comprehend the frog within its pond, where it feeds on insects, lays its eggs among aquatic plants, and interacts with other species, like dragonflies and herons. This interconnected web reveals the true nature of the frog and teaches us that understanding comes from observing relationships, not just isolated parts.
This huge financial institution, UBS, affirms that global markets’ appetite for precise nature-related data is surging.
This is not a mere statement; it reflects what UBS feels it needs in order to continue its growth and meet the aggressive projections mentioned above. In its paper, UBS affirms that “global markets’ appetite for precise nature-related data is surging.”
This urgency brings to mind the story of the old Cherokee elder who tells his grandson about the two wolves fighting within us. One wolf embodies greed, destruction, and shortsightedness. The other stands for compassion, sustainability, and wisdom. “Which wolf wins?” the grandson asks. “The one you feed,” replies the elder.
At this critical juncture, the data we feed into finance will determine which path we take.
Just as the elder’s wolves, two forms of finance are emerging to capture Biodiversity: one driven by short-term profit and exploitation, the other guided by long-term sustainability and regeneration.
The choice is clear: we must feed the wolf that leads us to a nature-positive world, aligning our financial systems with the health of our planet.
The UBS report also asserts that “measurement is a critical enabler to manage biodiversity loss.”
And this is the crux of the matter: what metrics should be integrated into a modeling system that can continuously Monitor, Verify, and Certify Biodiversity?
First and foremost, these metrics need to be trustworthy. The certification and verification process must be impeccable. But beyond that, these metrics cannot be solely quantitative. It’s not just about counting the number of different species, though that is important.
We need metrics that measure the relationships between species. The principles of regenerative design emphasize reciprocity and developmental flows. They recognize nested systems and how the interdependence of these systems creates “wholeness”.
This requires a fundamentally different approach — one that understands and values the intricate web of life. We need to capture how these relationships evolve, adapt, and sustain the ecosystem.
In essence, we must shift from a reductionist view to a realistic one. It’s not about how we dissect a dead frog; it’s about the relationships that frog has within the pond and the broader ecosystem. The data we create through a process of Measuring, Monitoring, Verifying, and Certifying (MMVC) is crucial. This is what the financial system will capture to Assetize, Securitize, and Trade. The MMVC should reflect the complexity of these interrelationships, the feedback loops, and the first, second, and third-order effects of interventions. By doing so, we ensure that we nurture and sustain the interconnectedness that underpins life itself. Our financial systems must evolve to recognize and value this complexity, transforming our approach to building a resilient and sustainable future.
As UBS also states, “it’s a race against time. The challenge now is delivery”.
These quotes encapsulate the urgency of our times. Nature has gone mainstream, and the momentum is building. The financial sector, armed with technology and a newfound commitment to ecological health, is poised to play a pivotal role in safeguarding our planet. As we stand on the brink of this ecological revolution, we must be acutely aware of how we measure value and act swiftly and decisively.
Which of the wolves are we going to feed? Will we kill the frog and dissect it into lifeless parts, or will we strive to understand our place within biodiversity, integrating a regenerative developmental process?
Are we going to design for abundance, wholeness, and the well-being of all sentient beings? Or will we reduce nature’s essence to a commodity traded like wheat, oil, and bonds?
This is where it is crucial to define which paradigm will prevail.
In Bill Sharpe Three Horizon Framework, Horizon One is described as a fading, greedy, separate-from-nature, business-as-usual paradigm, desperately clinging to the status quo in a self-dominating game. Alternatively, nature finance can emerge as Horizon Three, designed with the patterns and principles of living systems, securing a sustainable future for all.
The stakes are high, and the choice is clear. We must embrace the regenerative approach, feed the right wolf, and ensure our financial systems reflect the complex interrelationships that sustain life on Earth. Only then can we truly safeguard our planet and build a resilient, thriving future.
If you want to dive further into this topic and explore the intricacies of how finance can play a pivotal role in biodiversity conservation, please visit my white paper on Nature Finance. This document delves deeper into the principles and practices necessary to align financial systems with ecological sustainability, offering comprehensive insights and actionable strategies for fostering a regenerative future.
Before You Leave!
If you relate to this story, I would greatly appreciate you clicking the 👏button. You can hold it down up to 50 claps and this will help this story get more exposure and this narrative more support. If you feel the calling please reach out privately or leave a comment below
Thanks for your support!
