The current planetary crisis is marked by the leading role of nature, intrinsically linked to climate change, influence and loss of biodiversity. Global strategies such as the European Union Deforestation Laws and the COP15 target, who seek to protect 30% from nature to 2030, highlight the importance of incorporating nature at the heart of investment decisions and in the private sphere. A significant milestone occurred when Lombard Odier Investment Managers (asset management company of the Lombard Odier Group) became a pioneer by designating a “Chief Nature Officer” (CNO) in June, highlighting the need for nature to have a voice in decision-making discussions.
O Dasgupta Report 2021 highlights nature as our most valuable asset. Although, the loss of biodiversity, identified by the World Economic Forum as a critical global risk, resulted in a decline of almost 40% no natural capital between 1992 e 2014. Recognizing the collective mismanagement of our global heritage, Sir Partha Dasgupta emphasizes the need for a financial system that directs public and private investment towards activities that value our natural resources and promote healthy practices. governments, central banks, Financial institutions and the private sector play a crucial role in this process.
Despite the appeals, the adoption of nature as an asset class is progressing slowly. A Taskforce on Nature-related Financial Disclosures- Task Force on Nature-Related Financial Disclosures (TNFD), composed of financial institutions and companies with more than US$ 20 trillions in assets, helps assess the risks of biodiversity loss. Nonetheless, there is still a lot to be done. The Paulson Institute predicts a funding gap of about US$ 598-824 billion per year until 2030 to address global biodiversity loss.
Roles and responsibilities of a CNO
The appointment of a CNO plays a crucial role in prioritizing biodiversity and natural capital in investments, filling a funding gap. As the first CNO of Lombard Odier, Marc Palahí assumes responsibility for defending nature, mobilizing various groups, as governors and investors. Its role encompasses understanding environmental risks across different sectors and value chains.
In the daily life of a Director like Palahí, his routine involves collaborating with the holistiQ sustainability research team, one collaboration platform between LOIM (Lombard Odier Investment Managers) and the environmental consultancy Systemiq. The team works on developing strategies and guidelines related to natural opportunities, seeking to mobilize large-scale capital for nature and inspire others to do the same. Furthermore, part of their duties consists of identifying risks that seek attention in future investment strategies and establishing connections with potential clients or companies. For Palahí, The role of the CNO is diverse and involves promoting nature-motivated solutions, especially in bioeconomy.
At the executive level, the CNO collaborates with the Chief Sustainability Officer (CSO) to integrate natural strategies into company operations and investments. This cooperation, according to Sebastian Troëng of Conservation International, can increase the importance of biodiversity, equating it with the climate crisis and driving comprehensive solutions.
Bridging the skills gap for nature conservation
The newly conceived role of the Chief Nature Officer (CNO) to address evolving environmental challenges and a changing political environment is significant. LOIM’s appointment of a CNO sends an encouraging message to the private sector about the importance of nature, according to Troëng.
Nonetheless, Troëng emphasizes that CNOs must be effective leaders, supported by executive directors and boards of directors. They need to be empowered to not just follow pro-nature efforts, but also gradually eliminate unsustainable practices.
According to Palahí, identify the right skills for a CNO, given your unique abilities, is to challenge. The ability to connect complex information, have empathy and understand diverse perspectives, especially in the financial sector, it is fundamental. Furthermore, a scientific understanding of the nature and confidence to engage investors are necessary. Palahí shares that universities could develop degree programs in nature finance to address this skills gap.
Using data for biodiversity performance
Improving nature performance for investors and corporates requires improving data management and overcoming obstacles related to accounting for natural capital and assessing biodiversity performance.
Segundo Rashmi Bomiriya, COO (Director of Operations) and chief data scientist at RS Metrics, Historical barriers involving data and transmitted to nature can hinder conservation efforts. These include a lack of detailed activity-level data and challenges in benchmarking and monitoring biodiversity impacts over time..
The platform ESG Signals da RS Metrics e o AssetTracker lead as data catalysts for TNFD (Task Force on Nature-Related Financial Disclosures), offering specific environmental information at asset level, addressing issues such as water stress, risk of forest fires, thermal variations and species distribution.
Bomiriya highlights that CNOs can leverage this data to make informed decisions, set ambitious goals for biodiversity and efficiently communicate your nature-related efforts to stakeholders, investors and customers.
The role of the investor in valuing natural capital
Investors and the financial community have an important role in highlighting the benefits of natural capital estimates and recognizing the value of the emerging circular bioeconomy. Collaboration between the Chief Nature Officer and stakeholders is vital to integrate natural capital considerations into investment decisions.
According to Azevedo, banks and investors can influence practices, moving from actions that harm nature to those that regenerate it, like regenerative agriculture- concept linked to the possibility of producing by recovering soil, with a proposal that aims to regenerate and maintain the entire agricultural food production system, including rural communities and consumers. Looking beyond quarterly results and taking a long-term view helps fill a biodiversity financing gap.
In addition to investors, Governors and policymakers have a major responsibility in facilitating this transition. Through political reforms, training and initial investments, governments can encourage the private sector to adopt more attractive practices. Natural capital accounting practices are also essential. This is especially relevant, since, according to Dasgupta Review, incentives harmful to nature amount to between US$ 4 a 6 trillion globally each year.
The perspective is that the role of the CNO will become a norm. Palahí predicts that, until 2025, The United Nations Department of Public Information invites, asset managers and renowned corporations will have a CNO. With autonomy to promote regenerative practices and prioritize nature at a strategic level, the CNO can play a crucial role in valuing natural capital and promoting sustainability.
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