Healthy Ecosystems, Healthy Returns

Investing in mangroves could be the next green gold. It was recently estimated that an investment into mangroves of US$11.1 billion could bring a return of 100% by 2040¹. With mangrove forests storing carbon multiple times quicker than land-based rainforests they are an ideal candidate for carbon sequestration and could play a pivotal role in realizing carbon neutrality objectives that are set by many corporates, investors and others. In addition to carbon storage, mangroves provide multiple ecosystem services, such as protection against natural disasters, mitigating the loss of biodiversity, slowing global warming and supporting local economies. Mangroves are just a small part of our wider ecosystem.

With over 50% of global GDP in some way dependent on nature² it’s hard to underestimate the importance of healthy ecosystems to life on earth and our economic activities, such as investing. Ecosystems are the foundation of life on earth, they purify the air we breathe, produce the water we rely on, maintain the soil for our food, recycle the nutrients we need to survive and regulate the climate in which we live. Healthy ecosystems are the foundation of economic activity and healthy returns. However, from an investment perspective it is not well understood how our economic activities impact our ecosystems, and vice versa.

The World Economic Forum’s (“WEF”) global risk report 2021 placed environmental degradation as the top long-term risk to our planet for the second consecutive year³. As ecosystems diminish, businesses and financial institutions are put at risk. Although many large companies now have strategies in place to reduce their environmental impacts, few understand how to lessen their dependence on natural ecosystems. The UN Sustainable Development Goals 14 and 15⁴ addressing this challenge are also the least prioritized by corporates, as identified by KPMG’s survey of sustainability reporting⁵. To manage this long-term risk, investors will have to be on a journey to better measure the interdependency between healthy ecosystems and their investment portfolios.

The first step in this journey is an important one. We can only make a positive change for ourselves and the next generation by truly understanding impact and dependencies on ecosystems. Innovative solutions, such as the Sustainable Investment Framework Navigator (“SIFN”), are now being developed for investors to better understand the connection between investment portfolios and our ecosystems. Considering the multi-faceted and catastrophic threats that the degradation of our ecosystems present, on both a global human and economic level, it is imperative that we get these measurements right, right now.

It is in investors and corporates best interest to invest in the things upon which they rely. The WEF estimates that transitioning to a nature-positive economy could create 400 million new jobs and generate US$10 trillion in annual business value⁶. Mangroves alone save an estimated US$65 billion a year by acting as a protective coastal barrier to urban areas⁷ and provide a massive carbon sink by holding an approximate 3 billion metrics ton in carbon⁸. So, whilst as humans, we must invest in the ecosystems for our own survival, the same runs true for investors and businesses; they need to invest in the planet in order to survive in the future. Healthy ecosystems bring healthy returns, for all.

The SIFN is a solution that helps investors measure the impact of investments on healthy ecosystems, based on currently available data. To learn more about the SIFN or to request a demo click here.