Hi, I'm Helen Avery with the Green Finance Institute, and
you're listening to Financing Nature for our penultimate
episode of the series. I'm joined by Harvey Locke, who
has been an advisor to governments on conservation for
decades, as well as currently holding the position of Vice
Chair for Nature Positive for the IUCN World Commission on
Protected Areas. And we're going to be talking
about some very big ideas to solve our wicked problem of
biodiversity loss. We've had a very strange view
that is circulated when you talk about money in the economy.
You hear these words. Well, the economy cannot afford
to protect the environment. That's completely.
Idiotic. The environment is the context
for all human activity. I think we need to have a bigger
scale conversation. About how money intersects with
those big issues and how we can have a conversation of how large
scale finance, large scale corporate activity can be
aligned with the imperatives of getting ourselves back in line
with the context for all life and all economic activity, which
is a healthier system. Hello and good morning, good
afternoon, good evening, wherever you may be.
And yes, we are back with the final two episodes long promised
and long overdue about this season.
And I'm really thrilled we're going to be wrapping up this
season with some great guests. Last year, you'll recall we
focused on very practical solutions.
We looked at compliance markets. We looked in the US and
Colombia. We looked at collective action
models with Lestari and Lens and finances, Fisher improvement
projects and funds. We looked at the role of
transition plans in turning disclosure into investments.
And I promised that we would end the season.
With a bit of a. Different take with two guests
who could maybe encourage us to think even bigger and to
question our current approach to nature finance and provide us
with some food for thought as we bring this season to a close.
So today in our penultimate episode, I'm thrilled to say
we're going to be joined by Harvey Locke.
Harvey has had an incredible journey that we will talk about,
an amazing career. But over the last 18 months or
so, he has been exploring with experts around the world what
financial mechanisms are we not considering for what he calls
the very wicked problems that we're facing right now with
biodiversity loss. And if we thought really big and
if we thought bold, what would and could we develop that would
unlock investment at scale for the protection or the
restoration of nature? What are we missing?
What are we not thinking about South today?
He's going to be sharing with us some of the ideas that he's been
gathering. And we'll be talking natural
asset companies, if you remember those from a few seasons back,
accounting treatments, insurance, war bond models and a
lot more. We've got a lot to cover off
today, so let's get going. Well, Harvey, hello.
Thank you so much for joining us from Canada.
It's my pleasure. You know, the the essence of
these last few episodes of the series is really about sort of
coming together and thinking about, OK, maybe, you know, all
these wonderful models are in existence.
We're looking at sort of ways to finance nature.
But actually, do we have to come up with some new thinking?
Are there things that we're missing?
Is there a sort of a reimagining of the way we're thinking about
nature finance? Is it working?
Because we seem to be at a bit of an impasse, I would say, at
the moment around it. Can we get corporates to move?
Can we get the finance to move? MDBS, DFI, blended finance still
not going anywhere. So I know that you have spent
decades working at the intersection of conservation and
protected areas and mobilising private finance for nature, and
you've given this a huge amount of thought.
So I wondered, before we start, for those who don't know you,
could you just kind of walk us through your own journey and
where and where you've got to at the moment and sort of tell us a
bit about what you've been doing the last few months?
Well, I'm a Canadian and I describe myself as a tree
hugger, so that discloses my biases right up front.
I actually was a barrister for 14 years and I stopped doing
that to devote myself to nature conservation full time in the
late 1990s and I had the pleasure.
Of working with a lot of top scientists.
In a lot of settings also, I've been influenced by relationships
with Indigenous colleagues who've been interested in
conservation as well. And what I've come to realise
is. There, there's some.
Really big things we need to. Tackle.
So the first big thing I got involved in was this idea that
parks as islands weren't going to make it through time, so we
needed to think about them being interconnected across the
landscape. And that led to be helping to
create something called the Yellowstone to Yukon
Conservation Initiative, which is widely regarded in the world
as sort of the leading innovation around these
interconnected protected areas. And then I got started asking
the question, well, how much do we need to have in protected
areas? And that led to an idea called
Nature Needs Half, which is the idea that we need to protect at
least half the world. And I also became very
interested in the intersection between nature and the climate
and was fascinated why we were treating those as separate
topics when very clearly they are not.
But they've been treated like separate topics, which is a
problem. So I started working on that
about 15 years ago and all of that sort of came forward
towards the negotiation of the what's now the Kunming Montreal
Global Biodiversity Framework. And I was very involved at the
global level and a consultation for the IUCN World Commission on
Protected Areas about, well, how much of the world do we need to
protect and what would it take to protect biodiversity if
that's what we really are trying to do?
What's the answer? Not what's progress, but what's
the answer? And then I was asked by the
Government of Canada to take a leap from that and to serve as a
special advisor during the cop process, and they asked me.
To look at how to increase private finance for the global
biodiversity framework. So I had six months to work on
that, think on that and. Discover that there's a huge gap
in the motivations for private money, the need for private
money to support nature conservation and the climate.
And so we have a gap in the architecture of how money can
flow to this necessary thing on the private side.
So since then, I've devoted the large part of the last three
years to trying to solve that problem.
But I've had the luxury of looking at it at a deep
conceptual level as opposed to just trying to make things work
with the existing tools. Because I don't think we can't.
I think we the existing tools are fine, but they don't
fundamentally go to the problem of the great market failure,
which is that nature is worth more debt.
Than alive in the market and we need nature to be worth
something in the market if we want to reverse this trend or
halt and reverse the loss of nature which is the goal.
Of the global biodiversity frame.
So I know you've sort of been thinking about these, as you
say, wicked problems, if we can call them that.
So do you see sort of the wicked problem that you're trying to
solve is the the valuation beats because I know it goes beyond
that. Like there's there's many wicked
problems within financing nature restoration, protection where
you say so do you see what I mean?
So I wondered if you could sort of share, you know, what are the
wicked problems that you are specifically working on when it
comes to finance and nature? Well.
The the central problem. Is that we don't value nature,
but we value the products of nature, and that was fine as
long as we lived on an infinite world.
And we could just continue to gobble up what we call natural
resources and turn them into higher levels of value for
transactions and markets it. Became manifestly not fine when
we understood that the Earth is a closed system.
And that we're starting to exceed its capacity to generate
the things that we're exploiting.
And that's not what we're experiencing now.
We're experiencing. Climate change?
Well, that's just moving too much carbon out of the ground
and into the sky, depleting the oceans of fish, heating the
ocean up, drawing down too much water, and draining the aquifers
to keep going. These huge things we're doing
because we don't have our mental model right for economic
activity in the context of a finite planet, and externalising
those costs has been a really great.
Way to do business that leads to the accumulation of capital, the
development of wealth. The development of wealth has,
generally speaking, benefited people, particularly in the
global N, but not exclusively. But what we're?
Doing now is we're actually threatening the accumulated
capital by degrading the very context in which business
operates. So I think that there's a a
need. For finance to protect itself by
protecting the planetary systems on which that finance is based
and on which it is wholly dependent upon.
And we've had a very strange view that is circulated when you
talk about money and the economy.
You hear these words. Well, the economy cannot afford
to protect the environment. That's completely idiotic.
The environment is the context for all human activity,
including everything humans do, their families, their lives,
their eating, their relationships, and their
economic activity. And the economy is solely there
to serve people and is a creation of people.
And it's a nested hierarchy. It's not a set of competing
interests like the Venn diagram of the of the SDGS.
It's not that at all. There is only one context for
all life, and that's the Earth. There's only one context for the
economy, and that's human society.
And human society can even exist without an economy.
But an economy cannot exist without human society, and human
society cannot exist without a healthy ecosphere on which
humans can breathe and drink water and eat.
It's a very clear thing that we need to get clear now when it
comes to talking about money, because money right now is a
driving force of the destruction.
We need money to be a constructive force in the
restoration of halting and reversing the loss of nature,
stabilising the climate, pulling back from other planetary
boundaries. That's the wicked problem.
And that message has has been relayed for many years now,
hasn't it? But it's just not getting
through. And so almost like the what what
are your thoughts about sort of where we are?
I mean, I know you're saying you're thinking about, OK, how
do we come at this from a different angle?
And we'll talk in a moment about some of those newer angles that
you're you're thinking of. But I mean, what's your thought
about why? I mean, is it ever going to get
through if we just carry on relaying this message?
It seems not. Yeah, I think the challenge has
been that we've we've we've had messages what I might call mid
level. So within the a mental.
Playing field that we never make expressly articulate.
And here's the fundamental challenge.
My work, my biases, my underlying assumptions were that
the environment is a public good.
It's a public problem. It needs government, which
represents the public, to be the solution.
Government can do that. By protecting areas, government
can do that. By regulating industry,
government can do that by financing that which is
necessary to achieve a healthy relationship between humans and
nature. About 10 years ago on the Paris
Agreement, government said we can't afford to do this without
the participation of the private sector.
So we have that conversation in the context of what those of us
who care deeply about these concerns want money to do.
What we haven't really done much thinking about is how money
works and what money wants so. We need to think.
About the way that money flows and influencing the way that
money flows for money's reasons. And of course, money doesn't
have an entity. I'm talking as though money is
real money's. Money's a human.
Creation to serve a purpose that serves people.
And you know, essentially private money can't do the
public good as much as those of us who are interested in the
public good would like it to. Money has to make money in the
private system. I may or may not like.
That, but it's a fact, so. We need to start.
Having conversations that are based on what I'll call the,
the, the iron rules for money and the iron rules for money is
that money needs to make money if money is going to get
invested or money needs not to be lost, which is, you know, the
other side of money. You know, there's this the
simple line about the stock market that it's based on 2
principles, fear and greed. When it comes to private money
that's expressed more gently as in it's you can invest in it for
a return on capital or you can insure it to prevent the loss of
capital. So investment for capital
appreciation or insurance are the.
The two faces of financial participation that could be
brought to. Bear to participate actively in
nature finance that stabilises not only biodiversity,
understood as species, but the actual functioning of the
planet, the relationship between nature and the climate, the
bigger scale issues. I think we need to have a bigger
scale conversation about how money intersects.
With those big issues and how we can have a conversation of how
large scale finance, large scale corporate activity can be
aligned with the imperatives of getting ourselves back in line
with the context for all life and all economic activity, which
is a healthier system. So it's a slightly different
approach I think than sort of going right, well, how can
finance be used here for this conservation project?
It's more about how can we look at the way money works and and
build a system that works for the environment around how money
works. If there's some understanding,
there's like a nuance in there instead of just sort of
shoehorning innovative finance models into small conservation
projects, which is wonderful and we need that too.
If I does that feel fair to you? Yes, I'm advocating for the art
of the necessary instead of the art of the possible.
Right. And an awful lot of what we've
done with green finance has been the art of the possible.
How do you tweak things? It's sort of you're backing into
solutions by accreting them to existing models.
And what I'm saying is, what if we just looked at the core
economic propositions that investors and businesses need?
To work with as their rules of the game and see if we couldn't
construct some system that makes those rules of the game.
Benign in relation to the Earth system as opposed to
destructive. And why this is important is at
the end of the day, capitalism is the economic model that
largely we follow, and increasingly all over the world,
capitalism has the seeds of its own destruction sown.
Into it the way it's. Behaving right now, therefore,
capitalism is either a failed system.
Because it can't adjust to the seeds of its own destruction.
Or it's the robust and resilient system that people say it is, in
which case it would adjust to this reality and make necessary
changes to perpetuate itself. That's the game.
And expressed like that, you see the conversation isn't really
anymore about the environment. It's about the preservation of
capital and the preservation of proper conditions for business,
which is of course a requirement for that.
Is a healthy environment. So you get at the problem
through looking more profoundly at the issues associated with
wealth, the generation of wealth accumulation and the protection
of wealth as it relates to the context.
For that wealth, and that's what I've been trying to work on with
you and and other colleagues around the world, is let's
imagine that instead of this being a problem or that we're
trying to accrete ourselves to existing systems, what if we
thought up ways? Of growing capital, of growing
wealth that involve protecting nature.
What if we involved in preventing economic loss by
ensuring nature's well-being to try try to move away from the
the margins and into the what I call the bull's eye at the heart
of the problem? Yeah, it's really fascinating.
So I know you've, as you mentioned, you've been
travelling around the world bringing together finance
experts, nature finance experts, nature experts, and sort of
seeing how do you come at these problems and this sort of
reframing of what the problem is that we need to solve.
And you've sort of been starting to put together some ideas.
So I think we're all really excited just to hear if if there
are any of those ideas that have come up you could share.
I mean, maybe somewhere surprising, maybe somewhere more
fleshed out, maybe somewhere good ideas, but you don't think
it's a go? Then we'd just love to hear
like, what have you learned? Well, what I've learned is
there's enormous interest on the private capital side and on the
operating business side in this problem.
So this. Is a really?
Positive thing to start with. This is not Treehugger's
clamouring for attention. If you look at the Task force on
nature risk disclosure and these huge number of large companies
who've engaged in that, it's voluntary.
It's because they're getting that there's a problem here that
they need to be concerned about for their own good reasons.
Similarly, we have all the global frameworks we need for
action. We don't need to negotiate
anything else if we achieve the goals of the Paris.
Agreement and the underlying UNF Triple C if we achieve the goals
of the Kunming Montreal Global Biodiversity Framework and now
the the new Convention on the Law.
Of the sea and we would be going an awful long way towards
solving our problems. So it's not that we don't have
the language or the scientific understanding or the interest.
What we're missing is the. Thing in the middle.
What's the bridge between these policy frameworks, these
scientific imperatives and private money?
So, you know, working with people like you, the green
finance. Institute and others.
I've had the the pleasure of convening conversations with
colleagues of UN, Nature Finance and others to say, hey, let's
just think about this. Deeply fundamentally, you either
need to build something that provides a return on capital, or
you need to. Prevent the loss of capital or
the loss of income streams that are going on through something
that's insurance like so maybe. If you'd like, I could.
Walk through each of those individually.
Yeah, go for it. So capital appreciation
basically is the idea. That you invest today to have
your capital increase tomorrow and if you can get revenue
streams along the way that's great so the simplest terms, the
value proposition is the value proposition that gold works from
why do you buy gold you buy gold because it's going to be worth
more tomorrow than it is today that proposition is held
spectacularly well through time but if you.
Ask why is gold valuable? The answer is because gold is
valuable. We don't even fill our teeth
with it anymore. It's completely useless.
And yet it's seen as this storehouse of value that people
buy to to against the. Dangerous times financially and
it outperforms stock indices in many countries.
It's it's been a really good investment.
Why? Because it's a good investment.
Bitcoin. Why is Bitcoin valuable?
The answer is because Bitcoin is valuable.
There's no other reason. It doesn't do anything.
The idea that it might become a currency someday.
So what you know that it's, it's valuable because it's valuable.
Similarly, you know, if you, if you think this through like art,
why is fine art valuable? Why does it gain value over
time? Because it's valuable.
It's not because of the canvas and the paint.
It's because Monet did it. Or Picasso did it.
So those are all perceived value.
Nature is actually valuable. Nature makes the world go round.
So if we can create the understanding that nature is
valuable, it should therefore be investable.
So the idea would be that you could represent that value of
intactness and the things that it does for the world as a
capital commodity that could gain value over time.
So you said, but there's no market today.
Well, there's a market the minute you have your first trade
and if the conversations going on for example in Europe about.
The regulatory need to disclose impacts and dependencies of
businesses. The potential conversation about
natural capital having to be shown on corporate balance
sheets, well, that's the creation of a market.
So you could. Have a share capital about
protecting nature and the value represented by the share capital
is the value of intact nature, not the degradation thereof, but
the protection there. And along the way I encountered
this idea of a natural asset company where in addition to
that they incorporate the idea that in addition to the capital
appreciation opportunity, you could think in terms of what are
called ecosystem services as flows parallel to financial
flow. So we think of an investment in
a in a company that has factories that would create
products that provide flows of income over time plus your stock
value will go up. And we used to value companies
based on just that, you know, what's the capital, what's the
income streams and something like 8590% of corporate values
50 years ago were based on that stock and flow of money well.
Apparently that's completely flipped and about 85% of the
stocks value these days is its brand and its image.
Well, that's perceived value. So imagine if you could create
companies that showed that there's potential income
streams. From nature, and the only one
that's now monetizable, even though carbon markets are very
troubled, is the idea of carbon additionality.
Plant trees, get some carbon draw down, get some money for
that, whether it's the regulatory carbon schemes or the
voluntary carbon schemes. But there is an income stream
for that. But imagine freshwater, imagine
wildlife. Imagine all the other.
Things that are called ecosystem services that nature produces
being perceived as flows of value in relation to that stock,
which is a stock in intact nature.
And if that isn't more valuable than gold, I'm confused.
If that's not more valuable than Bitcoin, what is wrong with the
world? If that's not more valuable than
fine art, we're nuts. It's the logic of of the market.
And I and I might digress for a moment.
You, you were going to say something.
I was just going to say like it's a challenge really like
natural asset companies. It's been an idea that's been or
we've had it on the podcast actually several years ago and
it was it's it was re brought up recently in England and I know
I've been kind of reticent to get behind them because.
You know, while I very much see the point you're you're making,
it just feels like we're maybe missing a step.
Perhaps you know that first step is natural capital on the
balance sheet as you mentioned and perhaps we're just jumping
ahead. To the vehicle.
Rather than solving that part first, I don't know.
Or maybe you're saying it's the other way around.
Actually create the vehicle and that will result in the
valuations happening when it comes to NACS, but I don't want
to take you off. Track if you were you were
heading somewhere else, but. I'm happy to.
Dive straight into that. So how you value stuff on the
capital appreciation side is by creating a market.
That's how you value stuff in economic terms.
We valued nature and in. Many ways, you know, inherently
I'm in love with it. That's a value.
We have cultural values of nature.
We've talked about valuing whales and valuing ecosystem
services and everything and lots of methodologies I'm sure you've
explored over time and many of the listeners will know about.
But the fundamental question if you want to attach financial
value to it has to be tradable in a market.
So all you have to do is create a market.
And when does the market get created?
Like how gold has not been the measure of anything since the US
abandoned it at $36.00 an. Oz in 1970.
So this idea that gold is a currency reserve is nonsense.
It's just perceived as valuable and.
There's huge gold reserves held by countries to protect
themselves financially. Well, nature is way more
important to all those countries than their gold reserves is
because that's, that's where you get your water from.
It's, it's we, we're just confused and, and I'll digress
here into a moment. So there was a great market
failure in the 19th century that threatened to stall the
industrial revolution. And that was that if you
invested as an investor, you are liable to the full extent of
your personal worth. And if you invested with someone
else, you were deemed a partner and you were liable to the full
extent of your personal worth for their misdeeds.
That was a big barrier for even the richest person in England.
Which was the richest? Country in the world by far then
couldn't finance a railway because the risk was too great.
We had steam engines, we had railway capacities, we could
build these things, we knew how, but we couldn't finance them.
So that led to the creation of the joint Stock company, which
is a foundation of all stock markets in the world today.
It created a mechanism, A tweak by government to create a
market. So you can create a market for
natural asset companies by just saying show natural capital on
your books. Same type of thing.
The tweak with it was made for this problem of of you can't
raise money. Because of these liability rules
was create the joint stock company, what we call the
corporation now and has two defining characteristics.
You only can lose the amount of money you put in the bucket
there and you're not liable for other investors investments.
It's just your money by itself. That's your risk.
You decide how big your risk is. You put $10 in, you put $10
billion in. That's your risk.
You may lose it all, which you might gain.
That is the foundation of every stock market in the world today.
A tweak by government to create the conditions that enabled what
needed to happen, happen so we can governments could play a
role in creating a market here. As soon as they do, we're in
business. And there isn't any more to it
than that. If you unpack it and you know
what, what you hear in response to this, like, well, I've heard
about this idea before, but you know, where's the market?
Where's the buyers? That's like, how does the how
does the government get on board with that?
Simply, you know, a simpler way would be either a voluntary
corporate or investment decision that we need to show some
natural capital. In our balance sheets.
There's a market right now or people who say this is going to
become valuable. I'm going to bet on it now and
I'm going to start buying it now.
Nature is way more valuable than gold, than Bitcoin, than art
combined multiplied by a billion.
And that's how we have to get our shifts going.
And these shifts are just perceptual.
Shifts. There's nothing more to it than
that. Gold is not valuable.
And it's as simple as that. So.
How do you create a market for that perception of value?
And one of the ways that I think it's helpful to think about this
nature, like we got in trouble thinking about valuing nature by
trying to reduce it to something akin to the carbon market, which
is about trading molecules. So way back in law school, you
learn something that the sale and movement and the laws of
fungible goods like telephones or cars or computers.
Is one set of rules because those things are all identical.
That's what the word fungible means.
You can substitute for them and trade them in volume.
So there's one set of rules that applies to that.
And then you cross the hallway and go see a different professor
to learn about real estate law. And real estate law is all based
on the. Proposition that real estate is
unique. So if you have the department
you're in, in London right now, if you put that apartment in
Birmingham identical in every respect, it would be worth less.
Why is that? Location, location, location.
What is location? Location is your situation in
nature? Real estate is just a subunit of
nature that we have committed to private ownership.
So we need to think about real estate and nature as a set of
rules that are based on uniqueness and their value
situationally, not as tradable fungible things like carbon
atoms. And This is why that whole thing
has gone so badly wrong, because if you want to buy and sell
pencils, you know they're not unique.
As long as you get the same make and model, then any pencil will
do. They put the carbon atom.
Any carbon atom will do. So it makes sense for a carbon
market to say any carbon atom will do as long as it's not in
the sky and it's stored somewhere else.
Then you've you're dealing with your carbon molecule problem.
OK, fine. That's not how nature works.
Don't try to speak Greek in China.
It doesn't work. Both are good languages,
Mandarin and Greek, but there you, you don't speak one and the
other. And this is where we've gone so
badly wrong with trying to nudge our way into these other ideas.
Let's think about nature as the context for real estate and what
are the propositions associated with the value of real estate?
Well, location anyway. So, well, that's got to do with
the commerce of a city like London.
So the real estate's more valuable.
Yes. And now talk to me about a
property with a view and its value.
Why does a property with a view have a value?
Do we think it does? Oh, yes, they do.
Why? Because it's got a beautiful
view over nature. How about that?
The value is actually nature, and this is what we've got to
get straight in our heads and we've got to capture that value
not in ways that degrades it. Or the deprives the owners of
nature which is the public or indigenous peoples and local.
Communities, we need to acknowledge that ownership of a
common public good, but find a way to attach value to it so
that the private sector can participate in its protection.
And if you know this is a really simple proposition, If this
doesn't work, then money is in big trouble.
OK, so that is NAX and valuations on balance sheet of
ecosystem services. What other ideas have you been
exploring? So let's go to the Amazon
insurance idea, which is one I'm I'm I'm really excited about.
So I. I developed this with a group of
risk experts from the Boston area, courtesy of a friend of
mine who convened a conversation on a rainy afternoon.
And we were just talking about this nature finance problem.
And I mentioned the problem that the Amazon is perceived as an
environmental issue, right we. Clear the forest, we lose 1 of
the greatest storehouse of species richness on the planet.
We clear the forest, we have a carbon release to the atmosphere
that destabilises our carbon builds.
We clear the forest and we degrade the the basic lifeways
of the indigenous peoples and local communities who live
there. All of which is reason enough
for me to think it's a. Global problem that I'm part of
it that I have to help solve. It hasn't been enough to save
the place. We're continuing to knock it
down. Well, the interesting thing
about the Amazon is that it's a rainforest that rains on itself.
And this takes a minute to understand, but this is really
important. We're taught in grade school
that rain comes from the ocean. It falls on the land and runs
back into the sea. That's true.
That happens in the Amazon too. But the next rainfall is
actually coming from the trees in part, where the trees are
releasing their water vapour back into the sky into something
that's called the atmospheric river or the Flying River, and
that continues to roll across the Amazon basin until almost
most. Of the rain is actually coming
from the forest by the time you get to the Andes mounts and the
science that's been done is that somewhere around 20% clearance
of the Amazon forest, that system starts to break down.
If it breaks down then it could transition through what's called
a tipping point to a Savannah system, a Savannah meaning grass
with trees in it. That would lead to the
catastrophic loss of biodiversity, catastrophic
carbon release and this environment and social justice
loss for indigenous peoples and local.
Communities. That's the environmental
concern. But there's a huge economic
issue because that rain then goes from the Amazon into the
Rio de La Plata Basin, which is the agricultural heartland of
South America. So the crops of Brazil,
Argentina, Uruguay, Pargo, they depend on that rain coming from
the Amazon. If that shuts down, something
like 40% of the rain that goes into that region comes from this
atmospheric river out of the Amazon.
You take away 40% of rainfall from agricultural region, you
don't have a 40% loss, You have collapse, economic collapse.
The one of the biggest food producing regions in the world
is Brazil and Argentina. The biggest source of soybeans
for China is Brazil. You shut down that system that
depends on the environmental conditions in the Amazon.
You create an economic crisis that would reverberate through
capital markets. All over the world.
Therefore, that system is insurable if there's an economic
loss that can be prevented by some action.
This is why insurers pay for fire departments.
They write fire insurance policies if there's no fire
department in the community. They go build a fire department
so they reduce the risk of burning down here.
We can have the insurance idea, keep the forest standing in the
Amazon to protect the economic interests associated with the
loss of agriculture in South America.
And we just have to reimagine the scale at which we're working
and the reasons for doing it. These reasons are economic.
If they're economic reasons to prevent losses to money, that
becomes an insurable interest. And so we have to think about
how we could create some kind of this project that engages all
the necessary actors from those people who own the forest, if
you will, the people who are the custodians of it in some
equitable way through to the global economy that would suffer
such an economic shock if that collapsed.
If we're talking about the scale of a problem that none of us can
afford even imagine happening, and it's at risk as we degrade
the Amazon. So how about we don't degrade
the Amazon and avoid this massive economic loss?
So that's the. Foundation of this Amazon
rainforest tipping insurance idea that we've developed and
that we're talking with about people openly because the idea
is so very big that you know that no one can control it as
their own little private enterprise, except that the
concept needs to be controlled for the public good in it.
So we got to figure out a way. To do all this, but
fundamentally the Amazon is too big to fail.
If it's too big to fail, what do you do?
You step up and you solve for it.
It's about insurance. It's about insurance like
securities. It's about governments creating
the playing field where this makes sense.
It's about governments perhaps even taking on some of that risk
because they're bearing that risk anyway in their economies.
It's like an enormous collective insurance policy that multiple
governments and businesses are paying into.
Or or governments are even just underwriting it saying we'll pay
on the risk if there's a loss that it's it's.
It's unimaginable to lose 1 of the world's great bread baskets
due to clearing a forest. The cost of remedial action is a
fraction of the cost of the the. Impact of the loss.
So this is how I think we need to reimagine our problem.
It's not how do I monetize a tree in the Amazon No.
No, no, no, no. It's how do I value the Amazon
Biome for what it produces for the world, including the
economic outputs that depend on it, and then value that to keep
it function. Then you're talking money to
money. And I think this is what has
eluded us. And you know a good segue.
From this is into what you what I call the war.
Bonds. Yeah, totally.
Yeah, let's talk about that because I think that's
absolutely fascinating in in a world where budgets are being
upped for defence, it could be that natural capital's security
issue might actually pique interest with government.
So yeah, tell us. Tell us what you've been looking
at. So war bonds are a really
fascinating thing that during World War One, and I'm just
talking about my country, Canada, which was part of the
Empire and sent a lot of soldiers to fight in the war, it
was an all. Then effort by our country as
part. Of the British Empire and it
wasn't a really rich country then.
And so the finance minister got the idea of issuing war bonds,
which would actually the citizens would lend money to the
government to win the war, and they would lend money at cheaper
than the rates the government could borrow at.
So it was something called concessional finance.
And he thought maybe we could raise a billion dollars like
this. So they issued timidly the first
war bond to see if they could fund the war effort at a
discount through its. Citizens directly rather than
borrowing money from the big global bankers, it was almost
instantly oversubscribed and they raised tonnes of money
through war bonds. And that's like people lending
money to the government at a discount to get something they
wanted, which was they wanted to win the war.
And what's being discussed now, a version of this is the
Tropical Forest Forever financing facility that's being
in the news right now. So what is that?
Well, that's a model of financing tropical forest
conservation with concessional finance.
People will essentially lend money into $25 billion pot,
agreed to defer their capital payments, agreed to get a return
on that money. That's basically just the rate
of U.S. Treasury securities as opposed
to if they put it into the stock market and then the people who
get that money. Which will be held at some
global financial institution potentially.
We'll invest that in a higher return thing and keep the spread
and they'll also create bonds with the AAA rate of return that
are de risked by virtue of this other pool of subordinate
capital, junior capital as it's called, which is this 25 billion
and try to raise $125 billion which gets invested at a higher.
Return and then the spread the premium.
The difference, which is estimated to be 3 or $4 billion,
will go into tropical forest conservation across something
like 80 countries. That's just a new.
Version of the war bond. And I think we've got to
simplify our stories. This is like war bonds are
something that that that people participated in as a matter of
course because there was a problem to solve.
There was a big problem. It was an existential problem.
Well, guess what? We have an existential problem
right now. Where do you stabilise the
conditions in which humanity depends for stable society?
My goodness, that's certainly worth investing.
Yeah, I think $5.5 billion in the end was announced for TFFF
at COP 30 and it, you know, it's an ambitious initiative.
But what I hope that this does is it opens the conversation
more broadly to the capital appreciation side of the Ledger
that I talked about earlier to the insurance product approach.
But I'm I'm really cheering for this mechanism.
Because it it's an opening into valuing intact nature.
There's zero additionality if you use those words.
From carbon markets. In this this is all about intact
nature. Intact nature matters far more
than planting trees. It's not even close at the
global scale. Saving what we've got less
halting the loss of biodiversity?
Halt loss is way more important than restoration.
It's not even close. When we say this is the UN
decade of restoration, that's the decade of filling a hole
with the shovel. OK, Meanwhile, we've got a giant
backhoe digging a gargantuan hole in intact nature next door,
and we're busy trying to fill that hole with the shovel.
It's insane. Stop the backhoe digging and
fill the hole with the shovel. Then we got a chance.
That's why it's halt and reverse the loss of.
Nature. That's the essence of the nature
positive idea, which is the vision of the global
biodiversity framework. If we don't halt the loss of
intact nature, we're in trouble. TFFF is about halting the loss
of intact tropical rainforests. Wonderful, because that's the
innovation direction we need to go in.
So what I know, one of the things that we've discussed is
around this nature as a security issue.
And I wanted to come back to this.
So here in the UK earlier in the year there.
Was a report. From government that highlighted
the impacts of degraded natural environment internationally on
UK national security. And at the moment, it just feels
like governments are, you know, obviously facing short, middle
term, who knows, geopolitical national security risks.
And so environmental risk feels like it's not quite as high up
the agenda as maybe it was looking like it could get.
But do you think this security lens specifically may lend
itself to more larger investments from governments?
What do you think? I understand that security
analysts associated with government are already looking
at this as a huge security issue.
There are a lot of military analysts who say that the Syrian
civil war was a product of the decline of agriculture that
caused the urbanisation of an ethnic group.
Into cities where there was a different ethnic group that blew
up and created the Syrian civil war.
That then created a migrant problem of a million people into
Europe, which almost unravelled the European Union.
That's. An economic effect of security
relating to climate change and DRY.
Nature, the climate, all of that functioning within the sort of
stable bounds of what's called the Holocene.
That the period of stability since the last Ice Age until the
Anthropocene, which is the period of instability we're
inflicting on ourselves now for the last 50 or so years, or that
gives us more closer to 75 years now we've got to get back to
this more stable system if we want.
The systems we recognise to continue to function because if
you let's say you break the bread basket of South America by
clearing the Amazon forest and you suddenly have 10s of
millions of people with no food in bankrupt countries.
Are those people going to stay there and die, or are they going
to migrate the way people are already migrating N to the
northern hemisphere, the US and Canada, where there's already a
huge. Political issue in the United
states about illegal. Immigration and all that.
And this is not just the Amazon. This also applies to the Congo.
The Congo rainforest works the same way as the Amazon
rainforest. It rains, and then the forest
rains on itself all the way. Where does that rain go?
Well, that rain goes up into the Upper Nile, the Lake Victoria
area. OK, Well, that's not hugely
important for agricultural trade at the global level the way
Brazil and Argentina are, but it's sure important.
To the 10s of millions of people who live there and depend on
that for their subsistence farms.
How about we wipe that out by cutting down the Congo
rainforest? Destroy the rain that falls, the
headwaters in the Nile. You'd be able, you'd imagine the
flood of people across the Mediterranean because they're
starving, because they have nowhere else to go.
This becomes a massive problem for Europe at the fundamental
economic survival level. These are the levels that at
which we can think about security, not securities, but
security which is of course destabilises economies, of
course it destabilises societies.
You can't. We can't inflict this harm on
planet Earth without humans suffering the consequence.
And This is why it behoves us to act fast and big in our
self-interest, for financial reasons if nothing else.
Let alone the equity of not putting these people through
that misery. Let alone the concern that I
hold so deeply as an ethical issue that I'm no better than
the rest. Of life as Homo sapiens and I
have a duty of responsibility and relationship with the rest
of the world to safeguard the well-being of every species.
I believe that the core of my heart.
So I mean, almost two years ago now, gosh, time flies.
And we worked with, you know, several academic and research
partners on analysing nature related macroeconomic risks for
the UK and the University of Reading developed a national
risk register specific to nature related economic risk.
And in the top right box of the risk, so highest impact, highest
likelihood was economic risk from immigration due to food
security. And there were others in that
box too, like antimicrobial resistance and pandemics.
But it was very, very clearly an urgent and high impact risk.
And, you know, that point has been followed up in that report
I mentioned earlier from the UK government.
And yet we're still not seeing governments prioritise, or at
least not publicly saying they're prioritising, that kind
of risk. Well, I'll, I'll tell you why I
think it is. I think we've allowed those of
us who are concerned about these things, have allowed this to be
the conversation among specialists and we haven't had a
simple conversation with our neighbours in words they can
understand that if you want the UK to be a stable place and to
be able to control immigration and you know, all of those
self-image things that Britain holds so dear, you better care a
lot about these problems or the future is not going to be 1 you
like and it doesn't matter who you vote for.
And we're not having that kind of conversations with society.
We're having these very technical conversations, you
know, and the language we use on our side of the Ledger isn't the
language of intended to make other people understand.
We use language of policy specialists trying to influence
policy experts to see the logic and reason behind our words.
That would then result in a tweak inside government that the
Treasury might respond to and brief up the cabinet to cause it
to occur. No, we need something that
causes every cabinet member to think this is a problem and
asking the treasury and the people beneath it, how do we
solve it. And instead we're trying to go
up as specialists because this is the comfortable space for
people like you and me and probably most of the listeners
on this podcast is these are hard problems.
These are wicked problems. They need to be thought through.
There's a Rubik's Cube that we need to twist and turn and get
all the colours right. And then then we need to sell it
on other smart policy people instead of us doing the hard
work of abstracting the problems into the simple language that
motivates people to create the conditions where policy can be
made. And this is where I'm interested
in the kinds of conversations we're having today.
You know, you can make it. Making money is OK.
We all need it. Let's make money in a way that's
good for us, not bad for us. And, you know, let's let's think
in terms of what we're doing with the kind of urgency that
enabled us to invest in ourselves through things like
war bonds, because that's where we are.
And let's wrap that all in a message of hope.
We can do this. We can turn this corner if we
can tweak the financial system. Money moves so fast it's
unbelievable there you know money can move at the speed of
light in private money government moves at the speed of
a brontosaurus. And so let's take advantage of
that speed and nimbleness and the the return seeking nature of
private money directed through public policy to making a return
in a benign way. So for example, just requiring
companies to have natural. Capital on the balance sheets or
an idea that I've had which is? What if banks could invest 1% of
the reserves they're obligatory required to hold for the
stability of the banks? But if 1% of that 100% that they
have to hold could go to buy natural capital and hold it on
their balance sheets, there would be a huge market overnight
for natural asset company stocks.
For other schemes that show natural capital value in some
robust and regulatory type way, there'll be an instant market.
And why wouldn't we do that? Why do we have those rules of
having reserves in banks for the stability of the banking system?
And what was the network for greening the financial system,
which is all the central banks of the world.
There are 115 or so of them. What do they say?
Nature risk is a monstrous threat to banking systems.
Well, let's deploy some of the capital in the banking system to
solve for the risk that they're running instead of just saying,
golly, those dumb environmentalists, they haven't
figured out a way to pay for this.
No, we haven't. Help us, Help us.
It's. True think.
Think what can we do? Harvey?
You're so, you know, optimistic, as you say, full of hope and
positive. And I, I think it's great to
sort of really try and all the work you're doing around like,
let's think out the box, Let's think a lot bigger.
Let's stop just going, oh, it's really hard.
And you know, how many meetings we come to and everyone will
just present all the barriers and it's very hard to move
people into talking about solutions because it's, you
know, it's an uncomfortable and new place for people.
So I love, I just love what you're doing and I love all
these ideas that, you know, what I'm sure will be built upon in
the next few months or years or whatever, whatever it is.
I mean, just before we go, I mean, anything that you wanted
to leave us with either sort of sharing what, what you've got
coming up or just leaving us with something to, to think
about. Well, First off, thanks for
those kind words, Helen. They mean a lot coming from
someone who's worked as hard as you have on these things.
And I'm glad that we're colleagues working on them
still. And in fact, the whole Green
Finance Institute, I'm just so pleased that you exist and that
as a community you're, you're interested in these things.
But you know what? Give I want to maybe end with
this. At the end of the day, humans
are a narrative. Driven species.
The stories we tell ourselves about what a good life is, is
what we do. So This is why I'm such a big
fan of the nature positive idea, which is we need to halt and
reverse the loss of nature by 20-30 to put the earth back on
a. Recovery system and then that
feeds into this idea of stabilising the planet back to
more like what we recognise that we've come through as the
Holocene and less and less like the Anthropocene.
That's what it means. We can do that.
We can say that this is our shared ambition, that our
financial systems could align with such a vision, that our
government approaches could align with such a vision.
And it's a vision that is inherently hopeful.
And our problem is if we continue to ride the rocket sled
of the current system, there's only one diagnosis and that is
that smoking kills. This is we are on a sled that's
accelerating towards a bad place.
That sled doesn't have to accelerate towards a bad place.
The point of Inflexion could be placed to make it accelerate
towards a good place. It's just up to us, our systems
and our imagination. And I think we're up to it.
But I also think we need to simplify the conversation and
involve more people in it. This is not the role of the holy
priesthood. This is the role of the citizen,
the politician, the banker, the insurer, the, you know, the
pension fund and the environmentalist and and and and
the army and the security concerned people we all need to
recognise. That the Spanish Armada is off
the coast and there's no storm that's going to save.
Us the Spanish Armada is right there and it's about to dock.
So how about we take away the docks?
And figure out how to create some conditions where that
doesn't come and take over to our detriment, the world.
We want to live in those. Kinds of more simple metaphors
and those kinds of understanding of the moment we're in, which
is, you know, when I was a young person, I used to read Winston
Churchill's stuff and I thought, gosh, you know, those people
were so lucky. This is my parents generation.
They were so lucky that they lived through such meaningful
times. Well, be careful what you wish
for because that's where we are now.
We live in a very meaningful time.
What we do and the pivots we make now, and I'm talking about
pivots, not slow evolutionary nudges.
I'm talking about pivots. The pivots we make now will
determine the 21st century. And we're already in the glue.
But we can pivot out of the glue.
Or we can just say, oh, it's all too hard.
I wish it were easier. Let's write another policy paper
describing the problems and find ourselves at the bottom of an
abyss. But we're not the first
generation to face this. If, you know, I'm using British
metaphors, But I mean, this is what it is to be human.
They have faced the big challenges and, you know, Rome
couldn't face its big challenges.
Rome imploded because they couldn't figure out how to solve
for too many mouths to feed. They were degrading the
Mediterranean basin. They desertified the north of
Africa, which was once a bread basket.
They couldn't figure it out. And they had too much internal
dysfunction in their society to do anything collectively.
OK, well has that always been the case?
No. If you look at the 19th and 20th
century in Europe, it was able to pivot out of succeeding
crises into something better. Not perfect, but better.
And one of the I'll leave you with this thought.
I've read some research on happiness in the UK and Britons
were never happier, according to the research, than after World
War 2 when they were enduring rationing because they were
rebuilding a society that was more egalitarian.
They were part of a new world order that wanted to put an end
to wars. And they were prepared to make
that sacrifice for a better life.
And they were never happier than they were in the early 1950s.
And they were never more objectively poor in the 20th
century than they were in the 19. 50s That's because they had
a sense of purpose. They believed in what they were
doing. They were proud of what they
came through. They were proud of the
sacrifices they made. Well, it's our turn.
We need you for global president Harvey.
Look, someone out there rallying, We can have Team
Harvey on our T-shirts to remind us because it's such a
despondency at the moment. I think people just sort of,
they sort of see the society unravelling like either side of
your political spectrum. You can't help but notice that
we are not in a good place in a lot of countries.
So it is this sort of rallying cry that people do do need and
will step up. But yeah, so yes, Team Harvey
for the win. Thank you for a fun
conversation. Thank you, Harvey.
It's lovely. You know, it's taken up lots of
your time and I'm very appreciative of your generosity.
Thank you and good luck with everything.
Thanks, Alan. Bye bye.
Well, that's it for today. Thank you so much for joining
us, and do reach out to Harvey if you've got big ideas.
As we said, he's really on a mission to find and Support
Solutions and is extremely open to transformative and bold
ideas. So if you have them, definitely
look him up and let him know what they are Next week, and it
will be next week is going to be our very last show and sadly my
very last episode actually, but I'll be joined by the wonderful
Justin Adams. Justin is a fellow at the
Circular by Economy Alliance and he also founded Ostara.
He's been looking at how we can reimagine nature finance and
inclusive capitalism and has been doing some great work with
people around the world, including Kate Rayworth of
Doughnut Economics fame. In thinking in terms of system
change. I know that's a phrase there's
some change that he's not a huge fan of, but that's what we're
going to be looking at really. How do we sort of start to sort
of change some of the fundamentals Until then, you can
find out more about us at www.greenfinanceinstitute.com.
All the information around revenues for Nature is also
there and hope you have a wonderful week.