The best-known ‘Conference of the Parties’ is the one on climate. In 2015 it gave birth to the Paris Agreement and last year Glasgow hosted COP26. However, there is also another, lesser-known COP organised by the UN, which is dedicated to biodiversity. This COP deals with the ‘Convention on Biological Diversity’ created at the 1992 Rio Earth Summit and takes place every two years. A delayed COP15 on biodiversity will take place later this year in China.

Despite these two separate COP events, it is generally acknowledged that the climate crisis and biodiversity crisis are inextricably linked, and we need to talk about addressing them in tandem. In conjunction with addressing climate change, action is needed by humanity to halt biodiversity decline and begin its restoration. For example, planning, land use and agricultural systems need to be adapted to work with nature.

Last year, the high-profile Dasgupta Review told businesses and financial institutions that they must account for dependencies and impacts on nature in their activities; and this includes the measurement and disclosure, not only of climate-related financial risks, but nature-related financial risks too. Banks, the financial system, and in fact our whole economies are inherently linked to the natural environment and the health of our society. Their stability and success is dependent upon them. This was a key theme in the award-winning, 40-minute documentary created by WWF ‘Our Planet Too Big to Fail’.

The role that banks could play

Banks should be well-positioned to take the lead in tackling the climate and ecological crisis. Not just because they can be critical in divestment from any new fossil fuels, but also because they have the capacity and obligation to finance entrepreneurs and institutions that are committed to tackling major social and ecological issues.

Triodos Bank has stated an intention to be net-zero as early as possible, at the latest by 2035. In formulating this target, the bank adopted a holistic approach supporting our mission to create positive impact on people and planet. As Triodos Bank UK CEO Bevis Watts said at the time: “We have to look at the whole picture. It takes more than just cutting carbon. We can’t just reduce emissions, only to find out that we’ve used all our natural resources to get there. We can’t stop using fossil fuels, only to find out we’ve exploited people to get there. We need holistic solutions. An approach that works for all living species. Where renewable energy, massive investments in regenerating nature and a fully sustainable built environment go hand in hand.”

To this end, our ambition is that the greenhouse gas emissions of all Triodos Bank's loans and funds’ investments will be greatly reduced using a science-based targets approach. The remaining emissions will be balanced or ‘inset’ by investing considerably in nature projects that remove greenhouse gases from the air.

Investing in nature

Investing in nature will be key to this ambitious 2035 net-zero strategy. It will include forestry projects, but afforestation is not just about hitting carbon targets, but also promoting biodiversity – both of which are central to our mission of positive impact. In 2021, Triodos financed approximately 33,000 hectares of nature and conservation land, representing around 440m² per customer, which we plan to increase in the coming years.

A crowdfunding partnership with Trees for Life was a landmark project for Triodos in the UK last year and illustrates the clear demand for rewilding projects, with £2m of investment raised in less than 48 hours. The finance is supporting the construction of a visitor centre at the charity’s Dundreggan estate in the Scottish Highlands which will educate people about forest regeneration and the natural and cultural heritage of the area.

The current woodland cover at Dundreggan is 26%, following substantial planting of over 335,000 native trees since 2008, and the charity wants to increase this to 41% over the next 10 years. There are plans for a further 1,500 acres of planting, which the visitor centre will play a part in helping to fund and support. We are committed to including many more such projects in our portfolio over the coming years.

Pilot projects

It is our belief that a major shift is needed to a much more nature-based economy and that we need to create the financial mechanisms to support projects that absorb carbon. It is vital that our financial system appreciates the true value of nature and we need to create investable business models connected to nature restoration.

There are many different ecosystems to consider. We are proud to have recently joined in a Wildfowl & Wetlands Trust initiative to create networks of healthy wetlands across the UK, that explicitly aims to fight the interlinked crises of biodiversity loss, climate change and human wellbeing. The Blue Recovery Leaders Group launched in March to bring together purpose-minded businesses and WWT to help make the goal of bigger, better wetlands a reality in the UK.

In the background, Triodos Bank UK began working specifically on nature-based investments six years ago and sponsored the UK’s first conference on the concept in 2018. In 2020, four pilot projects aiming to protect and restore valuable habitats that were sourced and evaluated by Triodos were selected to receive grant funding. The projects vary in scope and geography, but all connect economic outcomes to investment in environmental restoration in terms of carbon storage, air quality, flood management and human health, as well as enhancing biodiversity and wildlife habitats.

One example is to be found in the Wyre Natural Flood Management project in Lancashire. In partnership with The Rivers Trust, Triodos has been able to show success is possible in terms of generating investor interest and supporting a capital raising process. £1.5m has now been raised to invest in the Natural Flood Management via a Community Interest Company, established as an independent entity to raise financial investment to go alongside a grant from the Woodland Trust via the Northern Forests Grow Back Greener programme, as part of Defra’s Nature For Climate Fund.

The money raised in the form of a nine-year loan will be used to deliver over 1,000 highly targeted measures, including tree planting, creation of temporary water storage areas, leaky dams and a network of hedges that will significantly reduce flooding to local communities at risk. It will be repaid through the sale of ecosystem services to organisations that will seek to benefit from those interventions including flood risk reduction, carbon sequestration, increasing biodiversity and improving water quality. Local farmers and landowners will then be paid to host and maintain those NFM assets. Social Investment Tax Relief (SITR) was utilised to support the arrangement.

If these pilot business models can work and be scalable then they could be gamechangers for the burgeoning ecosystem services investment sector. This is not about exploiting nature but seeing nature at the heart of a truly circular economy that is key to our own prosperity and wellbeing.

More support is needed to develop similar projects nationwide to address climate change, adapt to its effects and restore biodiversity. We hope this work will inspire others in the finance sector to play a role in connecting economic outcomes to investment in environmental restoration. This is going to be critical to meeting net zero goals, including those set at COP26 and COP15, and reversing nature’s decline.