Want action to protect and restore nature? Don't just give me tools to assess risk, tell me what to do about it.

How to translate risk into investments into nature and some major science/tech/analytic gaps (opportunities - looking at you nature techies 👀)

I’ve seen a plethora of tools come out of the private sector in the last two years to assess physical risk and dependencies, whether that’s climate or nature (is it time we stopped separating them and went back to environmental? earth systems? physical? they are too intertwined to keep talking of them as separate). Sorry, that’s another discussion, back to risk.

Don’t get me wrong, I think one of the best chances we have to get humans to protect and restore nature is to make it very explicit how we depend on nature and the risks we already do or will face if the ecosystem services that we depend on start to fail.

Making the risk explicit is a critical first step, and requiring disclosure of those risks is important. But I’m really worried that if we only take that step, will we find ourselves in a world where the real economy becomes too risky for investment. If we just make the absolute risks visible, will we see a wave of divestment? Which for nature, is the opposite that we want. We don’t want companies and investors running from critical nature landscapes, we want them running towards them. We want them committing in place for the long-run. We want them to have a clear case for investing to be the most resilient productive and healthy landscape in the face of a changing climate.

So how do we get there? There’s three missing gaps that I see that need more attention.

1. Risk to Dollars (Value-at-risk)

This one is simple. Risk is hard for a human to understand. But we know what dollars are from the time we are five asking our parents for a buck to buy a candy bar. There are far too few service providers/tools out there that translate risk into dollars, not generic economic assessments, but acute assessments of business or financial value-at-risk for individual entities. You hear the term investment-grade, what does an investment-grade value-at-risk tool look like? From the conversations I’ve had with corporates and financial institutions, there are far too few if any out there.

And I should clarify here, there are far more tools for assessing climate-related risks (disasters) but I’m speaking more on what seems to fall into the nature risk bucket (regulating and provisioning ecosystem services like rainfall).

2. Absolute Risk to Relative Risk

Absolute risk is data, relative risk is a decision-making tool. If I’m a global agricultural company operating in the Cerrado in Brazil and I look at water risks if the Amazon tips into savannah, why should I care? I can just go somewhere else to grow my commodities. But if I look at the other places where I want to grow and they have more risk or the cost of shifting my production to those areas relative to investing in resilience where I’m currently producing and the difference in risk, then I can start to make a case to invest in place.

We need more tools that produce relative risk analytics for corporates, financial institutions and governments. Globalization has happened and we’re not going back, at least anytime soon. If we want global corporates and financial institutions to invest, we need to remove the all to frequent assumption that there will always be another place to run.

3. Risk to what to DO about it.

As I mentioned earlier, there are more and more tools that tell corporates and financial institutions what their risk is, but how many tools have you come across that tell you what to do about it? Hardly any!

This is partially a science problem. We are still establishing foundational science for ecological function (relationships). If we restore this forest, how will that change local, regional and global rainfall patterns? If we protect this forest instead of that forest, how will that change the temperature regulation for this agricultural region?

We need tools that predict not risk today, but risk in the future. And most importantly, once we make a risk known, we need tools that give us a playbook for how to mitigate that risk and translate that into dollars.

Value-at-risk is important, but what is the value if you didn’t have that risk to begin with? What would the PNL look like for that agriculture company in the Cerrado if the Amazon is protected and restored? Even if we are in a 3C hotter world. Perhaps especially if we are in a 3C hotter world. Would I all of a sudden be the most attractive agriculture investment opportunity in the world for global investors? That’s an investment case that I can get excited about. That’s an investment case that my CFO might get excited about.

The next frontier for nature tech/analytics isn’t identifying risk, it’s telling us what to do about it. Where is the biggest bang for a corporate or government dollar to reduce the risk? And showing why investing here is a better financial decision than running there.

Let’s get to it!

- Eric