Climate under extreme weather – what lessons can be drawn from nature and finance?

As climate finance faces "extreme weather," it is worth examining how nature finance is evolving and what lessons it can offer to improve our approach to climate finance. So far, climate action has inspired nature action, for example, the Taskforce on Nature-related Financial Disclosures (TNFD) has copied its acronym and approach from the Taskforce on Climate-related Financial Disclosures (TCFD). In the same way, the Partnership for Carbon Accounting Financials (PCAF) inspired the creation of Biodiversity and Ecosystem Finance (PBAF). Furthermore, initiatives like Nature Action 100+ preceded their climate counterpart, Climate Action 100. 

But can this also work the other way around? How can nature finance inspire climate finance in practical ways?

1. Make it personal

How often have you heard someone passionately discuss high-pressure systems or their favorite type of weather? The answer is probably never. While weather patterns shape our daily lives, it is much harder for most people to develop a personal connection to climate. The key to driving climate finance action is creating a connection to the issue. This means shifting from a purely scientific perspective to one that engages people emotionally. From literature to art, nature has inspired us across centuries and cultures. Nature-based solutions can help by putting a face to the issue—whether through projects protecting coral reefs, reforesting ecosystems, or improving sustainable agriculture practices. By fostering a personal connection with the climate through local and tangible projects, finance can become a tool for meaningful action.

This could mean connecting investors to projects with a visible, direct impact in finance. For example, investments in green bonds for renewable energy projects or financing for regenerative agriculture practices can potentially engage individuals by showing how their investments tangibly impact the planet.

2. Everything is local

Nature’s impact is inherently local. The consequences of an investment in a river’s ecosystem or a forest’s biodiversity are felt locally. However, the effects on the global climate are more diffuse. Similarly, climate change impacts vary dramatically across different regions and ecosystems. Action on climate can only take place at the local level, which necessitates tailored sector-specific transition pathways. For instance, in finance, local action can manifest as impact investing, where capital is directed to projects and companies focused on sustainable, localised solutions—such as microgrids for energy independence in rural areas or local conservation efforts aimed at preserving biodiversity hotspots. Localised financial products, like community development funds, are helping drive region-specific solutions for climate resilience.

3. One metric is both a blessing and a curse

“What is the GHG equivalent for nature?” This is one of the most common questions asked about nature finance, yet the answer is unsatisfactory—there isn’t one. The complexities of natural systems don’t fit neatly into a single metric. But is this different for the climate? GHG accounting focuses on carbon dioxide, but the climate and nature encompass much more than just CO2. For example, methane, which is linked to livestock farming, is another potent greenhouse gas, yet its impact on biodiversity and ecosystems is also profound.

Nature finance faces similar challenges. Simplified metrics are helpful for broad communication, but they obscure the complexity of natural systems and the intricate relationships between various environmental factors. In finance, relying solely on carbon offsets as a climate solution misses the multifaceted nature of ecosystems. We must integrate more complex and nuanced solutions into financial strategies, including biodiversity metrics and carbon accounting in investment portfolios.

4. Nature and climate are inextricably linked

The interconnectedness of nature and climate is undeniable. Climate change cannot be mitigated without addressing the destruction of natural ecosystems and vice versa. Investment in nature-based solutions, such as reforestation or wetland restoration, is just as crucial as investments in renewable energy or carbon capture technologies. Without a healthy natural environment, we cannot achieve long-term climate goals.

In the financial sector, there’s a growing recognition of the dual importance of climate and nature. The TNFD framework, for example, highlights the financial risks linked to biodiversity loss and provides companies with a way to measure and manage these risks alongside climate-related financial disclosures. Bridging the gap between nature and climate finance will require more integrated investment products that recognise these links, such as funds targeting carbon reduction and biodiversity enhancement.

5. Patience is gold

Not long ago, nature-related finance was considered a niche concern; the average boardroom was only interested in nature if there was an actual elephant in the room. For those advocating for nature finance, the uphill battle to raise awareness about the topic's importance—alongside climate change—was tough. However, over time, the tide has started to turn. The global community now recognises that tackling biodiversity loss and environmental degradation is just as crucial as addressing climate change.

As in finance, achieving significant progress requires long-term commitment and patience. Success may not always be immediate, but building a strong narrative around nature-based solutions and showing their financial viability can position them as key components of a sustainable finance strategy. Investors are beginning to understand that nature-related investments are not just ‘nice to have’ but are crucial for long-term resilience and profitability. The growing importance of sustainability-linked bonds (SLBs) and nature-based bonds are a prime example of this shift.

By drawing inspiration from the lessons found in nature finance, we can refine and strengthen our approach to climate finance, ensuring that it is more localised, interconnected, and comprehensive. Nature and climate are not separate issues but two sides of the same coin. As we move forward, it's clear that integrating nature finance with climate finance isn’t just beneficial and essential for creating a sustainable future.

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