The safeguarding of natural capital

Perspectives

The safeguarding of natural capital

The nexus between climate, nature, and Indigenous peoples

Given the unique position of Indigenous peoples and local communities (IPLCs) as stewards of natural capital, explore how financial institutions have the power to play a significant role when it comes to not only supporting biodiversity and protecting nature, but preserving culture as well.

IPLCs: The Earth’s stewards

As a whole, ecosystem services are complex and interwoven collections that are key to maintaining the balance of our planet’s biological network. Individually, ecosystem services are divided into four major categories: provisioning services, such as food and water supply; regulating services, like flood and disease control; supporting services, including nutrient recycling that helps maintain living conditions on Earth; and cultural services, which encompass the recreational and cultural benefits that society derives from nature.

The preservation of these services is paramount, yet their importance is often overlooked. This oversight becomes even more significant when one considers that IPLCs, while representing less than 5% of the world's population, are the stewards of nearly a quarter of the Earth's land and seas and protect around 80% of global biodiversity. Their innate connection with the land and the natural environment positions them as key figures in the fight against biodiversity loss and natural capital degradation.

Natural capital | The nexus between climate, nature, and Indigenous peoples

Nature rights and minding the gap

There is growing support for Indigenous rights from financial institutions and international accords, with many banks pledging to consider IPLCs in their decision-making processes for projects that may impact these communities. 

Despite these advancements, there is a significant financing gap for nature. Financial institutions have a crucial role to play in addressing this gap, by improving access to private funding for projects that uphold human rights, generate positive environmental returns, and help achieve net-zero objectives. Organizations across the industry should place a greater emphasis on supporting IPLCs, given their extensive knowledge and skills in combating environmental degradation.

On a global scale, some $44 trillion of economic value generation relies on the health and well-being of global ecosystems and natural resources. The cost of inaction in protecting nature—and the collapse of ecosystem services—amounts to about $2.7 trillion a year.

The Paulson Institute, in partnership with The Nature Conservancy and the Cornell Atkinson Center for Sustainability, estimated that an average of $711 billion more needs to be spent each year to reverse the decline in biodiversity by 2030. The World Wildlife Fund calculates that between $300 billion and $400 billion in investment is needed to preserve and restore ecosystems alone, of which only about $52 billion is occurring each year.

As wardens of financial capital, financial institutions can play a pivotal part, both in improving access to private funding for projects that help achieve these objectives and in introducing bankable nature-based solutions as well. 

And at the very least, capital providers can take precautions and reconsider financing activities in green economy transition projects where Indigenous peoples are directly affected. Alternatively, the biodiversity net gain (BNG) assessment may also be useful to those looking for a more comprehensive approach to these types of projects. Conducting rigorous human rights due diligence and biodiversity assessments should be the first step before proposed projects receive funding. Additionally, the importance of securing the prior and informed consent of affected communities and considering their participation as project co-owners cannot be stressed enough.

Finance sustainability moving forward

For financial services institutions looking for ways to improve, increased participation in oversight of projects is a great place to start. From the very beginning, support government policies that incentivize improving financial prospects. Otherwise, be sure that involved project owners work to secure a market ahead of time, and confirm they also have the requisite expertise, capabilities, and track record to support sufficient technical set up and design. 

It is the early days, though, and the industry’s increasing participation is likely to keep evolving, leading to possible new initiatives and solutions not yet conceived. This report serves as a valuable resource for those interested in finance sustainability, nature rights, and nature-based solutions, particularly in the context of IPLCs. The commitment and capabilities are there to help narrow and then close the financing gap for nature—to not just preserve Indigenous peoples and their culture, but learn from them as well.

Get in touch

Have questions? Contact us.

Ricardo Martinez
Principal
Deloitte Risk and Financial Advisory
rimartinez@deloitte.com
+1 212 436 2086

 

 

Sarah Haley 
Senior manager
Deloitte Risk and Financial Advisory
shaley@deloitte.com
+1 980 376 4115

 

 

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