“Just imagine how the economy would change if we truly valued natural capital”

- Linda Broekhuizen - Advisor to FMO’s Management Board

Dear readers, It is our role as a development finance institution impact investor pur-sang to continue to raise the bar on impact and ESG ambitions. Given the climate crisis and increasing global inequalities, this is even more important in developing economies, which are the markets we serve.

How do we foster transformation and innovation? By selecting those customers who are able and willing to move the needle, and by supporting them in scaling up their businesses in a green and inclusive way, in adopting new technologies and in implementing international ESG standards.

Sounds easy? This is about reconciling dilemmas, embracing the apparent contradiction between the urgency for true transformation and the realism of pragmatic evolution, considering often complex realities on the ground in developing economies.

During the two decades I worked at FMO, I can confirm that we continuously raised the bar for our impact and ESG ambitions, increasingly basing investment decisions on an integrated impact, risk, and financial return perspective.

As an impact investor, it is crucial to timely identify the next necessary “change wave”, and to start preparing for the next “new normal”. To be able to continue to innovate, we expanded our investments with seed capital and blended finance products, in for example forestry, climate adaptation and start-ups with new technologies.

As part of my farewell, I had the privilege of choosing a theme for this special Future Minded edition: I selected the topic of Biodiversity, which I believe will be core at the next “change wave”.

Since the Paris Agreement in 2015, the climate crisis has increasingly become part of our global agenda, as is confirmed by the COP26 program starting in Glasgow in November. However, climate change cannot be seen separately from nature, and is often reinforced by the rapidly increasing loss in biodiversity.

We need to better understand potential biodiversity “tipping points” that could have an irreversible impact on climate, our economy, food security, and livelihoods through the depletion of natural resources and the loss of species in flora and fauna (which do get increasingly scarce, to speak in economic terms).

In a recent report, the OECD stresses that biodiversity loss is among the top global risks to society. It refers to the World Economic Forum’s estimation that USD 44 trillion of economic value generation – over half of global GDP – is moderately or highly dependent on nature. And it highlights that most ecosystem services are not priced in the market, because they are public goods.

How to address biodiversity loss in practice is more challenging than implementing CO2 reductions or increasing renewable energy production. Biodiversity is complex to measure and needs a local, customized approach, with many diverse stakeholders taking a joint responsibility.

Particularly in countries around the equator, we can learn from local indigenous communities, given their knowledge of the flora and fauna in natural tropical forests. It would add huge value to assess how we can strengthen their stewardship and prevent them becoming even more vulnerable to biodiversity loss and climate change.

It is encouraging to see how awareness around the value of natural capital and biodiversity is increasing and how many initiatives have already started. This was also reflected in the first part of the Biodiversity COP15 in Kunming last October: the parties to the Convention on Biological Diversity (CBD) committed to negotiate an effective post-2020 global diversity framework that can bend the curve of biodiversity loss, which is to be decided upon in the second part of the COP15 in May 2022.

The time to act is now. Like for climate change, we need to determine the gaps and dilemmas in implementing the biodiversity agenda in our common roadmap towards the 2030 Sustainable Development Goals.

In that light, I was happy to see some inspiring examples from various companies, like Miro in Ghana and Sierra Leone, like Ledesma in Argentina and like Commonland’s landscape restauration projects. Frontrunners in biodiversity measurement in finance and insurance are the Partnership for Biodiversity Accounting Financial (PBAF) initiated by ASN Bank and the Biodiversity and Ecosystems Services Index developed by SwissRe.

Just imagine how the economy would change if we truly valued natural capital. If we treated nature as a serious stakeholder worth conserving, and if we paid for ecosystem services.

Nature’s wealth might just seem to be there, always and for free. It is time to realize that it isn’t — and that we have to act, while we still can.

Linda Broekhuizen

Linda at FMO’s Biodiversity Event

On 10 December 2021 FMO organized a live broadcast from the Naturalis Biodiversity Center.