Nature as an Asset Class or Public Good? The Economic Case for Increased Public Investment to Achieve Biodiversity Targets

23 Pages Posted: 28 Dec 2022

See all articles by Katie Kedward

Katie Kedward

UCL Institute for Innovation and Public Purpose

Sophus O. S. E. zu Ermgassen

University of Oxford - Interdisciplinary Centre for Conservation Science

Josh Ryan-Collins

UCL Institute for Innovation and Public Purpose

Sven Wunder

Center for International Forestry Research (CIFOR)

Date Written: December 19, 2022

Abstract

Mobilising private institutional investors to fund global biodiversity goals has become a hegemonic narrative within environmental policy and sustainable finance circles. We challenge its underlying economic assumptions and question the deprioritisation of direct public investment in nature. Financial instruments for attracting large-scale private finance into conservation often incur high transaction costs to ensure ecological effectiveness, which potentially conflict with institutional investors’ need for competitive returns, market efficiency, and investment scalability. Market-led environmental governance approaches are frequently plagued by fundamental conflicts of interest, thus failing to mitigate this trade-off. Strategies to mobilize investor involvement by using public funds to ‘de-risk’ nature investments may not be as promising as assumed, given the costly exercise required to render nature markets conventionally ‘investible’. Given these ongoing problems, we explore the economic case of increasing direct government investment to achieve biodiversity targets, as part of broader green industrial strategies. Public financing is often more suitable to incentivize the imminent bundled nature of ecosystem services provided. Contrary to the conventional framing, well-targeted public nature investment may be a macroeconomically sound way of ensuring the provision of ecological public goods that are critical to economic productivity and resilience.

Keywords: biodiversity finance, nature markets, blended finance, public investment

JEL Classification: Q57, Q58, E62

Suggested Citation

Kedward, Katie and zu Ermgassen, Sophus O. S. E. and Ryan-Collins, Josh and Wunder, Sven, Nature as an Asset Class or Public Good? The Economic Case for Increased Public Investment to Achieve Biodiversity Targets (December 19, 2022). Available at SSRN: https://ssrn.com/abstract=4306836 or http://dx.doi.org/10.2139/ssrn.4306836

Katie Kedward (Contact Author)

UCL Institute for Innovation and Public Purpose ( email )

11
Montague Street
London, WC1B 5BP
United Kingdom

Sophus O. S. E. Zu Ermgassen

University of Oxford - Interdisciplinary Centre for Conservation Science

Josh Ryan-Collins

UCL Institute for Innovation and Public Purpose ( email )

11
Montague Street
London, WC1B 5BP
United Kingdom

HOME PAGE: http://https://www.ucl.ac.uk/bartlett/public-purpose/

Sven Wunder

Center for International Forestry Research (CIFOR) ( email )

P.O.Box 6596
JKPWB Jakarta 10065
Indonesia
+62 251 622622, ext. 414 (Phone)
+62 251 622100 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
1,397
Abstract Views
4,949
Rank
26,216
PlumX Metrics