Nature-based solutions guidebook

The global research non-profit World Resources Institute recently published the Financial Sector Guidebook on Nature-based Solutions Investment, (attached below), which seeks to provide financial institutions with a step-by-step framework to understand, evaluate, and integrate NBS into investment strategies—supporting risk management, sustainable growth, and innovation in emerging markets.

This will likely be of interest to many of our faith-based asset-owning subscribers, as virtually all faiths place 'care for our common home' — as described by Pope Francis in his encyclical Laudato Si' — prominently on their list of priorities.

As described in the guide, nature-based solutions (NBS) offer a holistic approach to mitigate 'nature-related materiality risks', i.e. financially material risks to a business that arise from its dependence and impact on nature. The guide presents this as an essential goal — with 'over 50 percent of global economic sectors highly dependent on nature' according to the World Economic Forum (WEF 2020) — to avoid an irreversible collapse of ecosystems that underpin the global economy, while unlocking opportunities for value creation.

Yet, as the guide notes, most NBS financing is still borne by the public sector; despite the promise of NBS, these solutions remain underused in mainstream finance. Key barriers cited include:

• A lack of standard definitions and metrics for NBS in finance

• Limited internal capacity

• High transaction costs for small-scale projects

• Liquidity concerns

Next the guide goes on to provide a roadmap for financial institutions to follow to become active in NBS investing. It highlights how financial institutions can tap into NBS-related opportunities across three domains: risk mitigation and portfolio resilience; sustainable financial growth; and emerging market opportunities and financial innovations, using a 'stepwise guidance to “INSPIRE” alignment of investments with NBS opportunities'. The acronym stands for:

1. Identify NBS opportunities to derisk traditional investments

2. Nurture partnerships and engage stakeholders

3. Structure the NBS investment framework

4. Put investments into action and monitor them

5. Increase transparency and reporting

6. Reinforce internal capacity and incentive structure

Each step includes detailed explanations and instructions to help investors implement NBS in portfolios.

The guide makes the case that financial institutions 'play a pivotal yet often overlooked

role in shaping nature’s future. By allocating capital through traditional financing instruments in portfolio companies such as equity, loans, real estate, or bonds, mainstream financial institutions can directly influence economic activities. Their investment choices can either accelerate ecosystem and biodiversity degradation or drive restoration and protection, depending on how capital is deployed. These choices have far reaching implications for long-term economic prosperity, risk exposure, and financial stability. Investing in companies with positive impacts on nature can help steer the economic system toward a more sustainable trajectory by lowering both physical and transition risks'.

Importantly, the guide also makes the case that while some NBS benefits may accrue directly to individual firms, broader and more lasting impacts—such as resilient supply chains and ecosystem restoration—can be realized only if a critical mass of companies and financial institutions within a region adopts similar practices. Without this collective action, the system may not transform sufficiently to secure these wider benefits. Or, put another way and as stated in our report earlier this year, Faith-consistent Investing: Challenging the Performance Penalty Myth, with enough investors focused on long-term systemic solutions, 'all investors...ultimately benefit from achieving systemic and sustainable change’.

Download the full report below.

Financial-sector-guidebok-nature-based-solutions.pdf

Download PDF • 7.14MB