Investing in natural infrastructure for a shared future for all life

International Day for Biological Diversity 2022

Posted May 20, 2022

The 'living bridges' of Meghalaya, in India, are an example of ‘natural infrastructure’, ecosystem-generated solutions that provide the needs of daily existence:

Photo: Unsplash/Utkarsh Bhiogade

The Living Bridge of Meghalaya documents the story of the indigenous Khasi people who trained the living aerial roots of the Indian rubber fig tree to serve as bridges. These living root bridges crisscross rivers that swell in violent monsoons, which would likely wash away any other form of bridge. They have provided reliable and safe passage to local populations for hundreds of years and are a stunning example of natural infrastructure.

‘Natural infrastructure’ is a term that describes more than just these ingenious living bridges - it covers all ecosystem-generated solutions that provide the fundamental, practical needs of daily existence: freshwater wetlands that provide flood protection, water provision and water purification services. Mangroves and coral reefs that can absorb the shock of storm surges and protect communities from sea level rise. And forests that clean air, regulate microclimates, and remove carbon from the atmosphere.

For ‘Building a Shared Future for All Life’, which is the theme of this year’s International Day for Biological Diversity, recognition of the efficacy and cost effectiveness of natural infrastructure - and a commensurate increase in investment for maintaining and building natural infrastructure - is paramount.

The G20 Global Infrastructure Outlook indicates that US$94 trillion in investment is needed by 2040 to close infrastructure gaps, with a further $3.5 trillion needed for achieving universal household access to drinking water and electricity by 2030. But infrastructure can also be a major threat to biodiversity and ecosystem functioning. The impact of roads on deforestation and habitat fragmentation is well documented. According to the World Economic Forum (WEF) Future Of Nature and Business Report, 29 percent of the threats to biodiversity are caused by infrastructure development including roads, dams and energy production facilities.

Research by the International Institute for Sustainable Development shows that nature-based infrastructure (NBI) provides identically effective and more resilient infrastructure service, for up to 50 percent cheaper than traditional ‘grey’ infrastructure. In addition, NBI’s added value is 28 percent greater than grey infrastructure, which in dollar terms translates to $489 billion per annum. These additional values come from the variety of ecosystem services NBI provides and enhances. If the world met its current ‘business as usual’ global infrastructure needs but swapped just over 11 percent of traditional or ‘grey’ infrastructure with NBI instead, we would save $248 billion each year.

This sounds like a no-brainer. But too often investment in nature-based solutions suffers from the invisibility of nature’s value in the financial and economic calculus. Natural capital does not garner investment capital proportional to its value because nature has been traditionally viewed as a limitless resource for humanity to exploit without account.

Traditional valuations for infrastructure focus only on a narrow set of financial indicators that do not measure the underlying value of nature - or the cost of its loss. This results in a disproportionate flow of investments to grey infrastructure, regardless of its relative cost-ineffectiveness compared with natural infrastructure (in many cases), and regardless of the negative impacts of infrastructure development on nature. This needs to change immediately to ascertain the true costs and benefits of infrastructure projects.

Transforming investment incentives

How can we incentivize increased investment in natural infrastructure, along with policies and financing mechanisms for natural infrastructure that are designed to maximize social objectives and enhance biodiversity?

The insurance company Swiss Re points out that infrastructure investment is not only about the supply of finance. The biggest constraint to unlocking private finance is the shortage of well-structured, bankable project pipelines.

According to the recent WWF survey of 30 global infrastructure investors, insufficient Environmental, Social and Governance (ESG) data - and in particular insufficient climate and nature-related ESG factors, including biodiversity and pollution - is a major barrier for increasing investment in sustainable infrastructure. Investors are also looking to identify key asset classes in which to focus these ESG factors as part of infrastructure investment decision making.

Along with real estate and commodities, nature and natural infrastructure need to be recognized by the financial world as an asset class worthy of investment and preservation. We know that the ecosystem services of the natural world are worth at least $125 trillion, which would make it the 2nd-largest asset class globally. This $125 trillion can either be nurtured and thrive, or it could be allowed to degrade and diminish exponentially without investment, resulting in the collapse of the very foundations of our well-being and prosperity. 

It is about time nature becomes recognized as an asset - an asset to nurture and an asset to invest in.

There are some encouraging initiatives that will help realize this transformation.

In 2018, the Nature Conservancy, Swiss Re, and Mexico’s state government of Quintana Roo partnered to develop the first coral reef insurance policy covering 160 kilometres of coastlines, including the tourism gateway of Cancun. In this policy, coral reefs are recognized as natural infrastructure, equivalent to artificial costal defences such as breakwaters, by virtue of the protection they provide to communities, businesses and built infrastructure in coastal towns. The insurance policy covered repair and reconstruction of coral reefs after several storms, providing communities the financial resources to manage the reefs and prevent erosion of coastlines.

In 2021, the US government announced a $1.2 trillion infrastructure package. This includes $40 billion to go towards projects related to natural infrastructure and conservation, recognizing the role of nature in building the resilience of physical and natural systems, to control floods, to provide clean drinking water, and more.   

The Taskforce on Nature-related Financial Disclosures (TNFD) is working towards delivering a risk management and disclosure framework for investors and corporations to report and act on evolving nature-related risks, aiming to shift global finance flows away from nature-negative towards nature-positive outcomes. The materiality of nature-related risks is too often invisible – with the realized or potential costs associated with nature degradation transferred to consumers, society at large or other third-parties, rather than being built into the balance sheets of companies. A reporting framework that identifies how nature impacts immediate financial performance, or the longer-term financial risks that may arise, puts nature on the balance sheet, no longer an invisible externality. Aligning global financial flows with nature is an essential path to protect biodiversity, support communities, meet climate targets and achieve the Sustainable Development Goals.

In Meghalaya, if people had not started to build living bridges, there would have been a large amount of wasted investment and efforts in building ad hoc, synthetic structures, which in turn would have resulted in loss of lives, livelihoods and cultural erosion. It is a remarkable example of the resilience, cost effectiveness and efficacy of natural infrastructure – an inspiration the world would be wise to follow.