Financing the Nature Transition: a HolistiQ approach

AuthorsMarc Palahí, Chief Nature Officer at Lombard Odier Investment Managers and RSF scientific committee member, and Laura Garcia, Nature Specialist at Lombard Odier Investment Managers.

Nature, our keystone asset, at risk

Despite our growing dependence on nature, its global condition has been deteriorating for decades. Since the 1990’s, produced capital, including roads and factories, has doubled while natural capital has declined by 40% [1]. 

Nature and biodiversity loss are closely tied to climate change, as ecosystems, remove more than 60% of anthropogenic carbon emissions [2]. However, climate change and related risks like wildfires, droughts, and pests are reducing nature’s ability to provide climate mitigation and adaptation services, and in some instances, can transform natural sinks into substantial sources of greenhouse gas emissions (GHGs). 

In 2023, wildfires in Canada emitted 1,740 megatons of CO2, around three times the country’s annual GHGs. Wildfires have devastating impacts, including costs for fire suppression costs, property damage, and increased insurance claims, amounting a total of USD $10 billion annually. Insured losses from natural catastrophes, including those related to climate change, have been increasing over the last decades. Since 2017, average annual insured losses have exceeded USD $110 billion, more than doubling the previous five-year average of USD $52 billion [3]. Climate change and related extreme events will also threaten price stability. A recent scientific study estimated that rising temperatures may cause food prices to increase by 3.2% per year [4]. In such increasingly changing environment, investing in nature is a very cost-effective way to reduce climate and disaster risk while enhancing the adaptation of ecosystems and therefore of our economic system [5].

Rethinking our economy: towards a Nature-based Economy

To ensure sustainable well-being and economic prosperity for future generations, we must embrace the nature transition – a shift towards a regenerative economy that is powered by and prospers in harmony with nature: a Nature-based Economy. An economy that recognises nature as the most precious asset upon which our economic system depends.  A Nature-based Economy relies on healthy, biodiverse, and resilient ecosystems and their associated ecosystem services – together referred to as nature-based assets. Nature-based assets are the foundation for creating circular bioeconomy value chains that are nature-, people- and climate positive- across the entire economy, interconnecting primary, secondary and tertiary sectors. Such transition requires investing at scale in transforming degraded natural capital real assets into nature-based assets through the implementation of Nature-based Solutions (NBS) and circular bioeconomy approaches [6] that holistically integrate the landscape to the value chain level. 

NBS encompass activities that protect, restore and sustainably manage natural and modified ecosystems simultaneously benefiting people and nature. NBS can be integrated into circular bioeconomy business models that enhance natural capital and the flow of ecosystem services throughout the business cycle. The advances of science and technology allow for the development of new circular biobased solutions capable of replacing and environmentally outperforming fossil and non-renewable products across most economic sectors: food, fashion, pharma, construction, chemicals, energy, tourism, etc.[7]
Making the above nature transition requires redeploying trillions of private capital towards nature-based strategies across all asset classes and economic sectors. Currently, the private sector invests USD $5 trillion annually in activities that directly destroy nature while it only invests USD $35 billion in NBS [8].

Rethinking the food systems through nature-based real assets

The global food system, valued at approximately USD $10 trillion, is at the centre of a vicious cycle – contributing to a third of global greenhouse gas emissions a year and being the primary driver of nature loss – which results in negative environmental, health and social externalities valued at between USD $13 trillion  to USD $19.8 trillion per year [9]. At the same time food production is experiencing increasing risks due to climate change and related natural disturbances. For instance, the Federal Crop Insurance in USA has more than doubled its indemnities related to climate risks between 2001 and 2022, with payments for heat increasing over 1,000 percent [10].  

The food systems need to transition from an extractive to a regenerative approach that contribute to climate mitigation and nature restoration while ensuring the food sector’s resilience to increasing climate risks. This transition requires moving from conventional agriculture to nature-based food production – using NBS, regenerative practices and circular systems. According to a new report by the Food and Land Use Coalition, investing less than 2% of the food sector’s annual revenues between 2025 and 2030, companies could mitigate 90% of agricultural and land use change emissions in their value chains, while unlock other co-benefits in terms of biodiversity restoration and climate-risks reduction [11].

The nature transition of the food systems requires rethinking entire value chains, which are often inefficient and long – to become shorter, more transparent, and traceable while integrating climate and nature pricing without making it more expensive for end consumers. Such vertical integration is key to deploy financial capital upstream where nature-based real assets, the pillar for sustainable and resilient food value chains, can be created.

Fig 1. Transition to Nature-based food system value chains.

A vast asset revaluation 

Nature, our keystone asset, is the world’s most undervalued asset class. The demand for climate-resilient, nature-positive land is going to drive the biggest asset revaluation of the century. Nature-based real assets will become a new form of real estate, which will: 

  1. Turn degraded landscapes into regenerative assets that are climate resilient and protected against CO2 pricing, thereby appreciating in value over time. 
  2. Capture more value in commodity/product pricing from (i) entering specialty markets (ii) disintermediating middle-men and brands and get direct access to downstream markets, (iii) taking advantage of macro-factors which will lead to structurally higher prices.
  3. Be attractive to long-term investors, as the strategy can create risk-adjusted returns, portfolio diversification, low correlation with other asset classes, a hedge against inflation, as well as hedge against CO2 regulation. The strategy also allows such investors to decarbonise their overall portfolio and contribute to the delivery of their net-zero targets.

We need to invest in nature to transform our economy rather than to offset for its failure. Investing in nature is crucial to avoid the unmanageable but also to manage the unavoidable.

1.Dasgupta et al. (2021). Population, Ecological Footprint, and the Sustainable Development Goals
2.FOLU, 2021. Why Nature? Why now? FOLU, 2021

3.Swiss Re Institute, 2023. In 5 charts: continued high losses from natural catastrophes in 2022
4.Global warming and heat extremes to enhance inflationary pressures | Communications Earth & Environment (
5.Sustainability | Free Full-Text | Nature-Based Solutions as Building Blocks for the Transition towards Sustainable Climate-Resilient Food Systems (
6.Investing in Nature as the true engine of our economy.
7.Investing in Nature as the true engine of our economy.
8.UNEP (2023). State of Finance for Nature: The Big Nature Turnaround – Repurposing $7 trillion to combat Nature loss
9.Multiple sources: i) Karolyi, G. Andrew and Tobin-de la Puente, John, Biodiversity Finance: A Call for Research into Financing Nature (June 20, 2022). Ii) World Bank. Food systems 2030. iii) Lord, S. 2023. Hidden costs of agrifood systems and recent trends from 2016 to 2023 – Background paper for The State of Food and Agriculture 2023. iv) Riemer, O., Shah, T.M. and Zitterbarth, S. (2023). Current Conditions and Policy Frameworks of Agri Food Systems Transformation
10.Crop insurance pays farmers billions of dollars for weather-related losses closely linked to the climate crisis | Environmental Working Group (
11.Future Fit Food and Agriculture: The financial implications of mitigating agriculture and land use change emissions for businesses

Article published in Il Sole 24 Ore on April 26, 2024
Photo credit: Tomáš Malík