Making the Case for Nature Investments in Southeast Asia, Report

Nature Investments represent a logical and powerful response to the combined growing climate and nature concerns in Southeast Asia.

This is according to a new report from Imperial College Business School London, which highlights that Asia is facing a steadily mounting climate crisis that now requires massive funding just to keep in check

According to the report which is authored by Dr Pernille Holtedahl, a Research Fellow at Imperial’s Centre for Climate Finance & Investment (CCFI), and is supported by the Singapore Green Finance Centre, Asia has experienced its hottest winter on record, while the International Monetary Fund (IMF) predicts that by the mid-2020s rising waters will impact nearly a billion people in the region.

Imperial College in its report, makes the case that Nature Investments now represent a logical and powerful response to the combined climate and nature emergency in Southeast Asia.

And while the public sector must assume overall responsibility, private capital also has a significant role to play in furnishing the US$200 billion per annum that could be required in the region, the report says.

The objective of the report is to offer investors a menu of investment options. A range of these exist; from ‘armchair investing’ in fixed-income markets with little need for detailed understanding, to money directed at real assets where investors are tied in over time.

Imperial College offers two case studies: one outlining different investment vehicles for mangrove investing and another proposing a biodiversity-linked sustainability-linked bond (SLB) for a sovereign issuer.

While these are very different in terms of their investment profile and impact on creating additional financial flows, they are all part of mainstreaming nature into the investment agenda.

Although important as a price signal at present, the report also warns against overreliance on the carbon market to provide the investment case for nature. Instead, it recommends a holistic view, where investing in nature can be seen as a risk mitigation and diversification strategy and as a way of future-proofing portfolios.

The author also points out that success is not guaranteed, indicating that while mangrove restoration represents a potentially powerful nature investment opportunity in Southeast Asia, scalable business models addressing the issue are still in their infancy.

Robust capital market instruments such as SLBs can help scale up investments in nature restoration projects.

A sovereign biodiversity-themed SLB for example could offer several advantages to both investors and governments in the region but would have to be structured carefully as skepticism surrounding greenwashing is also a growing threat.