MaRS Centre for Impact Investing is now seeking a Senior Associate, Capital Advisory Services! From persistent poverty to climate change, we face entrenched social and environmental problems. Fortunately, a growing number of charities, non-profits, co-ops and for-profit companies are building business models to tackle these problems. They are turning to investors for the financing to […]Read More ›
More Than Just Impact
Note: Last week, Jonathan attended SOCAP: Designing the Future in Malmö, Sweden. Armed with a passion for a world beyond mere ‘sustainability’, he attended the sessions on the biosphere economy and efforts by impact investors to work with environmentalists to restore ecosystems.
The biosphere needs more than just making an impact.
Two years ago, the Economics of Ecosystems and Biodiversity (TEEB) report [PDF] mapped out a portion of the immense value the ecosystem services hold. With that, a discussion about the biosphere economy also got started. From the discussions held at SoCap in Malmö, it is clear that impact investing needs to up the game and take into account how different forms of capital interact with each other, and provide a resilient system. The next step of impact investing is resilient investing, an expression coined for the very purpose of drawing attention to ecological and resource limits as a way making a lasting impact.
The talk about the biosphere economy and utilizing the services provided by ecosystems are sometimes too abstract. Alejandro Litovsky, who runs the Earth Security Initiative, concludes that the real challenge is to keep track of how much resources there are left that can provide for these ecosystem services. Rather than keeping track of absolute metrics, relative ones are used, such as efficiency per unit. But when production increases, total use still increases. The focus thus needs to be firmly grounded in scarcities, to avoid depletion. Only then can the ecosystems provide abundance.
This in itself opens up a discussion on metrics and scientists from the Stockholm Environmental Institute are currently providing a rough sketch as to which issues to focus on. These metrics come in play as planetary boundaries. They indicate that biodiversity, climate change and the nitrogen cycle are currently transgressed. To investors this may still seem somewhat abstract, but when it comes to building a portfolio, it boils down to focusing on two main areas – the first being real estate.
Viewing real estate through the lens of resilience means that you specifically look into how the real estate is stewarded. One of the indicators is forests – what are the amount of standing forests? In Brazil, for instance, they have decreased the legal requirement of standing forests for landowners. This in turn will severely hamper the ecosystem services that these forests provide and make the system prone to collapse. The TEEB report referenced above estimates that halving deforestation rates by 2030 would reduce global greenhouse gas emissions and avoid damages of approximately $3.7 trillion – and this does not account for the many multiplier benefits that would accrue.
The second area is eco-agriculture or ecological agroforestry. This type of agriculture increases the soil fertility and thus the resilience of one of the most crucical ecosystems that humans depend on. Focusing on eco-agriculture is also an opportunity to work with local farmers in a way that helps them get access to markets. It can make farmers ‘agglutinated’ and give them a capacity to organize. In time, they can become their own asset owners and steward their land.
The 2011 report Land Security Agenda [PDF] delves a bit deeper into these issues. But the focus on resilience and keeping track of scarcities also open up deeper questions on how to assess these new situation. There are no definite metrics yet.
However, the story of how scientists keep track of an endangered coral reef may help. The shrinking or growth of the coral reef does not provide a particularly good metric of how healthy the coral reef is. Instead, it is the population of a herbivore fish that grazes the coral reef of algae that prevents the coral reef to be overcome by algae mush when the coral is under stress.
The question is, what are the equivalent of the herbivore fish in the different social innovation systems. Have you encountered this kind of resilience indicator in the social sphere?
Photo credit: Azote Images/Stockholm Resilience Centre