A Return on Nature – Enabling an ecosystem services market

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We look at natural capital market-based and sustainable finance approaches for the agricultural sector with a key focus on ecosystem services.

Farmers want to continue to improve natural assets and drive environmental outcomes, and to date they have already achieved so much. Australia’s 50,000-plus farm businesses are already environmental stewards of vitally important plants, animals, air, water, soil, minerals and biodiversity – without which we cannot survive.

Governments want to support farmers in their environmental endeavours. Finance and industry are moving quickly towards sustainable investment goals.

These trends are driving new demand for Natural Capital markets, in particular through payments for ecosystem services.

Creation of an ecosystem services market

We believe that farmers and other landholders, government, business, investors and consumers are ready to support and invest in structured ecosystem-based funds that support farmers to continue to improve Natural Capital resources and underpin a new valuation of biodiversity outcomes, such as:

• Environmental – Improved soil, air or water quality including river health or biodiversity.
• Social and cultural – Indigenous community empowerment and protection of sacred sites, better livelihoods and community cohesion.
• Economic – Increased farm productivity and diversification of revenue streams for farmers and other landholders, regions and rural communities.

Sustainable finance offers three key opportunities

Sustainable Finance, driven through Natural Capital market-based structures, signals a new dawn to address the diverse challenges of the agricultural sector. We see a clear and powerful opportunity for sustainable finance to:

1. ‘crowd-in’ additional and much needed private sector capital at scale into the agricultural sector to assist in reducing the $159.9 billion capital shortfall
2. reward and incentivise the take-up of sustainable land use and management practices and deliver payment for ecosystem services to farmers.
3. drive market activity at scale.

Future-proofing the food and agricultural sector

Sustainable finance is a catalyst to widen and deepen incentives for farmers and other landholders. It’s also a powerful lever available to public and private investors to overcome typical adoption barriers and drive sustainable land use and management practices at large across the agricultural supply chain. This has the potential to reposition and future-proof the entire food and agricultural sector towards greater resilience in the face of climate change.

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