18th Jun 2024 Gemini 1.5 Pro
Martin Stuchtey begins by highlighting the inadequacy of our current economic models and the narratives we use to address climate change. He believes that framing climate action as "less bad" is ineffective and that we need a more positive vision for the future – one he calls "Prosperity 2.0". This new prosperity, he argues, must recognize the true value of natural, human, and social capital, not just produced and financial capital.
Stuchtey emphasizes that current economic growth often comes at the expense of depleting natural capital, making us collectively poorer in the long run. He believes that shifting our mindset to view nature as valuable and investing in its preservation is not just morally right, but also economically sound. He points out that nature provides essential services like climate regulation, flood mitigation, and fertile land for agriculture. By ignoring its intrinsic value, we are jeopardizing our future well-being and prosperity.
"We are still selling less bad. I think we should start selling a good. I think we need to realign our emotional, intuitive sense of wealth with the economic sense of wealth. Nature is value, nature capital is value, human capital is value. Getting that into the equation is important, and that's not a minus narrative, that's a plus narrative."
Stuchtey's latest venture, The Landbanking Group, seeks to make nature investable by turning it into a "fiduciary-grade asset class." He envisions a future where we treat nature like critical infrastructure, investing in its maintenance, expansion, and overall health. To achieve this, the group has developed a platform called Landler.io that uses a combination of technologies, including remote sensing, machine learning, and blockchain, to assess and verify the ecological value of land.
The platform creates what Stuchtey calls "biophysical nature capital accounts" for individual pieces of land, acting as ecological passports. These accounts track indicators like carbon sequestration, water holding capacity, soil health, and biodiversity. This data forms the basis for creating "nature service agreements," which are contracts between landowners and entities willing to pay for ecological uplift. These agreements, linked to verifiable biophysical outcomes, enable the creation of investable nature-based assets, akin to traditional infrastructure investments.
"We want to turn nature into a fiduciary-grade asset class. We want to make sure that we can invest into nature as if it was and it is critical infrastructure. Currently, we can't do that. We don't have the infrastructure to do that. And we want to create the hardest sort of the infrastructure to make nature uplift, nature preservation verifiable or verified, the hardest currency."
Stuchtey outlines a range of stakeholders who stand to benefit from this new paradigm of investing in nature. Agri-food companies, facing increasing pressure to reduce their environmental footprint and secure their supply chains, have a strong incentive to become "insetters" – investing in the ecological health of the land that produces their raw materials. Insurers, grappling with the rising costs of climate-related disasters, can mitigate risks and identify new opportunities by supporting land management practices that enhance resilience.
The growing voluntary carbon market and emerging biodiversity compliance markets, like Biodiversity Net Gain, provide further financial incentives for landowners to preserve and restore natural ecosystems. Finally, investors seeking to align their portfolios with environmental goals and capitalize on new asset classes are showing increasing interest in nature-based investments like conservation-linked bonds and nature-asset companies.
" Currently, we got ourselves into a really interesting, absurdly interesting spot where 85% of people have nature as a screensaver, which tells you something about how we think about value, and where the only way to bring it to market is by cutting it down. And that is, of course, something that needs to be resolved."
Stuchtey acknowledges the complexities of implementing such a system, particularly for smaller landowners who may lack the resources to navigate the legal and financial intricacies of nature-based markets. He emphasizes the need to make these markets more accessible and democratic, moving away from complex, project-based approaches to more scalable platform solutions.
He also recognizes the limitations of current carbon markets and the importance of avoiding unintended consequences, such as promoting monoculture plantations for carbon offsets at the expense of biodiversity. He stresses the need for comprehensive biodiversity assessments, moving beyond simplistic metrics like species counts to encompass factors like functional diversity, ecosystem integrity, and habitat complexity.
"We have created, in one of the most important in our economies, we have created the least democratic markets. How is that? So, I think we need to change, sort of, we need to create markets that are different in a number of ways."
Stuchtey sees technology, particularly Web3 and blockchain, as playing a crucial role in creating more equitable and transparent nature markets. He envisions a future where smart contracts empower local communities and ensure that the benefits of nature-based investments flow back to the stewards of the land.
He acknowledges the need for robust governance frameworks to guide the development of nature markets and prevent unintended consequences. He emphasizes the importance of ongoing dialogue between scientists, policymakers, investors, and local communities to ensure that these markets truly serve the needs of both people and the planet.
"Look, whatever we do, the next nature market needs to pass the eucalyptus test. So we can't crowd out biodiversity on behalf of eucalyptus forest."
Airtable