Is It Time To Appoint A Chief Nature Officer?

The image portrays the photography credit to MANJUNATH KIRAN/AFP via Getty Images.

The natural world plays a significant role in the three major challenges currently facing our planet: climate change, pollution, and the loss of biodiversity. Recent global policy initiatives, such as the EU Deforestation Laws and the goal set by COP15 to protect 30% of nature by 2030, emphasize the importance of making nature a priority in investment and private sector agendas. By appointing a Chief Nature Officer in June, Lombard Odier Investment Managers paved the way for recognizing the vital role of nature in decision-making processes.

In the year 2021, the Dasgupta Review emphasized the importance of nature. However, the loss of biodiversity, which has been identified by the World Economic Forum as a significant global risk, has caused a decrease of about 40% in the amount of natural resources available between 1992 and 2014. Recognizing that humanity as a whole has not properly managed its global resources, Sir Partha Dasgupta called for the establishment of a financial system that directs financial investments, both public and private, towards economic activities that improve our natural resources and promote sustainable consumption and production. This responsibility falls not only on governments, central banks, and international financial institutions, but also on private financial institutions.

In spite of these pleas, it seems that the process of transforming and embracing nature as a valuable investment has not occurred quickly enough in recent years. The Taskforce on Nature-related Financial Disclosures (TNFD), consisting of financial institutions, corporations, and market service providers with a combined asset worth of over $20 trillion, has played a crucial role in aiding organizations to acknowledge and assess the risks associated with the deterioration of biodiversity and ecosystems. However, there is still a considerable distance to cover. According to the Paulson Institute, we can anticipate a financial shortfall of $598-824 billion annually by 2030 in order to combat global biodiversity loss.

Chief Nature Officer: Roles & Responsibilities

Hiring a chief nature officer (CNO) plays a crucial role in prioritizing biodiversity and natural resources in the investment plan. By appointing Marc Palahí as the initial CNO at Lombard Odier Investment Managers, they assigned him the task of promoting nature conservation, creating enthusiasm among various stakeholders such as governments and investors, and enhancing knowledge about the impact of environmental risks on various industries and global supply chains.

According to Palahí, the Chief Nature Officer (CNO) is a role that involves a diverse range of skills and the ability to bring different ideas together. Palahí has a strong desire to advocate for solutions that are centered around nature and to educate others on the reasons behind it. He wants to emphasize that the bio-economy is essential in reshaping crucial economic sectors to be environmentally-friendly, sustainable, and supportive of biodiversity within the next twenty years.

In his role as CNO, Palahí spends his days collaborating with holistiQ's sustainability research team to analyze various nature-related opportunities. Together, they create roadmaps and strategies aimed at understanding and addressing environmental issues. holistiQ, a collaboration between LOIM and Systemiq, focuses on identifying and investing in important aspects of the environmental transition. Palahí explains that by developing holistiQ's nature strategies, they are able to attract significant amounts of capital for nature conservation and inspire others to do the same. Additionally, his responsibilities include identifying potential risks that should be considered in future investment strategies, as well as meeting with potential clients and corporations.

In upper management and within businesses, the Chief Nature Officer (CNO) would cooperate with the Chief Sustainability Officer (CSO) to incorporate nature-focused strategies into a company's operations or a firm's investment plan. Sebastian Troëng is an executive vice president for Conservation International, an organization dedicated to empowering societies to responsibly care for nature, biodiversity, and well-being. He shares his thoughts on the relationship between these two important roles, stating, "The CSO and CNO should work together as complementary positions. In reality, many CSOs are solely focused on reducing emissions, but that is only one part of the equation. By hiring a CNO, we can rightfully give the biodiversity crisis the same importance as the climate crisis, and help companies develop comprehensive solutions and policies."

Closing The Gap: Nature Conservation Skills

The task assigned to the CNO is not an easy one, as it involves addressing ongoing environmental risks and adapting to changing policies. LOIM's decision to appoint a CNO is seen by Troëng as a positive step, as it emphasizes the importance of nature to the rest of the business community.

Troëng mentions the importance of ensuring that CNOs have the necessary support and authority from the rest of the team to lead and achieve success. He emphasizes the need for a direct connection to the CEO, solid backing from the company's board, and sufficient freedom to not only implement nature-positive initiatives but also eliminate unsustainable practices.

Considering the distinctive set of abilities needed for a Chief Nature Officer (CNO), how can corporate boards and individuals in charge of employment discern the suitable skills and knowledge? Palahí from LOIM believes that this task is challenging since it involves linking together two distinct domains, finance and nature, that have been kept apart from each other since the very start.

Palahí discusses the qualities he considers important for the role, which include the ability to comprehend and relate complex information in a compassionate manner, as well as a genuine interest in comprehending various viewpoints, particularly the challenges and limitations faced in the finance industry. These requirements are in addition to possessing a scientific understanding of the natural world and the ability to establish trust with individuals investing in novel asset categories. Palahí suggests that universities should consider introducing a new degree program centered around nature finance, since the current pool of candidates lacks the necessary expertise.

Using Data To Improve Biodiversity

Enhancing the ability of investors and corporations to excel in nature-related achievements necessitates the development of skills in effectively managing data, while also confronting the difficulties associated with evaluating natural capital and gauging biodiversity accomplishments.

Rashmi Bomiriya, who holds a PhD, serves as the Chief Operating Officer and primary data expert at RS Metrics. This company specializes in delivering detailed intelligence at the asset level to various entities including corporations, asset management firms, and providers of ratings and indexes.

In the past, there have been various obstacles when it comes to understanding and analyzing data related to nature, which can impede efforts to preserve biodiversity. These challenges involve not having detailed information at the individual asset level, as well as facing difficulties in establishing benchmarks and tracking the impact on biodiversity over a period of time, as stated by Bomiriya.

As an enabler of TNFD data, the RS Metrics ESG Signals platform and AssetTracker have been created to offer detailed environmental information at the asset level. This includes data on water scarcity, the likelihood of wildfires, risks related to extreme heat and cold waves, the occurrence of landslides, proximity to and alignment with important biodiversity areas, distribution of species, and many other related factors.

In Bomiriya, it is observed that Chief Nature Officers (CNOs) have the potential to utilize the information available to them for making well-informed choices, establishing ambitious goals for biodiversity, assessing their progress, and efficiently conveying their nature-focused initiatives to stakeholders, investors, and customers.

Investors' Role In Valuing Nature

The investment sector and the broader financial community have an important role in promoting the advantages of assessing the worth of natural resources and acknowledging the value of the developing circular bio-economy. The Chief Natural Officer (CNO) can collaborate with financial participants to incorporate natural resource aspects when making investment choices.

According to Troëng from Conservation International, financial institutions and other investors possess a significant ability to alter motivations and prioritize actions that are harmful to nature, like oil production and logging. Instead, they have the power to promote and support activities such as regenerative agriculture and forest conservation, which aim to replenish and revive our natural resources. Troëng emphasizes the importance of shifting focus from short-term profit predictions to a more sustainable and forward-thinking perspective. This change in approach will play a vital role in bridging the funding gap for biodiversity conservation.

LOIM's Palahí shares the same views. Palahí believes that we must surpass the divisions that have been present during the industrial era, such as ecology versus economy, nature versus society, and rural versus urban. However, he maintains a positive outlook. Palahí states that the positive aspect is that science and technology have already developed various solutions and approaches required for transitioning to a new economy. The real challenge lies in implementing these solutions on a larger scale by making the right investments.

In addition to investors, it is vital for governments and policymakers to play a crucial role in facilitating this transformation. "Governments can enhance the interest of private sectors by implementing measures that minimize risks through policy reforms, skill development, or initial investments that inspire change. It is also important to adopt meticulous practices for evaluating natural resources," Troëng explains. This is particularly significant because, as stated in the Dasgupta Review, the worldwide expenditure on subsidies that harm the environment amounts to approximately $4 to 6 trillion annually.

Collaboration between the public and private sectors is crucial in ensuring that we accurately consider the importance of biodiversity and natural resources. In his role as the leader of partnerships at Conservation International, Troëng emphasizes that working together will result in greater value for investments. Each dollar will stretch further, leading to a multiplier effect.

Is it possible for the Chief Nature Officer (CNO) to become a common role in the coming years? According to Palahí, it is likely that all respected banks, asset managers, and corporations will have a CNO by 2025. The CNO will have the authority to promote sustainable practices, advocate for nature at the executive level, and implement natural capital accounting practices. With the CNO's ability to prioritize nature as both a strategic necessity and ethical obligation, we can only anticipate positive outcomes.