Please note that the transcript provided below is AI-generated and intended for reference. It may contain missing words, misspellings, or other small errors. To request a correction or clarification, please contact info@theclimatecenter.org.
Baani Behniwal, The Climate Center (00:06:09):
All right. Hi, everyone. Welcome to the last session of the day. I hope everyone got a little bit of energy during the coffee break. We’re going to be talking about innovative financing for nature-based solutions. And with that, I will hand it over to our moderator today, Michelle Passero of the Nature Conservancy.
Michelle Passero, The Nature Conservancy, CA (00:06:32):
Okay. See me standing right behind her there. Well, first, want to say thank you for caring about nature and coming here at 3:35 at the end of the day. So really appreciate that. I am Michelle Pasaro. I lead our climate and nature-based solutions work for the Nature Conservancy here in California. And I’d like to thank the Climate Center for hosting this event and including me. And it’s an opportunity to moderate such a great panel of speakers here. And before introducing them, I just want to provide a little bit of background on nature-based climate solutions and also kind of gauge the level of knowledge here in the room. So when I’m using the term nature-based climate solutions, I am referring to the management, restoration, conservation of our forests, our farms, rangelands, wetlands, and urban green spaces to address climate change. You may also hear the term natural working lands or natural working land activities.
(00:07:34):
And so I guess just at least for the purpose of this session, they’re kind of the same, trying to achieve same activities, achieving the same kind of climate benefits. And so just through a show of hands here, I just want to just see what the level of knowledge is here. How many of you are familiar with nature-based climate solutions and how they can reduce greenhouse gas emissions?
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All right. Knowledgeable audience here. And how many of you are familiar with how nature-based solutions can help address the impacts of climate change like flooding, fire risk, and extreme heat? All right. Okay. All right. So this might be a little repetitive, if not, but it’s just a way of how I kind of think about this. In terms of greenhouse gas mitigation, right? When trees and vegetation grow, whether that’s in our forests, our urban spaces, on farms and rangelands, through photosynthesis, they absorb carbon dioxide and it’s stored in the leaves, the branches, the trunks, the roots in the soil. And of course, they can store it for pretty long periods of time. And in some cases, hundreds, if not thousands of years when we get to redwood forests. But when they’re disturbed, either through human activity or maybe through natural disturbance, this carbon can also be released back into the atmosphere.
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So the idea here when we’re thinking about our nature-based solutions and climate change is really to kind of manage and protect these resources in a way where they’re storing more carbon than they lose over time to be what we call a beneficial sink of carbon dioxide. And these, on the global level, our science and science of some of our colleagues suggest that through nature-based solutions, we can achieve roughly a third of the greenhouse gas reductions we need to avoid some of the worst impacts of climate change. And these very same activities help us address the impacts, as you all are well aware, whether we’re talking about wetlands protecting us against flood and storm surges, urban green spaces and forestry protecting against extreme heat and managed forest, restored forests can help us reduce fire risk, among many other things. The California, the state of California and many of us here in the room had worked on passing legislation, Assembly Bill 1757, where the state has adopted targets to include nature-based solutions in its climate solutions to help achieve carbon neutrality by the year 2045, and also to help us be more climate resilient over time.
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And it is really important that we have this state leadership. It creates accountability. It also gives us kind of a north star to aim for over time with respect to both the benefits of our nature-based solutions and also addressing climate change. Now that we have this leadership and these goals, we have to achieve them. And an important issue, an important obstacle that we need to overcome is financing. There are a number of issues we need to address to really effectively implement nature-based solutions, but finance is one of the key ones. And this is where we come to our panel, where we will be talking about financing, how we fund nature-based climate solutions. And it’s not just about how much funding or increasing the amount of funding we have, but it really is a nuance around how we fund it. How do we aggregate funding? How can we deliver it most effectively to the ground and to the people working on the ground who need it the most?
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We’re fortunate here to have some funding to get us started. As many of you may be aware, voters pass a $10 million bond, climate resilience bond that’ll help fund some of these activities, but that is just the start. We do need to do a lot more when we’re thinking out to 2045 and carbon neutrality, we’re talking about in the tens of billions of dollars over time. So turning to our panel now, we have a great group of speakers here who are innovative in their own fields who will help us discuss what’s happening in terms of funding and financing for nature-based solutions. They’ll each provide an overview of their work and their thoughts on how we can finance nature-based solutions, maybe where some of the obstacles are, and some ideas for addressing them and effectively delivering funding to the ground. And our speakers include Leo Beckerman, who’s the director of operations with Zero Foodprint, Deborah Halberstadt with the California Department of Insurance.
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She’s a special advisor to the commissioner on biodiversity and inclusive insurance. Mike Kent, who’s a partner with New Leaf Climate Partners, and Gary Knoblock, who’s a senior consultant with Conservation Innovations Group. As I mentioned, they have deep expertise on this topic. Please see the program for their detailed biographies. They’ll start by giving an overview of their work, and it’ll be followed by a few questions for me, and then we will turn it over to all of you for some question answers and some additional dialogue. So I am going to go sit over there, and as I mentioned, the speakers in order, so hopefully each of them will come up and give their seven minutes or so overview, and then I’ll come back up for the moderation.
Leo Beckerman, Zero Foodprint (00:13:25):
Thank you so much, and thanks everyone for being here. It’s really interesting to be the nature people at what seems to be so much about energy, but it’s really exciting as well. So let me see a question for you all. In 2018, the New York Times magazine ran this piece, and to be honest, we didn’t really need to wait eight years to answer the question. And I know I’m preaching to the choir over here, but I always like to think of this now, this is obviously one quote from one doctor from one university, but the power of nature is unbelievable. And I every day wake up and think, wow, what if we could do just 1% of what nature can do and how amazing that is. And so I say that because this is a huge problem, but we have the environment to deal with it.
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So we’re talking about rangeland and the power of rangeland to absorb greenhouse gases, right? And now let’s think about farms in California. We have over 62,000 individual farms, and they are actively managing about 23.6 million acres. I will also note that every year, both those numbers go down a little bit, the number of farms, the number of farmers, and the number of acres that they manage. And I’m sure we could get them all to agree, right? They’ve got the solution. What’s the problem? If we really want a significant portion of those 60,000 plus managers of land who are growing food and fiber for us to take action, we have some serious financial and logistical hurdles to overcome. So let’s just do some quick math. Dr. Silver was talking about a quarter of the rangeland that we have in California, that’s eight. You don’t have to follow along, but I will get to the point.
(00:15:31):
That’s eight million acres. She suggests about 15 tons of compost per acre. That comes out to be about 120 million tons of compost. It would take the state of California about 50 years to generate that much, right? So let’s just worry about, let’s just say one year. Let’s start in year one. Let’s say two and a half million tons of compost. And I’ll tell you, I have no idea what that looks like. What does that even mean? Right? So let’s think about all the trucks, the semi-trucks that you see on the road every day, how many of those it would take them to do our first year.
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This is 400 semi-trailers, right? We’re going to need about 120,000 of them in year one. This is a thousand. Don’t have 20 more slides. It’s just like this one. Bear with me everybody. But really the point here is that the solution that is required is quite frankly, simply too big for these 60,000 independent operators, let alone just me or just you or just you, and we have to work together. So now you’re wondering, wait, who am I? I’m going to tell you a little bit about Zero Foodprint. Zero Foodprint was founded on the belief that we’re all in this together and that the food system itself can be an agent of change, working with and supporting the people who are working on the ground, managing land. And we provide a pathway to make direct contributions to climate smart agriculture, and we aggregate those contributions and we give them out as cash grants to farms and ranches who are doing the actual change on the ground, implementing that change.
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We started as a group of recovering restaurateurs who wanted to do the right thing, and that’s why we started with restaurants.
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In 2020, after about five years of doing a carbon neutral restaurant program, we realized that about 70 to 75% of the footprint of restaurants were all coming from the ingredients themselves, whether you changed from gas, gas range to an electric or induction stove, whether you had light switches that could turn off, whether you were not providing meals into go boxes, whether you were using … Whether you were beef or organic beef or plant forward, at the end of the day, the ingredients represented the biggest impact and yet there was no way for us as restaurateurs to go and get and purchase those ingredients. And so we started our restore program, which is with small commitments from restaurants willing to support the actions of farmers who were changing the way that they grew food. And we provided a 1% opt-out surcharge that allowed those restaurants to work and educate their customers and their diners, regardless of the type of restaurant or cuisine, where they were, their geographic restraints, or their relationship to the local agricultural community.
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So if you think, we’ve all been to a restaurant before, some restaurants are on farms and they’re able to grow their own food, some source locally, but that’s not true for everyone. And Zero Footprint, we decided not to be a purity contest. We weren’t going to judge either restaurants, consumers, or farmers, whether they were taking their first step towards something or their 100th. And so we decided to be a way for anyone and everyone to work together to implement that change and to make the barrier to entry as low as possible. And so what I’ve got here actually is a receipt from Subway, and you can see this Restore Colorado program because the person at Subway making your sandwich, maybe they’re not a chef, and they’re certainly not going to their farmer’s market to buy your sliced turkey, but they are still able to contribute to the positive change within the food system.
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So again, we are believing everything is about working together and we’re aggregating all these things, whether they’re 10 cents from your $10 sandwich. And since then we’ve gotten a little bit bigger. We’re working not just with small restaurants, but consumer packaged goods, groceries, local and state and even federal government. And so I like to think of Zero Foodprint as both a funding mechanism, a way to raise and aggregate funds, as well as the pipeline, because we need the infrastructure to get those funds to the people who are managing the work on the ground. And in just California, if there’s over 60,000, we’ve got to come up with a way. So today we have funded work on over 120,000 acres. That’s in the last six years alone. And in just a few months, we’re going to be announcing our 1,000th farm grant. So in addition to the capital needs that we’re talking about, we’ve identified technical and logistical challenges that come along and that recognizing that the infrastructure needs to be developed, and it’s easy to put rather a thousand trucks on a slide, but filling up 120,000 trailers with compost, getting it to 60,000 managers of the land and then applying it onto the land is a much bigger job that requires all of us.
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So I’m really excited to see what some of my colleagues here also have to say, and thank you for your time, and hopefully we can continue supporting and working on a solution.
Deborah Halberstadt, California Department of Insurance (00:22:12):
Good afternoon. Let me find the next slide here. So again, my name is Deborah Halperstat. I am the special advisor on biodiversity and inclusive insurance at the California Department of Insurance, which is a very unusual role. I am the only person in the United States working for an insurance regulator focused on biodiversity and biodiversity loss. So the first question is, what is biodiversity? It’s such a technical term for such a beautiful thing. I mean, when we think of biodiversity as actually the tapestry of life, how all the different systems work together to create and support life. And so it actually is fundamental to our entire economy. The World Economic Forum did a study a couple of years ago that’s now a little outdated, but it says over 50% of the global economy is entirely or moderately dependent on healthy, thriving nature, and over $10 trillion are at risk due to its destruction and degradation.
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So we have a lot of work to do to protect our economy and the people and the animals and the plants and the mountains that exist on it. So that’s sort of my starting point for thinking about insurance.
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So what is insurance? I feel like as a lawyer, I have to define my terms before I get into the meat of it. So defined by diversity, let’s define insurance. Insurance is this financial instrument that provides funding after a disaster. You pay a small amount, a small premium, theoretically small every month, and with the expectation that when a disaster happens and you need money the most, those funds will be released and you can then rebuild your life and have that economic resilience that is so important. So insurers have a really unique perspective on risk. They can analyze it, they can underwrite it, they can invest in risk reduction, and they do all of those things. So as the Department of Insurance, we regulate those insurers to make sure that they’re doing that appropriately. One of the really important components of insurance is that it reduces that uncertainty that you have with a disaster, and it can really help people bounce back after an event.
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It’s quite a critical tool. And by … Once people have insurance, and the folks that have insurance are then able not only to sort of bounce back, but bounce back better and faster than those who don’t have it. A really important piece of insurance is that it can de- risk those investments and transfer risk, which means that you can unlock a lot more capital. So if you have a plan to do a restoration project, and it’s hard to get funding for that restoration project, if you can get some form of insurance to come in and take away some of the risk, whether it’s performance risk for how the conservation project is going to work, or whether it’s how much risk will be transferred away from the people who are actually experiencing the disaster, you can start accessing bigger and more investment.
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I like to talk about this risk matrix. This is my stop sign, my stoplight of risk. So the axes are severity and frequency, right? So in those high severity, high frequency situations, runaway faster, you want to avoid that risk. It’s too much, right? If it’s a high frequency, but a low severity event, that’s something that you can maybe absorb or you can reduce that risk. You can think about how do we reduce the frequency, but since it’s not such high severity, it’s not something that is deeply concerning. If you have a low frequency, low severity situation, fantastic, you’re golden, don’t worry. And if you have a low frequency, but high severity, so it doesn’t happen very often, but when it happens, it is powerful. It is dangerous. That’s where you use insurance to transfer your risk to somebody else who’s better capable of handling it.
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A big company, a big international company can handle that risk better than you can shift it over to them.
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So I mentioned before that insurance is really important for enabling people to bounce back better. Unfortunately, it is not equally accessible to all people because if you are low income, particularly communities of color, many of those folks have been redlined in the past into less safe living environments, whether it’s high flood zones or worse housing situations, lead on the walls, whatever it is, and they live in these older, riskier houses that are harder to insure and more expensive to insure. And these are the folks who have the least ability to pay the higher premium, and therefore you have this expanding protection gap. So this is an area that we are particularly concerned about at the Department of Insurance, and we really are seeking different types of mechanisms and ways to shift how insurance is envisioned in order to reduce that protection gap and make sure that the people who are bearing the brunt of climate change and whether there’s wildfire or flood or heat are able to actually have access to insurance to help them bounce back as insurance is intended to do.
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So we have a couple of different ways of thinking about this. We’ve got parametric insurance. I’m not going to get into that definition because I’ve used up my definition time, but I can talk about it later. We’ve got community-based insurance and we’ve got nature-based solutions. So I’m going to focus right now mostly on the nature-based solutions. So one of the ideas that we’re looking at is, can and should the urban forest be insured? You have this amazing natural infrastructure all around us right here. We have these beautiful trees that are providing shade, they’re sequestering carbon, they’re providing habitat, they are providing stormwater drainage, they’re reducing urban heat island effects. And so these are critical, vital assets that local governments have and that are all around us, but they are at risk because with climate change, we’re seeing increasing severity of storm, we’re seeing new and different pests coming in, we’re seeing drought.
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And so the question is whether these beautiful magnificent trees are worthy of being insured. So we hosted a convening a year ago where we brought together urban Foresters and NGOs and funders and healthcare providers, just a range of stakeholders to ask, is this even local governments in particular, is this something that you would consider? And they said yes. The resounding answer was yes. So we are now exploring with insurers, is this something you would consider? Same question, just different audience. And really diving into whether and how much it would cost and what would the design look like and how would you protect a forest from pest or from storm using insurance? And my last example that I can do in one minute is we’re working with the city of Imperial Beach down in San Diego. So they are at risk from considerable flooding.
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The combination of king tides plus atmospheric rivers plus a highly polluted river leads to terrible, terrible flooding in Imperial Beach. And so they have currently a levee that kind of stands upright and they have a wetland that has been bisected by a bike path. And they’re looking at converting that upright standard levee into an ecotone levee that will allow the water to migrate up and support the different ecosystems throughout that community in order to reduce flood risk to the folks who live on the other side of the levee. And they’ll remove the bike path to restore the wetland. And so the question is A, will the Ecotone levy work and do they need to ensure that Ecotone Levee, that’s kind of a performance risk question and B, how much will that ecotone levy reduce flood risk to benefit the community? And can that community then get an insurance premium reduction for their flood insurance?
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I guess I’ll skip this one. And this is the most exciting one though. So come up and talk to me afterwards. This is the Green Ribbon Commission on biodiversity and insurance. We’re working with international experts to think through what does biodiversity insurance look like and how can we progress on that? So thank you.
Mike Kent, New Leaf Climate Partners (00:32:35):
Great. Thank you, Deborah. And hi everyone. I’m Mike Kent. I’m a co-founding partner at New Leaf Climate, an entity we set up around five years ago after I spent about the prior decade working at BlackRock setting up their climate investment program. I founded New Leaf along with two others. We’re now a team of 15. And we basically, I think, kind of came together around this idea of how do we attract more private capital into nature-based solutions and we focus across the Americas. And my main observation working at a large institutional investor prior to this was that, at least at the time, many conversations were being had with the largest pension funds, insurance clients, endowments around the energy transition, the transportation transition, but not as much discussion around the role of food and agriculture and land use. So that sort of inspired me and others to start this.
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And at the same time, I grew up in Vacaville. The 2020 wildfires hit and my family home was lost. And so I think that also has motivated me to think about, yeah, how do we bring more private capital to bear on these important issues that aren’t going away? And so in my talk, in 10 minutes, I’ll try to cover three main points. First, building on the definitions bit, I want to focus and define leverage. This has guided a lot of our thinking and work. And we use terms like blended capital or catalytic capital, but I want to make sure to cover that because I think it’s important when we’re thinking about how do we attract private money based on limited public and philanthropic dollars, because we know the scale of the financing issue is so large and growing, we need to use all the tools that we have at our disposal to close that gap.
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Two, I want to talk a bit about systems investing of the nature economy or the restoration economy. I think often in these discussions, we talk about how do we fund specific projects which are necessary, but equally, I think we need to think about the entire infrastructure and the entire value chain of a nature based project, which we’ll get into, including sort of upstream small businesses as well as downstream markets that we need to be financing. And then finally, I’ll cover a couple of different pilots and projects and investment funds that we have in the market that I think are bringing some of these concepts to life. So first, on leverage ratio, what is it? It’s basically the multiplier effect. And again, we have trillions of dollars of financing and funding gap at the global level for natural based climate solutions in the hundreds of billions in the US and say tens of billions in California alone.
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And public financing and private philanthropic money won’t be enough to close the gap. And so the question is, how do we leverage that limited amount of money to have most impact and to scale that impact in the marketplace? So fortunately, the nascent NBS market can look to existing examples for how to do this well. But here you’ll see a chart that we pulled together just to illustrate the point. I mean, at the bottom left, you see kind of philanthropy. That’s kind of dollar in. It goes out, makes a meaningful impact. There’s no money recycled. Of course, we’re going to continue to require philanthropy in this sector across all sectors, but I think that should be used for in cases where there is no recoverability of assets, where there’s no revenue generated, there’s no business or sort of cash flow associated with the project, which again, we need and we will continue to do.
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Moving up the scale and sort of this leverage ratio is matching grant programs. So Cal Fire, a number of state programs, for example, have these matching requirements that say, “We’ll grant you a dollar in so far as you bring another dollar.” And oftentimes that other dollar can be private money. Sometimes it’s also philanthropic money, but it’s sort of increasing the total size of the pie through this requirement of the grant program, which is also great. Then we start getting into sort of these more positive leverage ratios. And here we’re looking to the kind of the clean energy expansion of green banks across the country. So green banks, special financial institutions primarily provide debt, but they provide some equity financing as well for clean technologies and clean technology deployment. The average green bank in the US has a leverage ratio of two and a half, meaning for every public dollar spent, they’re attracting two and a half dollars of private money that they’re then reo deploying to borrowers to support, again, clean energy deployment.
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And then you’re seeing some more mature green banks in New York and Connecticut get even higher leverage ratios. In Connecticut’s case, one to eight. And then another useful data point for us that we look at is the community … So green banks obviously focus on clean tech and for us, we see an opportunity to basically leverage that model, but deploy it toward the nature economy. And then you also see on the top right, the community development financial institution world was really born out of the need for more low income housing in the US. They benefit from tax beneficial treatment from the US Treasury. They are able to accept Community Reinvestment Act dollars. And so basically every dollar of public money that’s spent, again, they’re deploying eight. So that’s all to say, there are existing models of this working well, but importantly, and this kind of gets to point two, how you deploy that matters a lot.
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Obviously the sort of financial capital that we’re talking about really applies in my mind to a set of primarily revenue generating activities. It doesn’t have to be private companies, but often it is, but you can also think about lending to nonprofits in this space as well, where if there is this recoverability, you can recycle the capital over and over and get more impact over time with the same dollar. So when we think about the restoration economy, I like to think of it as an integrated system of players, not just the tree planting, but it’s every step before and after that as well that needs to be properly financed and coordinated. And so, on the input side, starting with kind of the top of the funnel, we think about kind of the natural materials, the labor and the planning that go into designing and executing a project.
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And from a small business perspective, we’re looking at seed companies that are doing collection of native varietals, for example, nursery companies that are growing or propagating those seed for planting. On the project side, this is obviously what gets a lot of attention, which is great. And here we’re looking at sort of how do you finance landowners to help with regenerative practices, to help with fuel treatment on their properties, how do you incentivize that? And then also kind of all the associated businesses or consulting foresters, restoration consultants, et cetera. And then finally on the downstream end of the system, we’re looking at sort of the markets that can provide cashflow to the projects themselves. So things like sawmill, is there sawmill capacity in the region? Are there biomass facilities that can accept chips? If you’re doing a fuel treatment project, are there ways to recoup some of those costs and pay back a landowner, for example?
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And then finally, we’re doing some work that I’ll touch on on the carbon and ecosystem credit market. So basically paying for the outcomes of the restoration work. Are you improving water quality or quantity? Are you reducing or removing carbon? And how do you begin to quantify and measure that? And so you can essentially monetize to bring the total project costs down. But I think here again, the important thing to take away is beginning to think about at a systems level and kind of all the underlying small businesses that we need in place that are coordinated around regional ecosystem needs. And those small businesses typically need to be well financed and capitalized to do their work and to grow and to modernize. So just quickly, kind of a few highlights from our work and how we’re putting some of these ideas into practice. Like I said, we provide advisory transaction support and fund design and are an asset manager.
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So looking at the upstream supply chain, we launched a $10 million fund that basically provides primarily low interest debt, longer term first loss capital in many cases to private nursery and seed companies around the US. Here we saw a gap in native seed production that was limiting some of our project implementation partners because they couldn’t actually find the right inputs to do the restoration plantings. And when we did a comprehensive study, we found that a lot of these businesses didn’t have access to capital through the conventional capital markets because interest rates were too high or the lenders didn’t really understand their business models. And so through this fund, we’re helping to solve some of those gaps and challenges. Two, just this quarter, we’re launching what’s called the Rural Resilience Fund, which is a landowner support vehicle that through primarily nonprofit intermediaries, we’re providing bridge loans to cover the sort of grant reimbursement timeline gap that we see in a lot of programs, both federal and state.
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So we’re working with established intermediaries that have relationships with landowners that are managing these programs, but that are encountering cases where landowners want to enroll in programs, but can’t shell out say 50 or $100,000 to do the work upfront. We provide that capital and we’re paid back through the grant money. And then finally, last project I’ll highlight in Northern California, Shasta, Trinity, Modoc, and Lassen counties, we’re working with small underserved landowners to help pilot a new set of carbon credit and methodologies, 20 seconds, carbon crediting methodologies that quantify the benefit of fuel reduction treatment. So essentially, we know that catastrophic fire leads to emissions. In 2020, the wildfires in the state basically offset all of our emissions gains up to that point. And so the question is, how do we incentivize more fuel treatment and actually capture the carbon benefit of that? So this is a pilot study to see who are the buyers of these credits and what is the price of per ton that we can achieve in the market because that could go back to the project and back to the landlord to offset some of their costs.
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And that’s again, kind of paying for the outcomes and the downstream markets. I’m over time. Thank you guys. That was a lot, but look forward to the Q&A.
Gary Knoblock, Conservation Innovations Group (00:43:41):
Hi, everybody. I find it really interesting to listen to my fellow panelists. It’s just so interesting. I hope in some way, all of you, as for myself and all of you, one of the takeaways is just all the different ways we could actually be financing this. Even as Washington seems to lose its mind and cut off funding in all sorts of ways for nature and climate, there are all kinds of things that we can be doing. I’m Gary Knoblock. I am currently a consultant working on nature finance projects, but I have about 25 years of work in conservation for a significant amount of time, probably 20 years I’ve spent working for a number of different philanthropic foundations. So the Moore Foundation, Bechtel Foundation, Maxwell Hanrahan Foundation, King Fisher Foundation. So I spent a lot of time in foundations and boardrooms. So part of what I want to talk about today is sort of how foundations and private philanthropy thinks about this.
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So I want to give some perspective on that. Just private philanthropy is one more stream that we can bring to bear for nature based solutions, but I also want to really challenge us to think about, well, how do we bring all this together? There’s all these different funding streams. And so one of the things I want to explore is what would it take to have a more effective system that actually could bring all this different kind of funding and financing together? Oh, I guess I’m supposed to be advancing slides. Clicker.
(00:45:13):
Okay. So yes, we do need to increase funding overall, but I would also really want to say that we should focus on the proposition that we also collectively need to use the funding and financing available more effectively that we already have. Currently, public funding, private philanthropy, corporate contributions, private capital are often pretty siloed and often they don’t really understand each other’s realities and the constraints that each phase and we don’t do enough to coordinate as much as we could. However, there’s also a lot of opportunity here. So I think there’s ways to explore how each type of funding and financing can play a more strategic role and how we can link arms among ourselves to other types of funders and financiers to really collectively accomplish a lot more. So I want to exemplify this first by talking about private philanthropy and what it can do well and what private philanthropy needs from its partners to do this better.
(00:46:15):
So one thing about private philanthropy is it actually can be really innovative and actually can really help catalyze new approaches and new ways of doing things. Foundations have a great deal of flexibility. It’s really just the board and the staff that really decide where grants go. So although some foundations seem like they have a lot of funding and they can be pretty big making millions of dollars of grants, from their perspective, they often see that systemic solutions really are going to require substantially more than the funding that the foundation can provide. And they often see that public funding actually is the really big pot of funding. So a lot of foundations really try to position themselves to really kickstart new approaches or develop new innovations that once demonstrated can then unlock public funding. So public funding has the constraint that it often has, it’s very constrained by needing to be very accountable to the public, and it should be.
(00:47:07):
It’s the public tax dollars. So often public funding feels like they really can’t, they can’t screw up, they can’t lose that, they can’t do something that loses somehow the benefit of that public investment. And so for that reason, private foundations and private philanthropies, you can really take the risk upfront. It can really try to figure out, well, what’s the innovation, what’s the new approach? And then public funding, once it’s demonstrated, it can step in and do that. Michelle mentioned that California has prop four, which is a $10 billion climate bond. It’s a lot of public funding that could go towards nature-based solutions. And there are a lot of folks in the agencies and the public agencies in the state who are really leaning into the question like, how do we use this money effectively and what are innovative new approaches? However, private philanthropy really could do more to help catalyze the exploration of those new approaches.
(00:47:51):
Private philanthropy is also really flexible. So it really doesn’t have a lot of constraints. It doesn’t have the constraints that public funding has. So just one example is public or private philanthropy can really help catalyze the planning and the collaboration that is needed on a large landscape for all the folks to come together and figure out what are the priorities on the landscape. Public funding has a harder time funding that kind of collaboration building, that partnership building. Once a landscape or a county or a community comes together and figures out what the priorities are, then the public funding can come into those priorities, but that private philanthropy can really help figure out what are those priorities with that flexible funding. And then another way that philanthropy can help is really by de- risking investments. And so a good example of this is that philanthropy could provide early capital for nonprofit carbon credit projects.
(00:48:39):
The nonprofit can be using philanthropic dollars to talk to landowners and explore with landowners if a carbon project is the right approach for that landowner. And then once that’s established, investors who need a more secure rate of return can come in once that project’s deemed as feasible.
(00:48:58):
So to do those things well, private philanthropy needs some things from its partners. Foundations are good at helping with startups and new approaches. Foundations are not very good at staying the course for the long term. That’s really the role for public funding. So philanthropy needs funders who will come in for that longer term. Climate mitigation and even adaptation does have some pretty technical aspects and private foundations often don’t have expertise on staff to assess technical aspects of these projects and what’s needed. So we do need new templates and frameworks for natural and working lands mitigation that non-technical funders could trust and rely on to make investments. And private foundations are often not that familiar with how public funding and corporate funding in the nature-based solution space really works. So each has some unique aspects and approaches, and we need to do a lot more to understand one another’s perspectives.
(00:49:57):
Philanthropy often doesn’t understand public funding, corporate funders and private funders really don’t talk to each other.
(00:50:05):
Corporate funding has some requirements around measurement, reporting and verification that private philanthropy really doesn’t understand or pay that much attention to, but it’s pretty critical for those corporate funders. So we really need to understand each other’s realities a lot better. So from there, so private philanthropy is one aspect, but I would say what we really need to be thinking about, and we’d love to have a discussion with the panelists and this group as a whole is really thinking about what are the structures and mechanisms that would allow us to catalyze and blend funding and financing using all these different sources of funding, public funding, corporate contributions. There’s a lot of funding coming in now from companies like Google and Microsoft and Salesforce, which are really contributions towards nature-based solutions. They’re not necessarily offsets. There’s market mechanisms in financing, there’s insurance that we talked about today, and then there’s also corporate compliance like Cap and Invest that we talked about earlier.
(00:51:03):
So we don’t need overly elaborate top down control of all these things. We actually need sort of a wide diversity, a mosaic of approaches that can work. But we do need some way to think about how everyone’s able to do their unique thing as a funder, but that it can all come to bear on a single parcel. Right now we have this problem that it’s really hard to get different kinds of funding to come into a project. So we need some way that we actually think about this stacked financing into projects and we definitely need new mechanisms and creative ways to do that. So I’ll stop there.
Michelle Passero, The Nature Conservancy, CA (00:51:45):
Great. Thank you, Gary. Thank you all the panelists. Really appreciate your overviews. I’m very excited by the topics you discussed. I’m actually going to go back and I know we’re headed towards the end of the day and also a reception. So I’m actually going to shift things up a little bit here and just ask before we turn over to you for questions, any reactions on what Gary laid out here in terms of any ideas, in terms of how, within your sphere of work, of like, how might you blend things? Or is there, where do you see private and public coming together? Any first impressions?
Deborah Halberstadt, California Department of Insurance (00:52:29):
I can give an example. I can give. Okay. So one quick example is in the context of extreme heat. We’ve been looking at outdoor workers and particularly sidewalk vendors who are most affected by extremely hot days because they feel compelled to continue to go out and sell their wares, even if it’s dangerous to their own health. And so we have been working with several entities, including a private foundation, a private philanthropy, insurer, and a CDFI and us. So I think we cover almost all of the pieces, but basically the idea here is as we anticipate a heat wave, the private philanthropy would release dollars to these sidewalk vendors to allow them to take precautionary steps ahead of time. And then as the heat event progresses and you have actual evidence of how hot it got and for how long, that will unlock the insurance, which is essentially business interruption insurance that will pay out at the end of the heat event and those folks who then were able to take precautionary steps and maybe were able to stay home and not put themselves in dangerous way, can still receive their daily income.
(00:54:07):
So it’s a micro insurance product. It’s for a very small amount of money. And then the CDFI is the one who’s sort of overseeing the entire process and working with the sidewalk vendors who they already have a relationship with, they already are providing loans. And the idea here is right now we have a foundation that is subsidizing the premium for that insurance product, but as time goes on and it is demonstrated to be effective, that premium can be wrapped into the loan that the sidewalk vendors are already receiving. So you have kind of a pathway for longevity and it’s not just a one-off pilot project. That’s great.
Michelle Passero, The Nature Conservancy, CA (00:54:50):
Any other thoughts from the panel members?
Mike Kent, New Leaf Climate Partners (00:54:57):
Yeah. I think in the carbon program that I mentioned, similarly, I think the US Forest Service provided a lot of the technical assistance funding to get the project off the ground. We’re benefiting from corporate philanthropy to actually do the project implementation. And the whole idea is to basically create a market mechanism, test a new market mechanism in which primarily corporate buyers, but potentially real estate developers in the state can purchase to offset their emissions. So I think it’s kind of combining the public, private, and the goal is to attract private investment capital over the long term. But I think from a regulatory or for policy perspective, we’re thinking about through CEQA, for example, could these new wildfire related credits be an eligible offset or mitigation unit as part of that program? So kind of moving this mechanism into the compliance markets or through capital invest or through carb, could these credit types be added as an eligible credit type to the capital invest program?
(00:56:08):
Because that just expands kind of the market of potential buyers. So I think longer term, those are some of the regulatory or policy shifts that we could see sort of accelerating some of this financing work. But before we get there, I think we’re still proving out like, how does it work? What are the market mechanisms? And we benefited from all these different types of funding to date.
Leo Beckerman, Zero Foodprint (00:56:34):
Yeah, thanks. I think when there’s sort of money to be made, that makes a lot of sense. Ecosystems pop up, which is awesome and definitely sort of the long term sustainable way to sort of keep this going. I tend to think of it as like if they were a case manager or something, again, sort of overly simplistic, but we definitely … I see this in many areas, whether it’s even in agriculture, whether it’s technical assistance or the Farm Bureau or local government or state government or any of the regulatory, food safety, certified organic, et cetera, these are not talking to each other at all. And if you could come up with some … Even just there could be a technological solution to it. It doesn’t have to be a human necessarily, but a way to kind of understand the landscape and maybe it’s tied to your exact location or something, to understand what’s available to you.
(00:57:29):
I think if you could do that and look in and put in your address and there was something that’s like, there are 55 programs that are available to you, you would know and you’d be sort of interested in going for that.
Michelle Passero, The Nature Conservancy, CA (00:57:43):
Thank you. Now I want to turn it over to the audience here, see if there’s any questions for any of our panelists. All right, so I saw Zoe first and then I think there’s a gentleman way in the back and then we’ve got two more people here.
Speaker 10 (00:58:04):
Hello? Okay, great. Hi, great panel. So interesting, really cool. I don’t work on this at all. I work on microgrids, but you guys are doing really cool work and it’s awesome to see all your approaches. I had a question for Deborah though concerning insurance. I was curious if this is more, if there’s proactive help to kind of protect these resources that you’re hoping to provide, or if the insurance is more of a retroactive reimbursing after …
Deborah Halberstadt, California Department of Insurance (00:58:37):
So going back to my love of definitions, insurance actually is required to pay you out after you’ve experienced a loss. And that is exactly why in that extreme heat example that I gave, we found private philanthropy dollars to help with the anticipatory preparation, because I mean, I would have loved for insurance to cover that too, but you have to have a loss before you can have an insurance payout. But that said, there’s a lot of work that insurance can do to incentivize that kind of work ahead of time, right? To say, “Well, if you can reduce your risk, you’ll reduce your premium and therefore you’re going to be saving money.” So there is a strong incentive role for insurance, but the payout comes after the loss.
Michelle Passero, The Nature Conservancy, CA (00:59:30):
There was a gentleman way in the background. Yes.
Speaker 11 (00:59:38):
Hi, thanks, Matt Holmes, California Environmental Justice Coalition. Deborah, I was riveted by … I never thought insurance would be EJ’s ally, right? And so that’s what equity looks like, right? De-risking valuable projects that the market won’t provide because markets never solve important problems. You will hear from Leo, we got less and less farms and less and Let’s farm land because they’re cannibalizing each other. You brought up AB 1757, which pointed out that we need more women and people of color owning farms because far away, rich guys don’t care about how farms are run. Deborah, is there any way for communities to help the insurance sector better evaluate market actors and to lease this profiteer class that has painted us into this corner?
Deborah Halberstadt, California Department of Insurance (01:00:22):
Yes.
Speaker 12 (01:00:25):
Great.
Deborah Halberstadt, California Department of Insurance (01:00:26):
I mean, I think that there are a number of opportunities for shifting the paradigm of insurance. So I think that traditionally insurance has been a tool to protect the wealth of the wealthy, but it doesn’t need to look like that. And it can be a tool to protect communities and it can be a tool to protect people who need the most help. And so how do we shift it on its head is an interesting political and policy not that I’m working on untangling, but I would be more than happy to talk with you and think through the types of … I mean, really it’s a bottom up sort of approach, right? What are the needs of the community and where does money come in and where can insurance then layer on top of that? Because essentially anywhere there’s money, there can be insurance. It’s just a different way of imagining what does that insurance look like?
(01:01:22):
How can it be used and who’s going to benefit? And so yeah, there’s absolutely ways to protect and help the people who need it the most.
Michelle Passero, The Nature Conservancy, CA (01:01:33):
There was. Yeah.
Speaker 13 (01:01:40):
Thank you. This question’s for Leo Beckerman. So I was wondering, I’ve been kind of following what’s going on with the municipal compost projects throughout California and all the issues around actually getting compost to the point that it’s organic and even if it’s … And which is the only kind that seems to be really, really that farmers really want to use. So what do you foresee as a way to kind of solve this problem and all the intended like not really compostable kind of fake compostable plastics and then issues with municipal compost?
Leo Beckerman, Zero Foodprint (01:02:16):
Thanks. You’ve touched on something pretty close to my heart. I think for background, what we’re seeing now is from California SB 1383, which is requiring the recycling of organics, the removal of organics out of landfill to avoid methane emissions. And that has been pushed down to the sort of local level as a requirement and everyone in our over 400 jurisdictions in California sort of working on their own to figure it out. From the organic standpoint, again, organic in the kind of organic certified, it is a requirement that compost be certified organic through a separate certifier based on the feedstock, the materials that are being composted only for certified organic farms. We do see a lot of farms that are interested in sort of quality compost regardless of the certification, but this is a statewide challenge and you’re exactly right. It involves a lot of industry as well because compostable plastics and compostable wear are certainly compostable, but generally not when they … Not in the systems that California industries use.
(01:03:28):
So for example, it might take 120 days for your fork to break down, but every California composter is running a 60 day system or you have 60 more days and you still have a fork at the end of that. You apply that compost on a farm and guess what? It’s applied a fork, right? This is something that we work in quite a bit, actually, and one of the reasons why I bring up the compost example. And I think ultimately, and this is not the most satisfying answer, but ultimately all these industries are actually really interested in a better solution and working together. I think to create a situation where we can have a more circular economy and that the compostables do break down and that we have higher quality compost. It’s honestly a really big issue and we see … I mean, I’ve worked with farms where the composters had to come out with teams of people and pick up glass because the glass was harming animals and things like that.
(01:04:33):
So it’s a huge potential issue, not to mention the opportunity to waste just literally millions of tons of organics that we need in our soil. And so, yeah, let’s make it work. I mean, ultimately, I think it’s actually about stacking opportunities together because … And the good news is I think many industries are aligned. I think they just might be looking in the wrong direction and I’d be happy to talk more afterwards because … I’ll stop now.
Michelle Passero, The Nature Conservancy, CA (01:05:07):
Thanks. Gentlemen, Tom was next.
Speaker 14 (01:05:15):
Hi, thank you. Tom Hobby, Yosemite Clean Energy. We’re not a nature-based solution, but we’re related to it. We’re a biofuels company using gasification, but really we’re working with forest communities, fire safe councils to reduce hazardous fuels, et cetera. My question is, all this land related basis, there’s a value there that’s not being really monetized in that way. Groups like the Task Force for Nature Related Financial Disclosures have come up with metrics that are trying to get on board that we can kind of come up with ways to see how stewardship and monetizing that. But looking at people on the panel here, so Mike, Deborah, and Gary, is there a way that we can actually kind of get this to a different level? Maybe it does start with some seed money at a national level to look at what are the different value stacks on these nature-based solutions?
(01:06:05):
What are the externalities? Once we start monetizing, then we can do pilot scale projects to look at what’s the impacts of water, air quality, obviously soils, forest habitat. And yes, we do have byproducts like all the excess biomass we can utilize for replacing fossil fuels with hydrogen, SAF, et cetera. So I think almost like we don’t value nature like a balance sheet, and we need to really start seeing how to do that. I know that basically the UK Forestry Commission, they’ve put actually a dollar figure on all their forest, a balance sheet, $9 billion. It’s only a million acres, so not a big forest, but they have it all broken down with their watersheds and riparian, and they’re starting to make decisions based on those values. If we can include insurance like reducing wildfire risk, there’s a value there for the community. Water, all the communities look at San Francisco or the watersheds value.
(01:06:56):
Somehow we need to come together because again, I think somebody mentioned silos. I think we’re good at doing silos and I’m a kind of scientist guy too. But collectively, we’re sitting on really, our natural resources are a treasure worth billions. We’re not managing it very well. So I think there’s a lot of room to improve. We’ve got a lot of great minds. Look forward to working with some folks to help with our solution from Yosemite clean.
Michelle Passero, The Nature Conservancy, CA (01:07:21):
I think we have more time. We’ve got another five or so minutes. I knew there were a couple people over here maybe that had their hand raised.
Speaker 2 (01:07:28):
This question’s going to build on what this gentleman was just talking about. With the blended funding sources, I think that we might have different levels of detail and outcomes that people are interested in, different types of outcomes, whether it’s carbon or ecosystem services or human health. And I’m wondering if you guys could speak on how to communicate that data, where the data burden falls onto, like who’s collecting it, who’s storing it, and speak a little bit more about that.
Gary Knoblock, Conservation Innovations Group (01:08:04):
Well, I think you’re both naming a really key issue is, yes, we should be doing exactly what you’re describing, really understanding, really quantifying the values. And it does get … And then you’re speaking to, it gets extremely difficult. It actually is one of the biggest obstacles to this. And so we need to find ways to create a shared language and shared metrics that are probably the simplest metrics we can do. Sometimes they need to be more complex, like carbon accounting does have a lot more rigor to legitimately, but there’s sometimes it doesn’t need to be that level of rigor. And I do think we tie ourselves in knots by the level of rigor that we … The certainty that we want is sort of unrealistic. What we need is more sort of guideposts. And then in the times when there are … When it’s really a financial investment, then you do want that level of rigor that’s appropriate for that project.
(01:09:00):
I know I’m talking in circles here. I don’t have the answer, but I actually think this is one of the key things we need to do. And this is one of the key things that all those different kinds of funders need to come together and figure out, well, where can we create some shared metrics that we all could work with? And again, I think there’s some scale continuum of level of complexity, but there’s some way that we need to do this. The task force on nature-based TNFD, task force on nature financial disclosures is actually kind of moving in that direction. I don’t know if people are familiar with this, but what they’re trying to come up with is ways that investors can see a consistent set of disclosures from companies to really understand what’s their exposure to nature and what’s their financial risk. So that’s an example where we could be doing that in a variety of different ways of really just understanding and monetizing those disclosures.
(01:09:47):
And they’re just creating a shared standard. It’s just an accounting standard that everybody agrees like, yeah, that’s the way to do it. Anything you want
Mike Kent, New Leaf Climate Partners (01:09:55):
To add or … I mean, I think that’s the challenge of working in this sector, but also the fun part and the opportunity, it impacts everyone and there are so many different entry points into the conversation. So we’re working with bird groups, we’re working with rural economic development groups, we’re working with watershed groups, with forestry groups. Everyone is ultimately impacted by our environment, and so therefore there are all these different entry points into financing and funding. I think the way that we’ve worked around it, as in many cases, a project developer or as a fund manager, we’re kind of responsible for coordinating across all these bodies and making sure people can see the whole project and kind of their role in financing or funding it. I don’t think there is a market standard in terms of these are the metrics for you water like there are, but not across every project.
(01:10:46):
So it’s kind of whoever’s in the project leadership role is sort of piloting essentially. But I want to get to a place where, yeah, it is more institutionalized and there are more established frameworks for all these things.
(01:11:00):
And then, yeah, I think just on the gasification bit, I think it’s a really interesting problem and sort of going back to the systems level view, it’s like if we’re going to treat millions of acres, if we’re going to reduce fuels on millions of acres in California, we need to have a place for the byproduct to go and ideally we can create markets for that product. So there’s like biocharter, there’s gasification. A bunch of our bioenergy plants are now closing, which was kind of a lifeline to providing chips from projects and getting it off property. So that’s another big issue that we need to solve. And I think it could be through interesting fiscal policy and kind of like support at the state level to say, “Hey, actually we need these bioenergy plants, for example.” But ultimately, and the insurance comes in too, if we can show that providing fuel treatments will reduce your premiums, both at an individual home level, but at a community level, that can create some more financing opportunity for these projects.
(01:11:58):
But I think for a long time, kind of the downstream markets has been missing or lagging some of the other funding sources. So that’s where we need, again, specific to the wildfower issue that we need to address.
Michelle Passero, The Nature Conservancy, CA (01:12:10):
I think we have time for maybe one or two more questions depending on how we answer. So I don’t know. I’m not sure who was first here, but.
Speaker 15 (01:12:22):
Thanks. Great conversation kind of building on several questions now. A couple things happened recently in the carbon removal space. One is Microsoft announced their quote pause, whatever that means, and funding carbon removal, a lot of their funding to date was nature based solutions, a lot of biochar, et cetera. Meanwhile, then I read that JP Morgan Chase, I had to read that a second time, is investing in … Well, they said wildfire risk reduction, carbon removal. So wildfire risk reduction was the main headline and it’s like, “Oh, by the way, there’ll be less CO2 in the atmosphere after we bury these graphite bricks or whatever it is there.” So thoughts on both of those developments, I’m guessing you’ve been following them.
Mike Kent, New Leaf Climate Partners (01:13:17):
Yeah, I think my view is that we need to move out of a voluntary carbon system. There are just a handful of primarily large tech companies that have the balance sheets to show goodwill and they’re doing great work. I mean, many of them are proving out new markets and investing a lot in CDR and a lot of the innovation we need to solve the climate challenge, but there’s no regulatory oversight. There’s no incentive if and when, when you’re seeing a backlash at the federal level, a lot of these corporates are either green hushing or they’re stopping their purchases altogether. And so this is where the sort of interesting overlap with carb and capital invest, like can we expand that program to more corporate buyers essentially in the state and make it a requirement to purchase offsets essentially. And so I think we’re moving in that direction, but moving away from just a pure corporates to highlight their, build goodwill with their employees, et cetera.
(01:14:18):
Again, great work, but it’s insufficient to the scale, to the challenge at hand. Yeah, the JP Morgan thing, I think was interesting. I didn’t read it actually as addressing wildfire risk because yeah, I think it was more of like a removals based project, but yeah, I just found it more interesting that they’re committing to this right now, like when others are pulling back. So I don’t know, I guess financials are doing relatively well. So yeah, hard to say.
Gary Knoblock, Conservation Innovations Group (01:14:49):
The only thing I’ll add, and Mike’s much closer to this, but what I’ve seen working with companies over the last several years is what they see driving a lot of this is actually their investors, right? So some of it is corporate contributions are sort of goodwill, but what they’re really feeling, and this goes back to the TNFD, the task force on nature- Financials. … financial disclosures, is companies like in Europe are having to disclose, “Okay, here’s what our exposure is to nature.” And so that’s starting to drive investors and that may be a stronger driver actually over time.
Michelle Passero, The Nature Conservancy, CA (01:15:19):
Okay. I know we’re just about at time … I want to do one little quick lightning round if you can think of just among all of you, if there’s just one thing that could help unstick funding flow to nature-based solutions or your area of work, what occurs to you? Just if you want to go quickly, we’ll start with you, Gary, maybe just go through the line here.
Gary Knoblock, Conservation Innovations Group (01:15:45):
I think we make it too complicated, as I was saying with philanthropy, but I think a lot of different funders are in this role that we need just really simple, straightforward, both narrative of like, “Here’s what nature can do and here’s how you could invest in it. ” So I think we need to make it simpler. We need to find the metrics, but at the right level so that we’re not over complicating the metrics.
Mike Kent, New Leaf Climate Partners (01:16:04):
I guess the, obviously no silver bullets, but closest to that in my mind is just price carbon, coming from a financial/economist background. You could do that through carbon trade, obviously, so expand the cap and trade program and then expand the list of eligible credit types, which would include a whole sloth of nature-based solutions as well.
Deborah Halberstadt, California Department of Insurance (01:16:31):
We need to shift our thinking to more of a systems-wide thinking approach that integrates nature wholly and equally as a fundamental piece of our economy and not just an externality.
Leo Beckerman, Zero Foodprint (01:16:49):
Yeah, thank you. Building on what we were hearing earlier, if we could understand the sort of monetary value of each of these practices in the long run and turn that into sort of a general understanding, I certainly have a sort of a gut reaction like if we take care of our soil, we’ll continue growing food and I get to eat, that’s a good thing, right? Or maybe I could sell that food and make more money, but if we had that list, everyone would be able to sort of look at that balance sheet and make the right financial decision for them, which would in turn be inherently linked to beneficial for nature-based solutions.
Michelle Passero, The Nature Conservancy, CA (01:17:27):
Great. Thank you so much. Thank you to the panel again. And thanks everybody for hanging in there. Hopefully you can continue the conversation outside and the reception.