The circular bioeconomy is a force of nature

What were the top three outcomes for investors from COP16?

Why does nature loss need to be seen as an investment issue, rather than only an ecological one?

Nature loss has significant economic implications. Currently, investments in NbS total just USD 200 billion annually, yet estimates suggest this needs to increase nearly fourfold by 2050 to deliver on nature and climate targets. Simultaneously, 8% of global GDP, or USD 7 trillion, is spent each year on activities that degrade nature, such as conventional agriculture and fossil-fuel extraction. The private sector accounts for 70% of these harmful investments but contributes less than 20% to investments in NbS.

NbS are the most cost-effective approach to addressing biodiversity loss and desertification. They can also contribute one-third of the emissions reductions needed by 2030 to limit global warming to below 2°C. Such solutions are most needed in the FLAG sectors, which are responsible for a significant portion of global greenhouse-gas emissions and environmental degradation. These sectors present opportunities to integrate NbS such as agroforestry and organic farming into the production of commodities like coffee, cotton and cacao.

Growing awareness of the need to close the nature investment gap offers the potential for a major revaluation of products and services that are unique to nature. This shift will be driven by greater demand from corporates and governments that need:

• NbS for climate-change mitigation that verifiably delivers emissions reductions within value chains
• NbS for climate-change adaptation that limits disruption to value chains and communities caused by escalating climate and nature crises, which can jeopardise commercial operations and lead to economic issues like food inflation
• products and services that comply with potentially punitive climate and nature regulations.

The adoption of solutions addressing these needs will be enabled by new scientific knowledge and technologies for implementing nature-based solutions and measuring their economic and environmental outcomes.

What are some examples of ways that business models can regenerate nature, rather than simply feeding off it?

Over the last few decades, the concept of a circular economy has become more widely used to capture the need for value chains and economic systems that eliminate waste and pollution and enable reuse. More recently, this has evolved to the need for a ‘circular bioeconomy’, an economic paradigm that focuses on the restoration, protection and sustainable use of nature, as well as the application of scientific knowledge and technologies.

In a circular bioeconomy, NbS such as agroforestry and the use of organic inputs are central to value chains. As well as transforming the production of biological resources like food, cotton, and timber, NbS provide also vital ecosystem services such as carbon sequestration, pest control, and soil and water regulation. 

NbS and advanced technologies can also reshape other sectors that currently rely on fossil fuels and non-renewable resources. For instance, the construction industry is increasingly adopting innovative engineered wood products that can replace steel and concrete while offering superior environmental performance. Meanwhile, in the pharmaceuticals sector, companies are using molecular-level technologies to develop new drugs. Examples include anti-inflammatory compounds sourced from marine sponges and antimicrobial agents from marine bacteria, as well as innovative cancer therapies derived from diverse marine organisms.

These examples illustrate how business models can be structured around nature, fostering sustainability and resilience while actively contributing to the health of our ecosystems. The key challenge is to translate the concept of a nature-positive economy into concrete actions that companies can implement and finance within their value chains. 

There is a growing number of nature investment products such as payment for ecosystem services, green bonds, biodiversity offsets and credits. However, we also need to see innovative products specifically tailored to transform FLAG-sector value chains. These products should help achieve the scale needed in nature markets by attracting big corporations, which are the natural buyers of NbS.

In listed and private markets, what are some examples of investment opportunities arising from the transition to a nature-positive economy?

At COP16, listed firms in the agriculture and energy sectors showcased various initiatives to deploy NbS. For example, food and beverage companies are scaling regenerative agriculture practices to accelerate their transition to being net-zero and nature-positive, while supporting the livelihoods of farmers and communities.

In private markets, as mentioned previously, various nature-positive financing instruments such as payment for ecosystem services, green bonds, and biodiversity credits already exist. A framework was launched at COP16 to guide the development of a high-integrity biodiversity credit market that encourages the use of such instruments to make evidence-based contributions to nature goals, provide local compensation for biodiversity impacts under strict criteria, and facilitate proactive investment within buyers' supply chains, rather than through offsetting.

While there is considerable enthusiasm surrounding this new incentive and financing tool, especially one that is data-driven, it’s essential to approach its implementation with caution. As highlighted by the Circular Bioeconomy Alliance, industries must primarily invest in and work symbiotically with nature to transform and rethink their value chains. In this context, the circular bioeconomy calls for prioritising not only in solutions across sectors responsible for significant global greenhouse gas emissions and environmental degradation but also the financing for instruments that can be directly integrated into agriculture and forestry supply chains, which the World Economic Forum recently mapped at over USD 21 billion. 

How do regulatory frameworks impact the ability to scale nature-based investments, and how can governments and the private sector collaborate better?

Regulatory frameworks play a crucial role in driving demand for nature-positive products and services. As mentioned previously, corporations need to deliver verifiable climate mitigation in their value chains in readiness to comply with punitive regulations; examples include the European Union’s Deforestation Regulation, Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive.

Businesses and investors at COP16 emphasised the need for countries to submit or update their National Biodiversity Strategies and Action Plans, which have only been presented by 44 countries so far. Clear targets and a monitoring framework are needed, both to assess the implementation of the Global Biodiversity Framework targets at the country level and to align private efforts with these goals.