The Anthropocene marks a point in history where human activities are fundamentally changing the Earth’s planetary processes.
The scale and speed of these changes are so profound that in addition to climate change, we are collectively causing the sixth mass global extinction of non-human species.
Earlier this year, the United Nations reported that after two decades of planning, negotiating and target-setting under the international Convention on Biological Diversity, species extinctions are occurring more rapidly than ever before. Transformative change of human societies – our food, energy, and financial systems – is needed to protect and restore the natural environments that support us.
It is easy to feel discouraged and overwhelmed amidst these dire warnings. We know that individual actions can collectively make a big impact, but ultimately, businesses and governments hold disproportionate power that can be used to either delay or accelerate transformative change.
Governments have so far failed to make adequate steps to act on climate change or biodiversity loss. Many businesses, including those with undue influence on government decisions, also continue to profit from environmental destruction.
But there is an emerging trend coming from some “unusual suspects” that is giving me new hope for the future.
A growing movement within the private sector recognises that climate change - and increasingly, biodiversity loss - are serious financial risks. We’ve been talking about the need to “put a price on nature” for a long time. These calls have largely come from researchers or environmental NGOs, in the hope that governments will introduce new policies and markets that incentivise businesses to factor environmental “externalities” into their decision-making. Yet the last forty years of experimentation with market-based instruments for the environment has shown, at best, highly variable outcomes.
Private firms recognise that climate change is significant material risk to their financial performance, and that investing in climate action will deliver a greater return over the long term. Although there are many investment opportunities that provide “win wins” for the climate and nature, in many ways biodiversity risk is much more complex , and is considered to be the “next frontier’ for financial risk management.
I am genuinely excited by the collaborations emerging between the finance, agricultural and environmental sectors to solve the biodiversity and climate crises. Investors want to direct capital to projects according to how exposed they are to climate- and nature-related risks, and businesses who carry out ecosystem restoration and carbon sequestration works are taking advantage of these new capital flows. This doesn’t mean I have blind faith in the market, or think that government action is no longer needed. Rather, I see an ongoing role for government, which must increase to unlock further private sector investment.
My vision for the Anthropocene is a better deal for people and nature, where all sectors of society are contributing to a safe and just future, with thriving human and non-human communities.
For this vision to be realised, governments still need to be held to account, even as they more frequently adopt “market enabling” functions over top-down regulation. But as the role of the private sector in environmental governance grows, there are additional issues to consider.
First, we must remember that the private sector is acting because it is in the private interest to do so. Projects that are highly risky or slow to mature – including restoration of highly threatened species or ecosystems – are less to attract private investment than high return, low risk projects, like monocultures. This means that there is still a crucial role for governments and philanthropic donors to fund necessary research and pilot projects.
Second, governments must deliver better policy alignment and coherence to improve business and investor confidence. Just as it is nonsensical for Australian governments to send competing signals about whether forests should be cleared or restored, it makes no sense to me why the twin environmental crises of biodiversity loss and climate change are not being dealt with in the same federal policy portfolio. Instead, the Australian government appears to be in a rush to suck the life out of environmental protection laws.
Third, while there are many opportunities for public co-benefits from private investment in the environment, these benefits must be real and not simply greenwash. Certification and third-party accreditation can assist with this, but their costs and complexity can exclude small to medium-sized enterprises (SMEs) from market participation.
Fourth, we have to acknowledge there are risks associated with marketisation and an economic framing on people’s motivations and behaviours, how they interact with one another, and ultimately the outcomes for people and nature. Critical questions related to fairness, equity and justice risk being overlooked when success is only determined by high-level parameters such as financial returns or area of land protected.
Fifth, we mustn’t ignore hard-won lessons learned from experiences with other environmental markets, such as carbon and biodiversity offsetting. A highly technocratic approach that focusses on developing and refining metrics to enable market trades risks overlooking major issues relating to governance – poor transparency, inadequate accountability, and agency capture. We must resist calls for more and more information before action is taken, and instead adopt a precautionary approach to address the ‘radical uncertainties’ associated with environmental degradation.
Finally, as awareness of nature and climate-related risks grows within the private sector, it is likely that a range of frameworks, approaches and practices will proliferate. Innovation and agility are big strengths of a private sector led approach, but ultimately there needs to be some harmonisation of efforts to minimise confusion and complexity in the marketplace. Governments must step up and provide the leadership needed to smooth this process.
We mustn’t lose sight of the risks that come with new opportunities, but together with a green economic stimulus, I have hope for a better deal for people and nature in the Anthropocene.
Dr. Megan Evans is an ARC DECRA Fellow and Lecturer in Business at UNSW Canberra, and a member of the Public Service Research Group and the Environment and Governance Research Group. Her expertise sits broadly within environmental policy, governance and economics, with a particular interest in the use of market-based instruments for biodiversity conservation and climate change mitigation and adaptation. She has undergraduate degrees in mathematics and ecology, a PhD in public policy, and direct experience with policy making. She sits on the editorial boards of the journals Conservation Letters and Conservation Biology.