Publication: How Natural Capital Approaches Can Support Sustainable Investments and Markets
Loading...
Date
2020-10
ISSN
Published
2020-10
Editor(s)
Abstract
The world’s stocks of natural resources its natural capital and the rich ecosystem it provides support business and economies to the tune of forty-four trillion in economic value each year. Yet the enormous value of this natural capital has been neglected and largely invisible from private sector decision making. This has had an impact on nature’s capacity to continue providing the ecosystem services upon which businesses and society rely. Nature’s current decline, underpinned by unsustainable consumption and production patterns, population dynamics, deforestation, and land use change, is a clear risk to business, markets, and society. The way that businesses measure, value, relate to, and account for the interaction between nature and people must evolve, and quickly. Building markets that consider natural assets and the services they provide alongside financial assets can provide a new, insightful, and relevant way to address and manage serious environmental challenges, while building long-term sustainability and resiliency in the private sector. This note underscores the urgency of action and shares ways companies can use natural capital approaches to help maintain both nature and their ongoing role in advancing prosperity and development in emerging markets.
Link to Data Set
Citation
“White, Elizabeth M.; Rahill, Bilal; Gough, Mark; Spurgeon, James. 2020. How Natural Capital Approaches Can Support Sustainable Investments and Markets. EMCompass;Note 92. © International Finance Corporation. http://hdl.handle.net/10986/34856 License: CC BY-NC-ND 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Financing Deep Tech(World Bank, Washington, DC, 2021-10)Deep tech companies - those built on advances in biotechnology, robotics, electronics, artificial intelligence, and other advanced technologies—aim to solve complex social and environmental challenges. Today the majority of deep tech companies are being launched in developed countries, yet the solutions they can provide are applicable globally. Many of these solutions are especially critical to emerging markets, as the intractable challenges of climate, health, and connectivity, among other issues, disproportionately affect these nations. Addressing these challenges is a strategic priority for development finance institutions and governments worldwide, so financing deep tech companies and boosting deep tech ecosystems in order to deliver new solutions globally is a pressing matter. Doing so, however, requires substantial capital and carries a higher degree of risk than ordinary venture investments. This note examines the process of financing a deep tech company, including the benefits and drawbacks of currently available types of financing, and suggests examples of promising but not yet widespread alternatives.Publication Banking on FinTech in Emerging Markets(International Finance Corporation, Washington, DC, 2022-01)Despite near-universal access to financial services in advanced economies, financial exclusion is stubbornly persistent in many emerging markets, leaving huge swaths of low-income populations unbanked or underbanked. FinTech companies, which apply innovative technologies to deliver such services in new ways, have begun to tap into the enormous unmet demand that this represents. These companies are starting to thrive in emerging markets, though regulatory issues, particularly weak consumer protection measures, remain to be resolved in many countries. If these can be overcome, and more progress toward universal access to digital infrastructure can be made, FinTechs will continue to scale and spread.Publication Sustainability-Linked Finance(International Finance Corporation, Washington, DC, 2022-01)Sustainability-linked finance is designed to incentivize the borrower’s achievement of environmental, social, or governance targets through pricing incentives. Launched in 2017, it has now become the fastest-growing sustainable finance instrument, with over $809 billion issued to date in sustainability-linked loans and bonds. Yet these instruments are still nascent in emerging markets, which represent only 5 percent of total issuance to date. This note shares examples of recent sustainability-linked financing, including several involving IFC in various roles, to highlight how investors can utilize these new instruments in emerging markets and mitigate greenwashing risksPublication Blended Concessional Finance(International Finance Corporation, Washington, DC, 2021-07)Blended concessional finance, the combination of commercial finance from the private sector and development finance institutions (DFIs) with concessional finance from public and other sources, is increasingly being used by DFIs to support developmentally important projects where normal DFI or commercial finance is not available because of the high risks involved. This can be especially significant in lower-income and fragile and conflict-affected situations (FCS), where risks are high and innovative and pioneering projects can be critical to economic growth, market creation, and poverty reduction. Blended concessional finance is also being used during the COVID-19 pandemic to help sustain struggling businesses hurt by demand and supply shocks, and to rebuild economies toward green, resilient, and inclusive growth. As blended concessional finance involves the use of concessional public or philanthropic1 funds to enhance the viability of private sector projects, strong processes, particularly in the areas of transparency, access, and governance, are necessary to ensure that these resources are used effectively and without distorting markets.Publication Artificial Intelligence Innovation in Financial Services(International Finance Corporation, Washington, DC, 2020-06)Artificial intelligence technologies are permeating financial services sectors around the world. The application of these technologies in emerging markets allows financial service providers to further automate their business processes and to leverage new and big data sources to overcome obstacles, including the high cost of serving rural and low-income customers and establishing customer identity and creditworthiness, that prevent the delivery of financial services to many consumers. Realizing financial inclusion benefits through the adoption of artificial intelligence relies on its responsible adoption by firms, on competitive market settings, and on continued investment in the necessary infrastructure.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Blue Natural Capital(International Finance Corporation, Washington, DC, 2021-04)The Coronavirus (COVID-19) pandemic hit the tourism industry particularly hard, affecting livelihoods and exacerbating some pressures on the natural capital resource base. Supporting the tourism sector recovery is an opportunity to build back better, ensuring that business investments lead to a sustainable and resilient shared-growth pathway that is good for tourism and the natural capital on which it depends. Further sustainable management of the Blue economy could more than double its economic contribution to global relationship with economic sectors across coastal landscapes and markets. The experience of the State of Palawan in the Philippines is explored in this note. It serves as a useful model for weighing the opportunities and challenges typical of coastal tourism areas and exploring natural dependencies therein.Publication Redefining Value : The Future of Corporate Sustainability Ratings(World Bank, Washington, DC, 2012)Corporate sustainability ratings are a potentially powerful but still underused tool for building a competitive, socially purposeful, and financially sound enterprise. In a globalizing world replete with business opportunities and risk, corporate boards continually need to reappraise what constitutes good governance. Traditional board duties pertaining to strategic oversight, executive compensation, and financial auditing will remain integral for the foreseeable future. But these alone will not suffice in a time when the prosperity of companies is inextricably linked to issues such as reputation, brands, supply chain management, quality and quantity of human and intellectual capital, protection of human and labor rights, and climate change. Such emergent issues are part of a historical moment in which the role of companies in fostering societal and ecological well-being at the global, national, and local levels is under increasing scrutiny. These are conditions that fuel intensifying public discourse concerning corporate social responsibility, sustainable capitalism, shared value creation, and other linked concepts that challenge the conventional wisdom that positions shareholder value as the paramount measure of company success. Indeed, sustainability is not new to the two common definitions of corporate governance: (i) the actual behavioral patterns of corporations in terms of efficiency, growth, financial structure, and other attributes; and (ii) the normative framework within which firms operate in terms of legal systems, financial markets, and labor markets.Publication Indonesia Sustainable Natural Resources Management through PNPM Green Investments(World Bank, Jakarta, 2013-09)The PNPM Green program has been implemented for four years. The studies reported in summary here were undertaken to identify the benefits of the program, and to examine to what extent the program meets its objective to make the utilization of natural resources by rural communities sustainable. PNPM Green aims to improve environmental and natural resources management (NRM) and associated governance, while increasing household incomes in poor communities, and empowering local groups who prepare and execute the sub-projects and activities. To assess the effects and outcomes of PNPM Green in targeting these objectives, the Economic and Livelihoods Study applied the concepts of financial, natural, human, and social assets, as well as influence and access . The Micro-Hydropower Return on Investment (MHP ROI) Study analyzed Micro-Hydropower (MHP) schemes using a business assessment methodology. This was expanded by incorporating non-tangible and social benefits of MHP schemes. The Spillover Effect Study measured the extent of benefits in non-participating communities. These studies indicate that participation of beneficiaries in PNPM Green sub-projects and activities is likely to be higher if the sub-project: (a) conforms to the priority needs of participants livelihoods; (b) provides immediate benefits to the community; (c) directly increases household incomes in participating communities; (d) is supported by local values, local regulations, or local knowledge; and (e) is co-facilitated by community leaders and local government officials. Sub-projects with these characteristics are also more likely to be replicated by other villages.Publication Investing in Natural Capital for Eradicating Extreme Poverty and Boosting Shared Prosperity : A Biodiversity Roadmap for the WBG(Washington, DC, 2014-06)The World Bank Group (WBG) has a long experience in engaging in biodiversity with world-class expertise in the field. It has been the single largest funder of biodiversity investments since the late 1980s. The WBG investments have largely been of two kinds: (1) investments in biodiversity, aimed at the conservation and sustainable use of species, habitats, and ecosystems that sustain healthy ecosystems, while enhancing people's livelihoods and safety nets. These investments have also been providing jobs and economic development in frequently impoverished rural areas for example by supporting protected areas and an increasingly important tourism industry; and (2) investments that add value to projects in other sectors, such as irrigation, hydropower, and infrastructure, by increasing their environmental sustainability. The WBG is a global center of excellence that provides economy wide technical and economic knowledge and expertise on biodiversity and ecosystems. It has the standing and convening power to facilitate participatory dialogue between client countries and networks of other relevant stakeholders on matters of biodiversity and climate change concern, such as loss of ecosystem resilience, forest law enforcement and governance, wildlife trade, and overexploitation of natural resources.Publication Private Equity and Venture Capital’s Role in Catalyzing Sustainable Investment(International Finance Corporation, Washington, DC, 2018)A defining characteristic of the private equity and venture capital (PE and VC) investment style is the injection of expertise (including technical knowledge, industry relationships, management skills, and so on) in conjunction with risk capital into enterprises to help them grow, improve their performance, and achieve strong financial returns. Harnessing this investment style in the pursuit of sustainable growth and investment is central to achieving the innovation needed for sustainable development. PE funds increasingly align with value creation linked to social and environmental considerations. PE firms are recognizing the material value brought by sustainable businesses and social enterprises, which has resulted in a greater availability of sustainable PE capital that follows, to varying degrees, one or more of the disparate standards being developed or already in the market. This paper focuses on key aspects of sustainable PE and VC market development and deployment. It discusses: (1) why sustainable PE and VC is a useful tool to catalyze other types of capital to achieve sustainability objectives, (2) best practices and lessons learned from the experiences of knowledge partners, (3) the main barriers to further developing the sustainable PE and VC market, and (4) options for countries to voluntarily consider or adopt to overcome these barriers.
Users also downloaded
Showing related downloaded files
Publication Global Economic Prospects, January 2024(Washington, DC: World Bank, 2024-01-09)Note: Chart 1.2.B has been updated on January 18, 2024. Chart 2.2.3 B has been updated on January 14, 2024. Global growth is expected to slow further this year, reflecting the lagged and ongoing effects of tight monetary policy to rein in inflation, restrictive credit conditions, and anemic global trade and investment. Downside risks include an escalation of the recent conflict in the Middle East, financial stress, persistent inflation, weaker-than-expected activity in China, trade fragmentation, and climate-related disasters. Against this backdrop, policy makers face enormous challenges. In emerging market and developing economies (EMDEs), commodity exporters face the enduring challenges posed by fiscal policy procyclicality and volatility, which highlight the need for robust fiscal frameworks. Across EMDEs, previous episodes of investment growth acceleration underscore the critical importance of macroeconomic and structural policies and an enabling institutional environment in bolstering investment and long-term growth. At the global level, cooperation needs to be strengthened to provide debt relief, facilitate trade integration, tackle climate change, and alleviate food insecurity.Publication Global Economic Prospects, June 2025(Washington, DC: World Bank, 2025-06-10)The global economy is facing another substantial headwind, emanating largely from an increase in trade tensions and heightened global policy uncertainty. For emerging market and developing economies (EMDEs), the ability to boost job creation and reduce extreme poverty has declined. Key downside risks include a further escalation of trade barriers and continued policy uncertainty. These challenges are exacerbated by subdued foreign direct investment into EMDEs. Global cooperation is needed to restore a more stable international trade environment and scale up support for vulnerable countries grappling with conflict, debt burdens, and climate change. Domestic policy action is also critical to contain inflation risks and strengthen fiscal resilience. To accelerate job creation and long-term growth, structural reforms must focus on raising institutional quality, attracting private investment, and strengthening human capital and labor markets. Countries in fragile and conflict situations face daunting development challenges that will require tailored domestic policy reforms and well-coordinated multilateral support.Publication Digital Progress and Trends Report 2023(Washington, DC: World Bank, 2024-03-05)Digitalization is the transformational opportunity of our time. The digital sector has become a powerhouse of innovation, economic growth, and job creation. Value added in the IT services sector grew at 8 percent annually during 2000–22, nearly twice as fast as the global economy. Employment growth in IT services reached 7 percent annually, six times higher than total employment growth. The diffusion and adoption of digital technologies are just as critical as their invention. Digital uptake has accelerated since the COVID-19 pandemic, with 1.5 billion new internet users added from 2018 to 2022. The share of firms investing in digital solutions around the world has more than doubled from 2020 to 2022. Low-income countries, vulnerable populations, and small firms, however, have been falling behind, while transformative digital innovations such as artificial intelligence (AI) have been accelerating in higher-income countries. Although more than 90 percent of the population in high-income countries was online in 2022, only one in four people in low-income countries used the internet, and the speed of their connection was typically only a small fraction of that in wealthier countries. As businesses in technologically advanced countries integrate generative AI into their products and services, less than half of the businesses in many low- and middle-income countries have an internet connection. The growing digital divide is exacerbating the poverty and productivity gaps between richer and poorer economies. The Digital Progress and Trends Report series will track global digitalization progress and highlight policy trends, debates, and implications for low- and middle-income countries. The series adds to the global efforts to study the progress and trends of digitalization in two main ways: · By compiling, curating, and analyzing data from diverse sources to present a comprehensive picture of digitalization in low- and middle-income countries, including in-depth analyses on understudied topics. · By developing insights on policy opportunities, challenges, and debates and reflecting the perspectives of various stakeholders and the World Bank’s operational experiences. This report, the first in the series, aims to inform evidence-based policy making and motivate action among internal and external audiences and stakeholders. The report will bring global attention to high-performing countries that have valuable experience to share as well as to areas where efforts will need to be redoubled.Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.Publication The Container Port Performance Index 2023(Washington, DC: World Bank, 2024-07-18)The Container Port Performance Index (CPPI) measures the time container ships spend in port, making it an important point of reference for stakeholders in the global economy. These stakeholders include port authorities and operators, national governments, supranational organizations, development agencies, and other public and private players in trade and logistics. The index highlights where vessel time in container ports could be improved. Streamlining these processes would benefit all parties involved, including shipping lines, national governments, and consumers. This fourth edition of the CPPI relies on data from 405 container ports with at least 24 container ship port calls in the calendar year 2023. As in earlier editions of the CPPI, the ranking employs two different methodological approaches: an administrative (technical) approach and a statistical approach (using matrix factorization). Combining these two approaches ensures that the overall ranking of container ports reflects actual port performance as closely as possible while also being statistically robust. The CPPI methodology assesses the sequential steps of a container ship port call. ‘Total port hours’ refers to the total time elapsed from the moment a ship arrives at the port until the vessel leaves the berth after completing its cargo operations. The CPPI uses time as an indicator because time is very important to shipping lines, ports, and the entire logistics chain. However, time, as captured by the CPPI, is not the only way to measure port efficiency, so it does not tell the entire story of a port’s performance. Factors that can influence the time vessels spend in ports can be location-specific and under the port’s control (endogenous) or external and beyond the control of the port (exogenous). The CPPI measures time spent in container ports, strictly based on quantitative data only, which do not reveal the underlying factors or root causes of extended port times. A detailed port-specific diagnostic would be required to assess the contribution of underlying factors to the time a vessel spends in port. A very low ranking or a significant change in ranking may warrant special attention, for which the World Bank generally recommends a detailed diagnostic.