Guernsey: Rewilding Emerges As Asset Class With Huge Potential

Rewilding, the practice of returning land to its natural uncultivated state and returning native animal species to habitats, is becoming an asset class with enormous potential for investor returns.

The financier Ben Goldsmith, Chair of the Conservative Environment Network, is an enthusiastic advocate of rewilding and says it not only improves land biodiversity, it also has the potential to drive sustainable financial profits.

He told the audience at Guernsey's Sustainable Finance Week conference, where he was a keynote speaker: "This is not romantic, it's practical. Infrastructure projects that move with the grain of nature, not against it, are often cheaper and more durable. The only barrier is lack of understanding and connection."

He highlighted a recent rewilding project - the restoration of Somerset Level marshes in the UK, which became one of the world's largest and most successful flood alleviation schemes. He also worked on a project to rewild forest land in Somerset.

"These projects have created incredibly rich new environments and ecosystems featuring deer, wild pigs, beavers, and 'mosaic woodlands' where biodiversity can flourish," he said. "The results have been magical and attract international tourists, walkers, cyclists, and local school groups. It makes much more economic sense than previous activities."

Private markets icebreaker

Rewilding projects are already thriving across many countries. In England, for example, the government's Environmental Land Management Scheme incentivises a range of rewilding solutions to protect habitats, improve water quality, reduce carbon emissions, and increase resilience to floods, drought, pests and diseases.

The scheme has already generated 40,000 agreements covering 34% of agricultural land. By 2028, the government expects around 70,000 agreements covering 70% of land.

Ben said the scheme is an icebreaker that cannot work alone. In its wake is a flotilla of private investment that will, in time, dwarf public-funded schemes.

Investing in flood reduction

With a commercial focus, rewilding sensitive parts of water catchment areas can help to generate cleaner, steadier water supplies. For example, water company Severn Trent invested in a marketplace that pays farmers to protect rivers and environmentally-friendly farming practices. This will help the landscape retain more water, and reduce carbon emissions. The rewilding also helps to stop flash floods – a benefit that has caught the attention of insurance companies as well.

There are now many such markets in the UK bringing together government agencies, water companies, councils, insurers and landowners to invest in reduced drought and flooding.

Carbon and biodiversity

The growing carbon and biodiversity credit markets are also key income sources for rewilding projects.

Whilst many organisations have an ambition to be carbon neutral by 2050, it is currently unlikely that will be possible without some offsetting. Carbon credits have become a powerful global market worth $364 billion a year in 2022 and growing at 39% a year, according to Grand View Research.

For example, Pakistan has received $40 million of investment through private carbon markets for mangrove restoration. But it ultimately targets $12 billion in revenue from mangrove rewilding.

"Only financial markets can fund schemes on such scale, and these markets are emerging," added Ben.

Another speaker at the Guernsey conference Dr Gemma Cranston, executive director of climate change investment and advisory firm Pollination Group, highlighted the investment potential in the emerging biodiversity credit market.

Many large companies, such as GlaxoSmithKline, are committing to nature-positive strategies by, for example, supporting farmers in moving away from intensive agriculture, she said. That will bring many opportunities for patient investors, including through the biodiversity credit market. But it will take time for farmers to transition and they need help and compensation.

Alongside farmers, many of those involved are ecologists and conservationists, not businesspeople, she added. They also need help commercialising their activities with a venture capital mindset to make the projects investable. One way to do this is to bring them together with companies, banks, investors, insurers, food companies, and local communities to create systems and frameworks that enable and de-risk their rewilding activities.

Guernsey's pioneering Natural Capital Fund designation is one option to support these challenges as it recognises nature as an asset that sustains human social and economic activity.

Exciting ambition

Large investors are taking notice. In a 2023 Pollination report, 75% of institutional investors said they see nature as an asset class.

"It feel like the clouds are parting and it feels exciting and tangible," said Cranston. The results show these, typically risk-focused, investors don't want to just deal in risks but in forward-looking opportunities.

"Nature is in crisis; climate is in crisis," she added. "We need answers. But let's get commercial and find real market opportunities to work with nature. The only way to do that is to work collaboratively with passion and ambition."

Nature's value to the global economy is $58 trillion a year – more than half of global GDP, according to PwC. Making rewilding an asset class recognises the quantifiable economic value in reversing nature's decline. It also brings hugely exciting potential for investors.

For more information about Guernsey's finance industry please visit www.weareguernsey.com.

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