The natural world is both precious and the backbone of stable communities, industries and climate systems. But despite early successes and enthusiasm around nature-based solutions to social and environmental challenges, a gap remains between what is being done today and what will be needed tomorrow.
McKinsey recently brought together dozens of leaders — from startup heads to global institutional investors — at Climate Week in New York for a panel discussion on “Financing Nature-Based Solutions at Scale.” The conversation that followed included the presentation of three case studies and a group problem-solving session on each.
“These conversations were real, honest and involved stakeholders at all levels,” says the associate Caroline DeVit, which helps lead McKinsey’s work on natural capital. “And in each of them, we talked about how to make these solutions work – financially, for local communities, for everyone.”
The first case study, for example, focused on Pacific Island tuna and Walmart’s Commitment to Supplying the Market with tuna from more sustainable sources. Next, participants discussed what it would take to expand the partnership beyond where it is currently focused, in the Marshall Islands, to other Parties to the Nauru Agreementwhich controls 50% of the world supply of skipjack tuna.
These conversations were real, honest and involved stakeholders at all levels.
Caroline De Vit, associate partner at McKinsey
Another was presented by Rooting, centered on the potential to create long-term value from forests for smallholder farmers who participate in reforestation programs to accelerate the scaling up of carbon credits from nature-based solutions. Community-based land-use decisions that depend on economic livelihoods and long-term planning that create value for all stakeholders will help ensure that nature-based agriculture and forestry solutions evolve sustainably .
And a third centered on Indonesia PT Rimba Makmur Utamawhich helps the Katingan Peatland Restoration and Conservation Project restore and protect peat swamp forests and the challenges and opportunities they face.
Over the course of the day, several broadly applicable ideas on improving nature-based solutions at scale emerged. Read on for takeaways from session attendees.
Build trust early among all stakeholders
For a nature-based solution to work, the value proposition must make sense to everyone involved. Engage early with developers, NGOs, universities, technology innovators, enterprises, and other investors to understand if a solution design aligns with investor impact priorities and risk expectations and performance (and vice versa). Also, use these discussions to spark new ideas on everything from technology to business models to funding.
Think beyond carbon credits
Although carbon credits can play an important role in monetizing nature-based solutions, it is important to consider complementary own-source revenues (such as sustainable agriculture or fishing). These will help the economy in the long run by building permanent change into the fabric of the business. As markets mature, other types of credits may unfold to support nature.
Design for scalability
All pilots must also be designed and executed with the idea of evolving in the future. With this embedded in the mindset and structure of the project, it will be easier to maximize impact and take full advantage of knowledge and experience gains.
Use data and technology to get a more complete picture of returns
Measuring and tracking outcomes related to livelihoods, health and nature, especially at the local level, can unlock funding and ensure long-term success. Some space leaders follow a landscape-based approach, focusing on economic and social outcomes at the local level. Participants also identified innovations from other interventions beyond nature such as public health, microfinance or human rights.
Engage local communities for long-term success
People living in the communities that a nature-based solution will impact need to be on board. These fishermen, farmers and families should be constantly encouraged to participate, and funding models should be self-sustaining. The most successful projects are championed by local communities, and building that trust takes time.
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