Introduction
In the financial realm, nature is first and foremost, a risk topic. As ecosystems are degrading, the economy is increasingly vulnerable to ecosystem services disruptions that may impact production processes and henceforth financial stability. Investing in halting and reversing nature loss allows issuers and investors to hedge against such disruptions and contribute to global goals.
The European Central Bank[1] recently introduced a new indicator that measures the exposure of the ECB’s and the Eurosystem’s corporate portfolios to sectors with material dependencies or impacts on nature. The findings indicate that roughly 30% of the Eurosystem's corporate bond holdings related to monetary policy are concentrated in the three sectors most affected: utilities, food, and real estate.
As nature is gaining momentum and becoming one of the main focuses of international negotiations, it is increasingly integrated within corporates and investors’ sustainability strategies. As investors are looking for greater exposure to positive impacts on nature to both contribute to national and international objectives, the ICMA provides the market with guidance on what can be considered nature-related projects and key performance indicators.
On June 26th, the ICMA published its “Sustainable Bonds for Nature: A Practitioner’s Guide”[2]. The guide is to be used in conjunction with the green or sustainability-linked bond principles. It creates a new sub-label for green bonds to be tagged as “nature bonds” when 100% of their proceeds are allocated to nature-related projects as defined in the guidance.
As nature-related expenditures are quite scarce, reaching a benchmark size nature bond issuance may be complicated. To palliate this and still underline nature-related expenditures, issuers may publish the proportion (%) of allocated nature-related expenditures pre- or post-issuance.
The guidance builds on the understanding that addressing nature loss requires to comprehensively tackle its underlying drivers (habitat destruction, resource exploitation, pollution and invasive species). Taking stock of this pressure-impact relationship, the guidance provides clear eligible project categories and KPIs in the realms of pollution, circular economy, water and waste management. Allowing for a larger set of projects to claim contribution to “halting & reversing” nature loss, beyond biodiversity protection and conservation
Eligible Projects for Nature Bonds
The guidance provides an indicative list of nature-related projects spanning from the implementation of nature-based solutions in many activities to wastewater treatment and construction. Some eligible projects appear quite niche in comparison with entire sectors fitting in (wastewater and stormwater management, construction, waste management) or “Circular approaches to reduce resource use and pollution”. These different levels show that nature-related expenditures may be found in every single sector at different levels.
Such instrument will therefore underpin all issuers’ nature-related strategies not only for those able to do pure nature bonds (100% of the proceeds allocated to nature-related projects) but also for those who can demonstrate that a substantial portion of allocated expenditures go towards nature-related projects.
A few principles must be respected for a project to qualify as a nature-related project:
- Going beyond business as usual and beyond what is required by local legislation. For example, a project that would not exceed environmental regulations requirements would not be considered additional and therefore eligible.
- The project must take part within the issuer’s value chain. Nature-based solutions implemented beyond the issuer’s remit as an offset scheme would not be considered a nature-related project. On the other hand, the integration of nature-based solutions in real estate or within industrial assets remits would qualify as nature-related expenditures.
Indicative list of nature-related projects |
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Restoration of hydrologically altered waters |
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Bioenergy |
Biodiversity-friendly transport and logistics |
Nature-based solutions for energy efficiency |
Nature-based solutions in transport and logistics |
Reduction of chemicals harmful to biodiversity |
Wastewater and stormwater management |
Waste management |
Nature-based solutions for water and wastewater management |
Nature-based solutions for pollution prevention and control |
Climate adaptation and resilience for biodiversity and ecosystems |
Sustainable forestry and agribusiness land management and production practices |
Nature-based solutions for resilient infrastructure |
Sustainable fisheries management and production practices |
Circular approaches to reduce resource use and pollution |
Sustainable aquaculture |
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Conserving and restoring ecosystems and the biodiversity they support |
Nature-based solutions for buildings |
Productive and protective buffer zones |
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Nature-related key performance indicators for SLBs
On the sustainability-linked front, most of the KPIs used in sustainability-linked financing so far, are GHG (scope 1+2+3) or energy related. Few KPIs related to the drivers of nature loss other than climate have been used. In some industries, such categories of indicators related to Land and sea use change, Resource exploitation, Pollution and invasive species are at least as material as climate-related ones.
In that sense, the paper provides guidance on how to assess and demonstrate KPIs materiality when it comes to nature.
Although it did not mention specific tools and data providers the guidance points at synthetic biodiversity footprints (such as Iceberg Datalab or CDC biodiversité’s footprints), TNFD reporting and sectoral materiality matrices for issuers to demonstrate that the nature-related KPI comply with the materiality requirement of the principles.
For target calibration, the guidance mentions the Global Biodiversity Framework (GBF) and the Sustainable Development Goals as overarching frameworks. As an example, target 7 of the GBF is to reduce pollutants from all sources by half by 2030. It can inspire corporates for which it is material, to set a Nox emission reduction target of 50% by 2030 for example.

For example, some KPIs such as the integration of regenerative agriculture practices seem to impose themselves in the Agrifood sector sustainability strategies. It addresses several objectives such as soil regeneration, carbon sequestration, reduced use of pesticides, etc.
Sovereigns may use the guidance to finance conservation or restoration programs or issue nature-related sustainability linked bonds. Ivory coast’s sustainability-linked loan[3] guaranteed by the World Bank integrating afforestation and deforestation targets is a good example of the use of nature-related KPIs in Sustainable Finance.
Conclusion
Further highlighting such nature-related financings will contribute to target 19 of the Global Biodiversity Framework: to mobilize $200 Billion per year for biodiversity from all sources, including $30 billion through international finance.