As introduced in our initial blog, the HBAR Foundation’s Sustainable Impact Fund (SIF) has been established to help solve the problems of inefficiency, lack of transparency and trust in the climate and environmental industry. The SIF does this through funding, technical support and by raising awareness of projects and businesses that measurably impact Environmental, Nature-based, and UN Sustainable Development Goal objectives and facilitate systemic change for the planet.
The Taskforce on Nature Markets (TNM) was launched on 31st March 2022 with the purpose of shaping nature markets that deliver nature-positive, net zero and equitable outcomes. It is a response to the emerging generation of nature markets and will establish a principles-based framework for building nature markets that both protect and regenerate nature, and ensure shared prosperity for the stewards of nature including local and indigenous communities The TNM whitepaper lays out the challenges and offers a simple framework for thinking about nature markets: https://www.naturemarkets.net/publications/the-future-of-nature-markets.
As part of our mission, The HBAR Foundation has become a Knowledge Partner of the Taskforce on Nature Markets. We will be contributing to the thought leadership and exploration of technical innovation in the establishment of global nature markets. Through our Guardian infrastructure expertise, and that of our grantees, we can provide real world experience and use cases that will inform the development of the nature market frameworks. Ultimately, this will benefit our grantees and the overall Guardian ecosystem, built on Hedera.
What are nature markets?
The sustainability of our global economic systems depends on the sustainability of our planetary ecosystem and its biodiversity. However, nature and its contributions are not valued appropriately and its economic benefits are inequitably distributed. The core concept here is that for a thing to be valued it has to have a recognised value. The so-called ‘tragedy of the commons’ occurs when users of a resource (in this case, nature) are unhampered by shared social and economic structures that govern access. These users then act according to self-interest, contrary to the good of all users, leading to the depletion and destruction of that resource through uncoordinated action.
Nature’s resulting decline increasingly impacts us all, undermining our efforts to address climate challenges, and disproportionately affecting those most directly nature dependent, including farmers, and local and indigenous communities. There are also strong links between carbon markets and nature’s capacity to store carbon, as well as the growth of markets for water, nature-linked tourism, and the emergence of a broader set of biodiversity offset markets.
From the TNM white paper, “Societies have deep traditions and diverse ways to value and steward nature. Nature’s critical relationship with the economy is both a source of pressure on nature’s health and continued bounty, and a mechanism through which it can be valued, invested in and conserved. Developed appropriately, nature markets could unlock and channel innovation in delivering new nature positive products, engaging and benefiting public and private actors, including local and indigenous communities.
Success in steering nature markets towards purposeful ends could deliver direct value to many actors in the sustainable use of nature, and catalyse investments linked to nature offset markets, including those linked to carbon markets. All of this and more is possible, tapping into the deeper values and social awareness of individuals and communities.”
Nature has joined climate as a risk that needs to be accounted for as part of an enterprise’s ESG (Environment, Social and Governance) obligations. The impact that a business’s operations have on the environment must be accounted for, not just tracking and offsetting its greenhouse gas emissions, but biodiversity impact, water impact, societal impact, etc., in short, nature.
Financial markets have frameworks, standards, rules, governance and (when efficient and transparent) fair pricing over the things that are traded. Putting a price on nature and ecosystem services allows us to recognise and report on how nature is traded, but nature and equity need to be at the core of these emerging nature markets in order to maximise their positive potential and mitigate associated risks.
Nature markets require nature-specific revenues to be generated as an integral part of the trade. For example, the sale of natural health products, or land-grown food, clearly involves the trade of nature itself. On the other hand, a business may place a monetary value on the risk of being fined for damaging nature by polluting. The nature in question is being valued but is not being traded. At the same time, if the business at risk takes out an insurance policy against being fined, this transaction would be part of a nature market in that not only is nature being valued, but there are associated revenue flows.
Tapping into sources of finance for nature related projects and market development can be complex. Projects can be easily financed, there are billions of dollars of impact funding looking for good projects to invest in, but that doesn’t necessarily lead to good value or positive and measurable outcomes. We have seen issues including lack of transparency, asymmetric information and double-spending in carbon markets – the very problem that the Hedera Guardian technology has been designed to solve.
Investors are becoming aware of nature risks and opportunities, making it an increasingly investable domain. This makes nature-friendly technologies and businesses more attractive – including those building on Guardian infrastructure that SIF is supporting with grants and through our sponsored accelerator programs. Many of the projects that we work with that create carbon offsets are already associated with nature assets (for example, through habitat renewal based on applying more sustainable agricultural practices) and so are in themselves investments in nature. Project financiers need to be able to understand and verify all these interrelated outcomes for the finance to flow into the ‘good’ projects.
Like ‘traditional’ carbon markets, nature markets risk the problems of fractured data and complex and opaque processes that lead to a range of issues from double spend of assets (such as carbon credits) to a lack of transparency in the markets and a systemic breakdown in trust. These markets have not matured in an efficient way that enables the trading of granular assets with complex roles and requirements and this has led to much slower market growth than is needed to address the environmental challenges that the world faces.
What is the HBAR Foundation’s role in the Taskforce on Nature Markets?
The HBAR Foundation Sustainable Impact Fund (SIF) was established as the first fund of its type in the industry to help solve these problems and is allocating $100M+ in 2022 to do it. The SIF funds, supports, and raises awareness of projects that measurably change how the world works in a specific and attainable way across Climate, NBS (nature based solutions), and UN Sustainable Development Goal (SDG) focused projects to facilitate systemic change for the planet.
As a TNM Knowledge Partner, the SIF will contribute to the Taskforce’s programmes of work by drawing on our technical capabilities and learnings, and those of our grantees, in the sustainable impact space. We will also support new and innovative approaches - through our incubation and accelerator programme - to address the challenges of shaping nature markets for the public good in a quantifiable way.
Our approach has been to drive standardisation in sustainability and nature markets by creating a repeatable format for high-quality tokenized credits that maintain an auditable link to project data through trading and retirement of tokenized credits. We are working with tools like the Open Source Guardian infrastructure which is the first implementation of the IWA Voluntary Ecological Markets ("VEM") Standards.
The Guardian enables Hedera based tokens to maintain a linked relationship to the roles, actors, and data created by ecological projects that follow a science-backed methodology. These assets are verifiable, auditable and discoverable on the Hedera Hashgraph public ledger. This allows for transparent communication to stakeholders, including governments and NGOs, with the full auditability of specific assets.
Our grantee projects fall into a number of categories, including projects measuring granular carbon emissions for industries including transportation, energy, manufacturing, and other supply chains. We will also support applications in our ecosystem, creating verified supply of carbon offsets and removals, in addition to infrastructure that enables new forms of exchange or more traditional tooling such as centralised exchanges and green bonds.
We see nature markets as the super-set of carbon markets combining all natural systems, species and environments and their inter-connected relationships - more complex than the ’simple’ carbon markets - but our Guardian-based approach to solve the problem of these markets is still applicable. Through our participation with Taskforce on Nature Markets working groups we will develop policies that our grantees and all other Guardian ecosystem participants can benefit from.
There is also a surge of interest in investing in nature-based solutions in securing carbon offsets to trade in voluntary carbon markets. Initiatives such as the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) have helped to catalyse huge growth in investments in the owners and stewards of nature assets to secure long-term carbon off-take agreements. Interest is also surging in agri-tech as an investable domain, in some ways the closest natural analogue of renewables to climate.
The SIF has a long pipeline of projects and businesses in the nature and carbon markets space seeking grants or access to our accelerator programs - from regenerative agriculture, to peatland and mangrove protection, to biodiversity and habitat renewal. Some examples of recent grantees who are building on Guardian infrastructure are:
- Tamuwa which is making an impact in Africa by converting bio-waste into highly calorific briquettes for use on cooking stoves, both reducing carbon emissions (via methane release from the agricultural waste), reduction in habitat destruction (for wood), as well as carbon credits as a revenue stream for local communities.
- Civic Ledger which is building its Water Ledger platform on Hedera with the Guardian infrastructure. Water Ledger redefines water markets using tokens representing water resource rights and a shared identity service providing Verifiable Credentials for water licensing. Civic Ledger is also a member of the TNM and, with THF, helping to design habitat and biodiversity into the policies for their Guardian water tokens.
- Dovu which is building a platform that allows farmers to access transparent and fair market places for carbon credits based on their regenerative land management practices. This makes it easy for organisations to offset their carbon footprints with carbon that’s sourced directly from farmers.
For more information on these projects, and others, see our blogs:
Call to Action:
If you’re a builder who wants to facilitate systematic change for the planet and leverage the distinct advantages of the Hedera network, apply for SIF grant funding here.
About the HBAR Foundation
Founded in 2021, The HBAR Foundation fuels the development of the Hedera ecosystem and the HBAR economy by providing grants and other resources to developers, startups, and organizations that seek to launch decentralized applications in DeFi, NFTs, CBDCs, Sus, gaming, and other sectors. In addition to providing funding through a streamlined grant process, the HBAR Foundation acts as an integrated force multiplier through expert support across technical, marketing, business development, and other operational functions that are required to scale. Apply for a grant at www.hbarfoundation.org/apply.
About the Taskforce on Nature Markets
The Taskforce on Nature Markets has been established to shape the new generation of nature markets to deliver nature positive and equitable outcomes. To deliver this objective, the Taskforce is advancing work across 6 interlinked areas: mapping approaches and experiences, building awareness of opportunities/risks, growing a community of practitioners, encouraging innovation, advancing supportive governance arrangements and launching pathfinder initiatives to scale the implementation of recommended approaches.
The Taskforce is an initiative of, and hosted by Finance for Biodiversity (F4B), and is supported by the MAVA Foundation.
Taskforce website (naturemarkets.net)
Taskforce White Paper (bit.ly/FutureofNatureMarkets)