Making the case for biodiversity and impact investing

Wed, 7 Oct 2020

The voice is calm and reflective. Nigel Sharp is someone who has the sound of the country in what he says, the way people raised on the land used to speak – unhurried, unfussed, uncomplicated. But Nigel’s message is anything but old-fashioned: it is, in fact, full of the urgency of the environmental challenges confronting the globe and finding new ways to support regenerative agriculture and biodiversity.

“It’s now or never,’’ he says, simply. Nigel is a biodiversity impact investor. His goal is to combine sustainable conservation businesses with commercial viability that makes them appealing to investors. Innovation and entrepreneurship with an environmental focus are at the core of making it all work.

Nigel was raised on a farm in south-west Victoria and after a stint as a valuer, bought the Mt Rothwell property in 2003 that became a testing ground for his approach. The 470ha property, north of the You Yangs in Victoria, is free of predators and has enabled the establishment of successful breeding programs for threatened species, the Eastern Barred Bandicoot, Brush Tailed rock wallabies and Eastern Quoll. It’s sister property, Tiverton – also in Victoria – is planned to supersede Mt Rothwell as the state’s largest feral predator-free conservation reserve. Nigel also established Odonata, a NfP that supports biodiversity solutions and taps into business to help support and fund its initiatives. He is, unmistakeably, an advocate for the difference impact investing can make when it turns its attention to the environment.

“Impact investing allows us to work with investors who are prepared to take the risk of seeing that change can come with the approach we’re taking,’’ he says. “It’s a leadership type of investing is the way I look at it that – and all through history, different risks are being taken to bring change, no matter what your attitude. Impact investing is a really critical part of how we recover the planet.’’

There are signs that there is growing interest. Some of it has to do with leadership, and some of it has to do with the increasing focus on renewable energy. And then there are the compelling examples of a summer of devastating bushfires and the deep impact of a pandemic that has boosted community awareness of the issues. “I think there’s a groundswell, but we still need to prove that up,’’ Nigel says. “People are announcing more and more investment in this space – we’ve got some amazing new emerging leaders such as (Atlassian co-founder) Mike Cannon-Brookes, and others who’d you say they were impact investors the way they’re taking their approach to renewables [and] the attention that comes to those people through the media can only make others start to think about it. What we really need though is to get our institutional investing community to start taking a stronger interest in impact investing beyond renewable energy,’’ Nigel says.

Central to those discussions is being able to adopt an approach that can potentially mitigate the risk. And for that, Nigel and his team have adopted what is known as the ‘Seven Cs’’, a checklist of investment and impact priorities that provide some comforting certainty. The Cs are – creatures, climate, corridors (connecting areas of similar wildlife habitat), community, culture, cash flow and capital. Ideally, they will all be in harmony, or at least a balance but they don’t need to be for a project to succeed. Perhaps most importantly for potential investors is the reassurance that pursuing a biodiversity solution is not antithetical to profit. At Tiverton, there is a sheep farm where the sheep feed on native grasses. The wool fetches a high price that reflects not only the conservation story but also the fine quality of the fleece.

“Whatever project we look at, we have to consider the Seven Cs – it’s a way to have that discussion with impact investors,’’ Nigel says. “A lot of messaging in the world is how do you keep something simple to understand and I think the Seven Cs do that.’’

But for all of that, Nigel still sees a reluctance for impact investment to take the next step. He puts it down to two reasons – the need for investors to see financial success and the practical difficulties for larger institutional to get involved. “As much as investors are interested in this space, they need a peace of mind that comes from financial returns,’’ he says. “And the allocation institutions have is difficult because the bigger they are, if they want to put a small allocation into something, they need to do the same amount of work.’’

Providing examples of how impacting investing can support and promote biodiversity is an important part of the broader strategy. “The approach we’re taking is looking at larger landholdings where we can and redesigning those, taking that farm and redesigning that from a regenerative approach,’’ Nigel says. “And I’m using the word regenerative quite broadly…so how do we take that farm so that it can be both producing and beneficial to the climate and biodiversity over the long term.’’

Nigel sees the next step is trying to engage the institutions in the vital importance of biodiversity. “We still live in a world where capital makes massive change. We’re seeing this demand coming in to solve climate change with carbon investment and that’s starting to be driven by corporates, rather than government and in a sense it will have a bigger impact than the government trying to tell the corporates what to do,’’ Nigel explains. Philanthropy has, on many historical measures, not been as interested in environment as it has been on what Nigel refers to as ‘human creativity’’. All in all, it only adds to the responsibility he feels to make biodiversity a priority for impact investors. “In wanting to do this I feel a great deal of responsibility for it be successful financially because I think that will open up the floodgates of investment and so the complexity of delivering on the 7Cs to get the result will make a much bigger change than convincing one or two big investors to give us some support,’’ he says. “We have to get those who are prepared to take the risk to come with us.’’ Nigel not only sees the benefits, so too can the investors. “The ones who get committed to it, really do feel they are part of change,’’ he says.