Post date 10 Aug 2026 (original LinkedIn date)
Original LinkedIn version· 3,293 words
‘The Other Half’ by Marillion, 2007, from the album, ‘Somewhere Else’
Part 4 of a series on discount rates, evaluation horizons, and what nature finance should actually be championing
The three pieces I’ve written so far (post initial inspiration from Dr Roger Iles) have been musing over the demand side of nature finance: what discount rate should apply to nature-related cash flows; why the twenty-year IRR window systematically undervalues long-tail nature assets, and how the Green Book change and the Cushon fiduciary opinion have quietly removed the institutional cover for asset owners continuing to ignore both problems. My line of thinking has been that private capital could be flowing into nature at meaningful scale, and the reason it isn’t lies in the methodological and fiduciary architecture that allocators operate under.
My argument is, I think, correct as far as it goes, but it really addresses only half of the problem. Even if every asset owner in the country adopted the parallel appraisal track I’ve been advocating for, and even if every trustee took the broader interpretation of fiduciary duty seriously, I feat that capital would still struggle to flow into restoration at scale. Why? Because on the other side of the market there’s a supply-side problem that’s just as structural: there are not enough investable restoration assets for the capital to flow into.
Roger Iles published a further piece in June making this argument directly, and putting a specific proposal on the table for addressing it. I want to engage with it substantively, because it complements the demand-side argument I’ve been making in ways that we haven’t quite gotten to yet.
The diagnosis: a risk pricing gap, not just a funding gap
The most important move in Roger’s piece is the diagnostic one. Standard nature finance discourse fixates on the capital shortfall ie we need c.£6 billion per annum for the next decade vs we have a mere c. £250 million, and the gap is huge. This has been known for several years and it has produced very little in the way of scaled deployment. Roger is now pointing at why.
I firmly believe that the capital exists, but what’s missing is the underwriting infrastructure that would let institutional capital flow into restoration at scale. Restoration projects are small, site-specific, biologically complex, and difficult for non-specialist investors to evaluate. Even where the ecological case is strong, the financial case is weakened by uncertainty about wildfire, drought, storm damage, establishment failure, and the chronic risk that biodiversity outcomes don’t materialise on the expected timeline. Until these risks can be assessed, priced, and transferred in standardised ways, institutional capital cannot legitimately come in regardless of how much intent there is to deploy it.
This diagnosis feels right, and it’s the kind of thing the nature finance conversation needs more of. It moves the discussion from vague calls for blended capital toward specific questions about market architecture: what underwriting infrastructure is missing; where the actuarial gap sits; and how risk transfer should be structured for asset classes that don’t yet exist at scale.
The historical analogy Roger chooses is Lloyd’s of London, and it seems a reasoned choice. Insurance markets have repeatedly taken risks that were initially considered uninsurable and developed the actuarial, data, and governance infrastructure that made them progressively more priceable ie marine insurance in the eighteenth century, aviation in the early twentieth., and cyber in the last ten years or so. Each started as bespoke, expensive, conservatively priced cover that became standardised as loss experience accumulated. Restoration risk could plausibly follow the same path, and the point Roger makes about no single insurer having an incentive to do the development work alone is exactly right. The economic case for the pooled structure is frustratingly strong.
The proposal, briefly
Roger proposes a corporate-backed nature insurance pool with three layers. Public or quasi-public actors, EU institutions, promotional banks, development finance bodies, environmental funds etc, take the first-loss position, absorbing the earliest and hardest-to-price risks. Corporate capital sits above that as catalytic reserve capital, funding the underwriting, monitoring, and risk absorption that makes restoration projects investable. Insurers and reinsurers add underwriting discipline and further capacity over time.
The pool would combine parametric cover for acute shocks like storm, drought, and fire with outcome-based cover for slower biodiversity underperformance, backed by shared monitoring and independent verification. The result, in his framing, is that messy, bespoke, hard-to-price restoration risk gets converted into a more standardised and investable portfolio.
I think his architectural intuition here is right, and the role Roger carves out for corporate capital is more thoughtful than the usual “corporates should invest in nature” narrative. He’s not asking corporates to become ecological investors, which they are demonstrably bad at. He’s asking them to provide reserve capital in a layered structure, which is something they could plausibly do well because it leverages their balance sheet capacity rather than their limited ecological underwriting skill. The distinction matters, and getting it right could unlock corporate participation in ways the current sustainability-adjacent commitment structures don’t.
Lighter than it looks at first glance?
I want to push on a few specific points, not because the overall proposal is weak, it isn’t, but because the execution challenges are maybe more substantial than the piece fully acknowledges, and getting the market design right depends on being open and honest about them.
The parametric-versus-outcome-based verification question could well be harder than the piece suggests. Parametric insurance works well when you can define a trigger that closely tracks the loss, say wind speed exceeding a threshold, rainfall below a threshold, temperature above a threshold. For acute shocks, fire, storm, drought, this is feasible, though there’s substantial basis risk between the trigger and the actual ecological damage. A fire that stays within a defined perimeter can still destroy the ecological value of what it burned, whereas a drought that meets its parametric definition may or may not correspond to the specific stress the covered ecosystem is experiencing.
For chronic biodiversity underperformance, I fear that parametric structures won’t work as we want. You need outcome-based verification, which means independent monitoring against ecological baselines. That’s expensive, slow, and contested, and it’s also the area where the current infrastructure is weakest. The Goldman Sachs and MIT-IBM Watson AI Lab work on AI-enabled biodiversity measurement that was published earlier this year is genuinely relevant here, the measurement infrastructure they’re developing is part of what would eventually make outcome-based cover feasible at scale. But we are not yet at the point where the monitoring exists in the form the pool would likely need. Roger’s piece hints at “shared monitoring and independent verification” but doesn’t fully engage with how hard this actually is or how much of the proposal’s viability depends on solving it.
This isn’t a fatal objection, more of a scoping question, I think. The pool might be able to launch with parametric cover for acute shocks while the outcome-based cover develops over time, which mirrors how catastrophe reinsurance markets actually evolved. But the piece reads as if the parametric and outcome-based components can be launched together, and I don’t think that’s realistic ... yet.
Is the first-loss issue the weakest link in the piece? Roger holds that “EU institutions, promotional banks, development finance bodies, or environmental funds” could provide the first-loss tranche. In practice, mobilising public first-loss capital at the scale the proposal would need is a multi-year political and institutional negotiation, and let’s be honest, the EU’s recent track record on this kind of structuring, the European Green Deal, InvestEU, the various blended finance facilities, is mixed at best. So it becomes a stretch to treat the public first-loss layer as available, when in reality it would be the binding constraint on whether the structure can launch at meaningful scale.
The commercial logic for corporate participation is also arguably underspecified. Why would large corporates put capital into this rather than into other sustainability-adjacent commitments competing for the same internal budgets? The piece implies the answer is regulatory pressure under CSRD, but the recent Omnibus revisions have narrowed CSRD scope substantially. The companies still in scope are large enough to provide meaningful capital, but the regulatory pressure pushing them toward exactly this kind of structure has been softened compared with the original CSRD trajectory. The proposal needs a sharper answer to why would a corporate treasurer choose this over the alternatives and I don’t feel that we’re quite there yet.
Finally, the framing of political coherence around delivery is, I suspect, sadly more optimistic than the situation genuinely warrants. The Nature Restoration Regulation is now legally binding, and National Restoration Plans are due in September, but several Member States are likely to miss the deadline or submit limited plans. The political environment in Italy, Hungary, and parts of Central Europe has shifted against the Regulation since it was passed. The financing need is real, but the political coherence around delivery is probably less assured than Roger suggests.
And stronger than it looks too!
There’s also a case that Roger is underselling parts of his own argument, and it’s worth surfacing those too. I think that the Lloyd’s analogy is doing more work than the piece explicitly claims. What Lloyd’s actually demonstrated over its history is not just that novel risks become insurable over time, but that the process of making them insurable creates the market infrastructure the risks themselves depend on for scale. Marine insurance didn’t just cover shipping risk. It created the standardised risk categorisation, the loss-experience database, and the actuarial norms that let shipping finance scale. The same logic can be applied to restoration - a functioning pool wouldn’t just transfer risk from developers to underwriters, it would generate the loss experience, ecological baseline data, and standardised risk categorisation that the sector currently lacks. That’s a more ambitious framing than insurance for restoration projects; it’s the construction of a market rather than the provision of a product.
The role of insurance in bringing standardisation to bespoke asset classes is a genuinely important structural argument. If you look at how private credit, private infrastructure, or renewable energy financing became institutional asset classes, the underwriting and standardisation infrastructure that developed alongside them was as important as the capital that flowed in. Nature finance has been treated primarily as a capital mobilisation problem, whereas Roger is implicitly making the case that it should be treated as an asset class standardisation problem, which rings true for me.
The other point he could have pressed harder on is the accounting one. Corporate capital in a catalytic reserve structure sits on the balance sheet differently from corporate spending on scattered direct nature investments. It’s closer to a contingent liability provision than to expense, a form of capital deployment that recognises risk exposure without deploying operating cash. For CFOs and treasurers, this is a materially different proposition from the spend money on nature projects narrative that most corporate sustainability discussions default to. The proposal would benefit from articulating this more clearly, because it’s part of why the structure could plausibly attract corporate capital that other structures haven’t.
Connecting the demand-side to the supply-side
This is where I think the analysis gets most interesting, because the two sides of the market don’t just complement each other - they interact.
The Gollier-Drupp logic that has been running through this mini-series says that ecosystem service values should be projected as rising in real terms over time, at a rate reflecting scarcity dynamics. Apply this to the cash flows a nature insurance pool would be underwriting, and the implications could be substantial. The premiums the pool charges, and by extension the risk transfer costs facing developers, should reflect not just current-period ecological risk but the appreciating shadow price of the underlying ecosystem service. A pool designed on the assumption of flat real ecosystem service values will systematically undercharge for coverage, which sounds attractive to developers but is actuarially unsustainable. A pool designed with rising real ecosystem service values will price differently, and will make different kinds of restoration projects economically viable.
The IRR truncation argument matters even more directly. If the pool itself becomes an investable asset, and one of the plausible endpoints of the architecture Roger proposes is that the reinsurance layer becomes a securitised asset class institutional investors can hold, then how allocators appraise it depends on their evaluation horizon. A twenty-year IRR appraisal on a pool whose real economic value depends on multi-decade ecological trajectories will produce misleading valuations. Therefore the pool needs allocators who can see beyond the standard window, which is what the demand-side arguments in the earlier articles have been driving towards.
The Cushon fiduciary opinion talks directly to who can legitimately participate in the corporate reserve layer. If trustees can consider the long-term systemic context beneficiaries retire into, then pension fund participation in a structure that supports ecosystem restoration is defensible in a way it wasn’t twelve months ago. The pool’s corporate layer might, in practice, end up drawing on pension fund capital as well as corporate treasury capital, which changes both the scale of what’s possible and the governance question of who the reserve capital is accountable to.
The Green Book change matters for the first-loss layer as well. If HM Treasury is now formally accepting that long-horizon projects deserve appraisal under lower discount rate assumptions, then the case for public first-loss capital in structures like Roger’s becomes stronger. The Treasury has, in effect, acknowledged that long-tail environmental benefits are systematically undervalued by standard appraisal, which is exactly the argument for public capital taking the position that private capital can’t price.
Roger was writing about market design, not about the demand-side reforms that would need to sit alongside it, but the point I want to make is that the two avenues of thinking are not separate. They are two parts of the same transition, and they succeed or fail together. A well-designed insurance pool without demand-side reform still faces allocators who systematically undervalue what it would cover, and a demand-side reform without supply-side architecture still faces allocators who have nowhere to put the capital.
The next stage
If I try to synthesise the demand-side argument with the supply-side proposal Roger has put forward, the picture that I think emerges looks something like this.
The next stage of nature finance market design isn’t primarily about mobilising more capital. The capital exists, and the institutional cover for deploying it has substantially opened up over the last twelve months. The next stage is about building the market infrastructure that lets the capital flow at scale. That means underwriting institutions like the pool Roger is proposing. It also means standardisation of ecological metrics, monitoring, and outcome verification, which the AI-enabled measurement work being done by MIT-IBM Watson and others is starting to make feasible. It also means legal and contractual templates for restoration project financing, which most jurisdictions don’t yet have. And it means matching demand-side reforms in how allocators appraise these assets, which is what the Green Book change and the Cushon opinion have started to open up.
None of this is a single-institution project - the pool needs public first-loss capital, corporate reserve capital, insurer underwriting expertise, and measurement infrastructure it doesn’t yet have. The demand-side reforms need allocators willing to change their appraisal frameworks, trustees willing to take the broader interpretation of fiduciary duty seriously, and regulators willing to codify what current guidance only permits. The transition depends on movement across all of these fronts more or less simultaneously. That’s harder than either the demand-side or the supply-side reform in isolation, but it’s also more honest about what actually needs to happen. And it points to a different kind of policy conversation than the one that dominates nature finance today. Not how do we mobilise more capital, but how do we build the market architecture that would let the capital we have flow to the assets that need it.
The four articles in this mini-series have, taken together, tried to make one central argument: nature finance has been stuck for a decade because the intellectual and institutional infrastructure isn’t there. The intellectual infrastructure has been arriving over the last few years, the Gollier-Drupp framework, the IFoA Planetary Solvency work, the growing consensus on TCFD and TNFD disclosure. The institutional infrastructure has been arriving in the last twelve months, the Green Book change, the Cushon opinion, the Mansion House reforms. What’s still missing is the market infrastructure that would let the intellectual and institutional shifts translate into deployed capital. Roger has just put a serious proposal on the table for building part of it ... and now we need others.
What happens next depends on whether the institutions with the power to build the market architecture, governments, corporates, insurers, allocators, and the professional bodies that shape their behaviour, take up the space that has been opened for them, or whether they wait for something stronger to force their hand. The technical fixes exist and the institutional cover exists. What’s left is a question about will, and about how many years of inaction the system can afford before the underlying nature crisis makes the question moot. Today we’re on fire - soon we’ll be underwater again
References
Roger’s work
Iles, R. (2026). “Making Nature Restoration Investable: Why a corporate-backed insurance pool could unlock private capital for restoration.” LinkedIn article, June 2026.
Iles, R. (2025). “Are we discounting the future out of existence? A calling for finance.” LinkedIn article.
On nature-related insurance and risk transfer architecture
Swiss Re Institute (2020). Biodiversity and Ecosystem Services: A business case for re/insurance. Swiss Re Institute, Zurich.
Willis Towers Watson (2022). Nature and biodiversity: The insurance industry’s role in a nature-positive future. WTW Research Network.
Lloyd’s of London (2023). Nature and biodiversity risk: Emerging risk report. Lloyd’s Futureset.
Global Parametrics and The Nature Conservancy (2019). Insuring Nature to Ensure a Resilient Future: The world’s first coral reef insurance policy. Case study, Quintana Roo reef parametric insurance.
On sovereign catastrophe risk pools as architectural analogues
Caribbean Catastrophe Risk Insurance Facility (2024). CCRIF SPC Annual Report 2023-24. CCRIF SPC.
African Risk Capacity (2023). ARC Group Annual Report. African Union.
Pacific Catastrophe Risk Insurance Company (2024). PCRIC operational review. PCRIC.
The demand-side framework
Drupp, M.A., Hansel, M.C., Fenichel, E.P., Freeman, M., Gollier, C., Groom, B., Heal, G.M., Howard, P.H., Millner, A., Moore, F.C., Nesje, F., Quaas, M.F., Smulders, S., Sterner, T., Traeger, C., and Venmans, F. (2024). “Accounting for the increasing benefits from scarce ecosystems.” Science, 383(6687), 1062-1064.
Gollier, C. (2010). “Ecological discounting.” Journal of Economic Theory, 145(2), 812-829.
NatWest Cushon and Eversheds Sutherland (2025). Legal opinion on the broader interpretation of trustee fiduciary duty.
HM Treasury (2026). The Green Book: Central Government Guidance on Appraisal and Evaluation. Forthcoming changes note on long-term discount rates.
On measurement infrastructure and the outcome-based verification challenge
Goldman Sachs and MIT-IBM Watson AI Lab (2026). AI for Biodiversity Measurement: Advancing Nature Finance.
Taskforce on Nature-related Financial Disclosures (2023). Recommendations of the Taskforce on Nature-related Financial Disclosures.
NGFS (2023). Recommendations toward the development of scenarios for assessing nature-related economic and financial risk. Network for Greening the Financial System.
Regulatory and policy context
European Commission (2024). Nature Restoration Regulation (EU) 2024/1991. Official Journal of the European Union.
European Environment Agency (2025). Financing needs for the implementation of the EU Nature Restoration Regulation. EEA Technical Report.
European Commission (2025). Omnibus revisions to the Corporate Sustainability Reporting Directive. Directorate-General for Financial Stability, Financial Services and Capital Markets Union.
Systemic framing
Jones, A., Bedenham, G., Goldman, M., Ranchin, A., Spencer, N., and Trim, I. (2026). Planetary Solvency: Tipping into the wild unknown, Global nature risk management. Institute and Faculty of Actuaries and Anglia Ruskin University.
Dasgupta, P. (2021). The Economics of Biodiversity: The Dasgupta Review. HM Treasury, UK Government.