SMBC spotlights innovative approaches to nature-positive investment

Sumitomo Mitsui Banking Corporation (SMBC) highlights the significant potential for nature-positive investment in the Asia-Pacific region, with nature-positive business opportunities expected to reach USD 4.3 trillion by 2030. However, biodiversity loss threatens 63% of the region’s GDP. SMBC stresses the importance of financial institutions in supporting nature-based solutions (NbS), including integrating environmental risks into financial decisions and collaborating with stakeholders to bridge the nature-finance gap.

TNFD transparency directs corporate capital towards nature-based solutions

The Taskforce on Nature-Related Financial Disclosures (TNFD) provides a framework that allows companies to incorporate nature-related risks into financial disclosures. In 2024, 43% of TNFD adopters were based in Asia, with SMBC being the first Japanese bank to publish a TNFD report. TNFD’s framework encourages capital shifts towards nature-positive initiatives by standardising reporting and increasing transparency.

NGOs: key facilitators in a new era of environmental stewardship

Non-governmental organisations (NGOs) play an essential role in facilitating nature-positive finance by linking local communities, governments, and financial institutions. Their on-the-ground insights help align financial flows with biodiversity conservation and ecosystem restoration. Conservation International, for example, contributes expertise and partnerships to enhance nature finance efforts across sectors.

Biodiversity hotspots: base to inspire ideas for financial solutions and opportunities

The report highlights three biodiversity hotspots: Mantalingahan (Philippines), Riau (Indonesia), and Tangalan (Philippines). These areas offer significant opportunities for carbon sequestration, biodiversity credits, and eco-tourism. The report underscores the importance of blended finance models to de-risk these projects. Technological innovations like coral reef restoration and satellite monitoring are essential for scaling these efforts. For example, the Mount Mantalingahan Protected Landscape provides ecosystem services valued at USD 5.5 billion, making it a key area for conservation finance.

Nature-positive financing challenges, opportunities, and solutions

Financing nature-positive projects faces several challenges, including managing biodiversity credits, aligning projects with suitable investors, and navigating regulatory hurdles. The report recommends using blended finance to de-risk projects and ensure long-term viability. Another innovative solution is the tokenisation of credits, which involves creating tradable carbon and biodiversity credits by tokenising geographical areas. This approach helps monetise conservation efforts and ensures capital flows to local communities. Additionally, the report calls for the development of clear pricing mechanisms in carbon markets to build investor trust.

Key discussion outcomes

The roundtable discussions identified four key revenue-generating models: carbon markets, ecosystem services, alternative business models, and technological innovation. Carbon markets are crucial for monetising NbS, while ecosystem services like water purification and eco-tourism offer sustainable financial returns. Alternative business models, such as the production-protection model, align financial incentives with conservation efforts by integrating sustainable practices in forestry and agriculture. Regenerative agriculture, while promising, requires significant investment and expertise to scale. Technological innovations, including flux towers and satellite monitoring, are highlighted as essential for tracking ecosystem benefits and improving the scalability of NbS projects.

Banking on nature: financial institutions as catalysts for growth in nature-based solutions

Financial institutions are well-positioned to scale NbS by offering capital, supporting technological innovation, and developing frameworks for nature-positive investments. The report suggests that banks create financial products that align conservation goals with market returns, support the development of standardised carbon pricing, and promote collaboration between public and private sectors. Capacity building, through partnerships with academic institutions and training programs, is seen as critical to closing the knowledge gap in sustainable finance.

SMBC explores innovative nature-financing products and investments

SMBC is actively developing nature-financing products, such as the “Natural Capital Management Promotion & Analysis Loan,” which supports clients’ nature-positive initiatives. They are also involved in reforestation projects that generate carbon credits, contributing to biodiversity enhancement. SMBC’s strategy focuses on blended finance and public-private collaborations to scale NbS and de-risk long-term projects. In addition, SMBC explores tokenisation of credits and investments in innovative technologies, such as coral reef restoration, as part of its broader nature-positive investment strategy.