Lily Louis, senior associate of product operations and strategy, is joined by Ricardo Bayon, founder and partner of Encourage Capital, to investigate the barriers advisors face in approaching nature-focused investment solutions.

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We have spent a lot of time discussing the value of investing in nature at Ethic, but today we’re digging deeper still with an expert in biodiversity-focused investment solutions. Lily Louis, senior associate of product operations and strategy, sat down with Ricardo Bayon, founder and partner of Encourage Capital, to discuss the inherent challenges in valuing nature, bridging the language gap for investors, and his thoughts on the best practices for considering both financial returns and positive outcomes for nature when investing. 

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Key Takeaways: 

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• One of the biggest hindrances advisors face in nature investing is the language barrier. There is a high demand for experts who can speak the language of finance and the language of natural systems fluently. 
• Collaboration across sectors is essential to the future success of sustainable investing. Our natural world thrives in networks and diversity, and we could benefit from “biomimicking” this ecology in our human systems.
• Charitable giving and investing are valuable tools for building the future your clients want to live in. Investing in impact is a tool for scaling and extending the benefits of philanthropy. 

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Lily: I first met you while enrolled in your Brown University Sustainable Finance course. You opened my eyes to the range of climate & biodiversity-focused investment solutions, tools and vehicles. From your early days founding the Ecosystem Marketplace to co-founding Encourage Capital, what’s motivated you to stay focused, and how has your vision evolved? 

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Ricardo: I can tell you there are days when the motivation flags, days when you see the magnitude of the environmental problems and you think, how do we fix this? Can we fix this? But most days motivation comes from looking out the window at nature and natural systems. These are incredibly complex and beautiful systems that are both brutal and beautiful in equal measure. 

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On the one hand, we have predation and life requiring death for existence, and then, on the other, on a more subtle level, there is radical cooperation where fungi gather nutrients for plants and plants feed the fungi. This symbiosis is so tight, so close that we don’t know where the plant ends and the fungus begins. Then I think of the majesty of a hawk or a dragonfly or simply photosynthesis, and I ask myself are we really just going to let that all be degraded? 

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And it isn’t only nature–humans are part of this system, and we are capable of the same beauty and brutality, the same predation and radical cooperation. Only, we can be more intentional about what we choose and what sort of world we want to build. And while predation might feed you for a day, symbiosis will feed you for a lifetime. I know what world I want my children living in. So, I guess you could say intentionally building a world that is better for all of us gets me up in the morning.

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Lily: One of the biggest barriers we run into with would-be impact investors is the schism between investments and charitable giving. How do you dissuade investors of the notion that philanthropy is the only means for impact, and convert them to viewing investments as a powerful means for change? 

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Ricardo: This is a hard one. Investors are usually enmeshed in a world view that investment is about return and nothing more; that any other consideration somehow “pollutes” the investment mindset. So you either do investment or you do philanthropy and never the twain shall meet. But this is old reductionist thinking. It doesn’t take into account the possible impacts of investment, both positive and negative. Investment isn’t just about returns; it is an active decision as to the world you want. Any purchase or investment is that. So if we only look at an investment in terms of return, we could end up building a very broken world. Indeed, that is what we have been doing. 

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Likewise, philanthropy on its own, without some form of long-term thinking, some form of sustainability, is less powerful. Again, do we want to make the world better for a day or forever? How do we extend and scale the benefits of philanthropy? 

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I think the answer lies in understanding that philanthropy and investment exist on a spectrum, where on the philanthropy end the returns are a net loss in exchange for a bit of impact, and on the investment end, the returns can be positive and also have a range of impacts. And each of us can decide where we want to fall on that spectrum as people and as investors. But I think the more positive financial returns we can get for a given positive impact, the more likely that impact can be sustained, scaled and maximized. Likewise, if we only look for positive returns, we might be maximizing negative impact such that no amount of philanthropy will save us. We have got to finetune where we want to live on that spectrum. For me, it is about maximizing and sustaining positive impact.

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Lily: As we both know, our financial system doesn’t appropriately value nature for its ecosystem services. Funneling capital to climate & nature solutions requires a collaboration between the finance community and the scientific/conservation community. How do we bridge their language barrier (think financial jargon) without commodifying nature? 

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Ricardo: Yes, one of the foundational problems we have is that we don’t include nature and its services/benefits in our financial/economic system. This leads to all kinds of problems. If this weren’t the case, then financial returns would equate or at least relate to positive environmental outcomes. As it is, the opposite happens so we need to build a new financial/economic system that fixes this problem. How we do that is another matter. It is difficult. I think we are moving in that direction, but the movement is slow and might be too slow to save us. It will be a close one. 

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On the issue of language, yes, communication is a major problem. It hinders cooperation and it prevents change. In part, we need translators, people who speak both languages fluently, but I also think we need to educate children and young adults on finance. We all need it and we all use it every day, and yet we don’t educate people in it. We expect children and adults to just pick it up as they go along. This is a major oversight. If we can get everyone at least passably fluent in the language of finance, then some of these problems will go away. And let me be clear, this doesn’t mean the jargon of finance. We need less of that. After all, finance isn’t rocket science. Most people understand it instantly with a tiny bit of guidance.

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Lily: You’ve intentionally built a community of investors, students, foundations, and government organizations to address global challenges. How critical is collaboration across sectors in achieving sustainable outcomes?

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Ricardo: It is absolutely critical. Network and collaboration—dare I say—symbiosis is essential to achieving what we need to do. None of us can do this alone. It is too big. As I’ve grown older, I’ve come to understand and appreciate the power of diversity and networks. This is why biodiversity is important. Our natural world thrives in networks and diversity. This is ecology. And we need to “biomimic” this ecology in our human systems. Networks are power; leverage and diversity are resilience. And we will need both if we are to build a better world.

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About Ricardo Bayon: Ricardo Bayon is a founder and partner of Encourage Capital, a new breed of asset management firm focused on profitable and strategic investments to solve critical social and environmental problems. He is a journalist, with work in publications such as The Washington Post, the Atlantic Monthly, and the International Herald Tribune. He is also an adjunct professor at the Institute at Brown for Environment and Society. 

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