Philanthropic funding has a “potentially vital” role in driving investment towards tackling biodiversity loss, the sustainability research arm of Swiss bank UBS has said.

The philanthropy sector could introduce standards to track impact metrics with a methodology that could be “game changing”, the UBS Sustainability and Impact Institute said in a report on driving investment towards the UN’s Sustainable Development Goals (SDGs).

“There is no general agreement about how to value impact in a way that allows for meaningful comparisons between social and environmental impacts,” UBS said.

Frameworks from the UN’s SDGs, the Impact Management Project and IRIS+ contribute to a shared understanding around impact, but “what is missing is the standards around how to track these metrics and performance benchmarks”, UBS said.

“The impact economy can only be realised by creating credible standards for what to measure and how to measure it.”

“Philanthropy can play an important role in this process. The industry has a long track record of accounting for the results of philanthropic funding.”

An impact rating methodology could be complemented by an “impact marketplace”, learning from carbon markets, with ratings verified by independent parties, UBS suggested.

Such a system would help for-profit philanthropy to build trust in stakeholders. Blended capital has faced criticism for the “power it gives to those who have benefited from the inequities perpetuated by the global economic system”, the report said.

Philanthropy can plug the gap left by venture capital in having the patience to wait for longer-term returns in some initiatives, UBS said.

Indonesia-based investment firm and “venture builder” Terratai seeks to meet these needs by advising early-stage nature-based businesses in Southeast Asia, UBS said.

UBS Optimus, the bank’s philanthropic foundation, provides 20% of first-loss capital to unlock commercial capital aligned with impact.

Philanthropic capital can act as a first-loss absorber to encourage more private financing in initiatives perceived to be riskier such as emerging nature technologies. Global philanthropy funding is expected to grow “tenfold over the next 20 years to reach nearly $12 trillion”, UBS claimed.

By Thomas Cox – t.cox@carbon-pulse.com

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