Eva Cairns

Hello, I am Eva Cairns you're listening to the abrdn sustainability inspired podcast discussing all things relating to sustainability and responsible investing.

I'm delighted to have with me as my guest Professor Martin Stuchtey. I met Martin at COP 27 last year and was fascinated by his career path and passion for nature, and I enjoyed his lighthearted humour and chatting in German. Martin is founder of The Landbanking Group, which focuses on putting a value on nature and of systemic, as well as professor for resource strategies and Management at Innsbruck University, ex McKinsey Senior Partner and board member of several companies. He's also a big author, organic farmer, father of six and alpinist. Martin, welcome to our podcast.

Martin Stuchtey

Welcome, Eva. Thanks for having me.

Eva Cairns

So before we dive into your career, let's start with hearing a bit more about you personally. You describe yourself as an alchemist, an organic farmer and your father of six. How do you manage to recharge your batteries with a busy career and family life like that?

Martin Stuchtey

Making hay, mending fences, skimming up mountains climbing up mountains. Well, I guess I just like to do many things. And when I was born attention deficit hyperactivity disorder wasn't invented yet. So my parents set out to let the boy move. And I guess sort of also, moving towards the theme of the podcast. I think in times when so much is in is moving motion might also be the best thing to stay sane and happy.

Eva Cairns

Excellent, absolutely keep him busy and keep him busy with interesting things that help have a positive impact on the planet is a great combination. I'm fascinated about your work into nature, which we'll hear more about today. But you've also written a book about disruptive technologies. In 2016, you published a book A Good Disruption, Redefining Growth In The 21st century. What inspired you to write this book? And can you tell us what it's all about?

Martin Stuchtey

Well, I guess that this book, if I was like, probably the most book a piece of self therapy. it tries to create a bridge and to overcome some dissonance that has built up in my life. I was a consultant for quite some years. For 20 years, I was with McKinsey and Company happily so proudly so but increasingly, I saw that there is a complete dissonance between on the one hand, how we do business, how we define growth, how we define success, what we work on long nights. And on the other hand, what science tells us where we are in history. And these two concepts are not reconcilable anymore, and sort of increasingly sort of that cut me into pieces. And the book was the attempt to heal that. So I went on to a journey together with two friends, where we tried to first of all, review all the work that we had done on the global energy transition on the Global Industrial Resource transition on the global and us transition on everything that needs to happen as we reinvent the city as we reinvent financial markets, all of that. And I tried to define for myself, how actually the same level of industrious growth, orientation and sense of improvement, a sense of elevation could actually be reconciled with scores of scarce resources and greenhouse gas budgets, which is a reality under which we live. And it's the attempt, it's my, our best attempt to describe how such an economy could look like. It was also inspired by a very personal learning case, which is called to circular economy was 15, almost 20 years ago by now that I started asking myself isn't the real reason for much of nature destruction and climate change, really, the overuse of resources and of depletable resources versus renewable resources. And increasingly, an idea that has been around for quite a bit. I mean, essentially, it has been around for four and a half billion years, which is the idea to use things over and then sort of had new incarnations with cradle to cradle with factor five, with other schools of thought that had a revival of more as the concept of the circular economy. And together with a good friend, Ellen MacArthur, sort of I spend a lot of time in Brussels, trying to tell the European Commission that this is actually a very, very interesting outlook for an economy and not just the way had to overcome a waste or pollution problem. And the way that the circular economy trickled through or not sort of was also a learning case that I think I processed in the book.

Eva Cairns

Okay, so redefining growth with that concept of circular economy is saying reusing things you cannot just endlessly grow and deplete those resources that won't. Renew is a key theme there. As I've said, you've had an incredible career working as a senior partner at McKinsey, as you said, for many years, then creating your own business with a focus on nature first systemic and then the Landbanking Group. And I love the strapline you have for the Landbanking Group that we you see, nature delivers $140 trillion worth of services every year, for free, she needs a better bank. I love that. Can you tell us more about your journey and why your work is so important to the sustainability and nature agenda with the Landbanking Group?

Martin Stuchtey

Well, not sure whether I would call that a career, I mean, Officer and the Alpine forces geologist, McKinsey consultant, resource economics professor, serial entrepreneur, sort of I have many people around me sort of who say that this is the opposite of career, that this is that this is a mess. They lead ordinary lives and sit in boards. Why it's I've created a bit of a playground around myself, but they I think there's a certain pattern behind this playground and I think is firm set of beliefs. I hope so. I mean, you have to ask yourself, what is a career anyway in the 21st century? What is prosperity was a good life, I think we all come to the conclusion that some of those conventional descriptions are not caring anymore. I mean, the big thing, and perhaps that goes back to me having started my life as a geologist, so I always was struggling to reconcile the long term and the short term, geology is a very slow moving business. Yeah, so there's 10 million years when nothing really happens. And then from time to time, things happen. And you call them a state shift sort of where something big happens, that's every 10 to 50 million years. And as it occurs to me, what we are seeing right now is when it comes to climate, a 5 million years singularity already, when it comes to biodiversity, what we are seeing right now is a 50 million year singularity, and how to reconcile that with our daily labours and with our with nano trading, and with quarterly results, and was the way we are defining sort of a good three years worth of career. And so I guess this, this whole concept was very relative to me from the very beginning, in the face of some of those bigger lines of history that we need to, we need to look at. And I think in the end, the only way to, to have a career is to make sure that you feel that you are consistent with the context that you see around yourself and very much sort of having read and dealt with and consulted on for so many years now on our global climate emergency on our resource emergency on our biodiversity emergency on our equality emergency, sort of it's very hard sort of to live a life that sort of is ignoring any of that away.

Eva Cairns

Yeah, absolutely. And then so can you tell us a bit more about the Landbanking Group? What issues are you really trying to resolve?

Martin Stuchtey

I happen to think that the scariest and most contested resource and a 21st century is land. We have very conflicting demands on land, we have to do many things, we have to feed a growing population, we have to store carbon in the ground, we have to give space for biodiversity. Because if we lose the web of life, we essentially lose everything 100% of the global economy depends on biodiversity. We needed to store our water to feed our cities. We needed to regulate local temperature, all of that. And currently, every day, every square metre everywhere on Earth, we are taking systematically the wrong decisions in the way we are making production choices on a square metre of land. And that's something we want to heal in such a way that it is consistent with the absolute urgency to find anything between 8 and 14 Giga tonnes of carbon storage in nature, not sometime in the future, but by 2030, which is just around the corner, and to stop and reverse the loss of biodiversity. And I can talk a bit about how we are trying to do that by being able to make nature a new asset class. And that takes us sort of to the abrdn’s of this world. Could we actually imagine a world in which nature and that's not buying land that is funding investing in nature, uplift improvement equivalents actually could be something thing you want to invest into. And the thesis that drives us is that there is even today and more so in the future, a very strong incentives to hold the long position on certified, verified uplift on nature, if you are an inserter, if you're an off setter, if you're an insurer, or if you are an investor or asset manager, we think that there is demand for it. And we are trying to build the trusted infrastructure that allows us to meet that demand.

Eva Cairns

A bit of a parallel to what we've seen in terms of the carbon market developments to try and put a guess a price or value something that has integrity, bid for nature, is that right?

Martin Stuchtey

It's right, we are trying to bring in a couple of paradigm shifts that we think could improve nature markets further, I'm a big friend of carbon markets, and I don't want to live in a world without them. At the same time, I think there is now an opportunity particularly enabled by technology that allows us to go even a step further. And to introduce a couple of shifts, paradigm shifts, new perspectives, whatever. And one of those shifts would be from assessing land, project by project in a way that is structured and increasingly automatized. There is technology available now particularly remote sensing, but which is then complemented by ground through things such as metagenomics fauna sonics, where you hear where you can actually read out the different voices from birds from bats from insects, IOT that is delivering that data. So we think that could be a first shift if you automate the way we do these verification and assessment approaches. The second one is that we move from a world where you're making a 30 year forward promise towards a world where we are looking at the outcomes actually has preservation been delivered. For, measured around water holding capacity measured around carbon storage measured around soil quality measure on biodiversity. And then I think another shift could it be that we those contracts in which we in these improvement equivalents are delivered, that we can actually turn them something that qualifies as a capital asset, because today, most of the funding we put back into nature, is treated as an expense, it runs through our P&L. And if you really look at it, putting money into nature, preservation, and restoration is an investment into critical infrastructure. And that needs to be recognised on balance sheets, because it's relevant, and it's in support of our future performance. So that's again, another shift that we want to bring in through the solution that the Landbanking Group has developed. And then lastly, can we make it much, much easier for everyone to engage both for the sellers, which are the billions of land stewards, who are currently poorly incentivized to treat their land well, and to create ecological outcomes? And the buyers of those services? Could it feel like almost the exchange or the transaction that you have for any other asset? Could you make it very, very easy so that everyone can enter these markets? And not just the big ones? Can we democratise nature markets, all these were thoughts, and we think all of that is technologically doable. And we try to pull this together in an integrated platform. So that's what we do Eva.

Eva Cairns

it's absolutely fascinating. And as you say, you know, the issue of nature delivers huge amount of services and benefits for free, the pricing is not there, and therefore the financial incentives, it's quite a challenge to put a value on the many different aspects of nature and biodiversity, I think, and what do you feel are the biggest barriers to success to have a nature as an asset class, as you see it? How can they be overcome?

Martin Stuchtey

Well, first, just to be clear on the principles, I think, I deeply believe everything has a value, not everything must have a price, nature for certain is undervalued in most parts also underpriced, and that we must change, sort of when we make a sort of what we can say with certainty is, when we make a decision today, we take a typically assumed nature to be of a value of zero and that and that cannot be on what is essentially a full planet, we cannot continue to extract and strip by nature. So we are now today actually turning natural capital into financial and produce capital. And then we only look at the value accrual of the produced and the financial capital and we don't see the depletion that we have created on natural capital. So we are essentially growing poor and we need to heal this. So either by forbidding to deplete nature at all, which is absolutely unrealistic politically, or by giving it a value. And so I think that's exactly the journey on which we excitingly We are, I mean, we moved from an age where sort of we ignored any value that sits in ecosystem services at all, then now we are moving with our carbon markets and a couple of other mechanisms into a world where we pay for these ecosystem services. And what we think can and should be done is now to move in a world where ecosystem services are looked at as an investable asset, eventually as collateral and eventually perhaps even as our as the one reserve currency there is thinking about need to turn nature actually into a NATO into a currency nature back to nature based currencies. And for that we are building the infrastructure in the short term, more in for the micro economy. So where food companies, energy companies, investors insurances can take these long positions, hectare by hectare, and outcome by outcome. And in the long run, this might be helpful. Well, the future will tell. But this might be helpful infrastructure also, perhaps for a bigger plan, where we actually start looking at nature, also as a collateral when we define what is of value to our economies.

Eva Cairns

And you mentioned earlier that incentives are so important, what more do we need from policymakers to provide the right incentives? I know you were at COP 15, the biodiversity conference that was held in Montreal last year, did that help move the agenda forward?

Martin Stuchtey

That was exciting and breathtaking. And there wasn't a single frustration and a single moment of joy, missing from that party, there was a moment where we thought that the dream of Paris for biodiversity was still 900 brackets away. And then all of a sudden, Saturday, Sunday night, that turned into a real miracle, we have a Global Biodiversity Framework now, which is, of course, has all the flaws that any political document that is signed by all countries on earth can have. And still it offers a lot of hope. It's, first of all, it's giving us a vision that we as mankind actually can live on a planet in harmony with nature, where our economic activities is not subtractive to nature, but where in fact, we can rebuild it, then it gives us a concrete targets 30 by 30, that if we put 30% of the planet under some kind of protection status, then this would be a good investment. And then it tells us to clean up many parts of our system, it starts with harmful subsidies. It starts with how we run agricultural policies, it goes into how we trade products of nature. So it's a long catalogue, all of this needs to be just sort of good practice good management of how we run a policy system. A very important part of it, however, is given that most of the biodiversity is hosted by the Global South, not all of it, of course, but sort of a lot of it. And given that most of the benefits of biodiversity extinction have been celebrated in the Global North, we have to repair that. And that's why we have to help the Global South to support its biodiversity. So there needs to be transfer payments. In a way, it's part of some way on a scarce planet, where some of the nature resources are held by the global cells. That might be a healing and overdue reversal of capital flows, which have been going to the global north to the global south. And so committing to substantial payments, is also part of it. And it's also part of this time around not climate justice, this time round, its biodiversity justice.

Eva Cairns

And obviously, the finance industry has a key role to play there. So it would be to good to bring our conversation to that point and look at what role can and do investors play in the broader financial industry and ensuring nature as valued as it should be, and the capital flows into nature increase? You mentioned a few things already, but what are the key points you would like listeners to take away on this topic?

Martin Stuchtey

Look, of course, evident, it plays a very important role. Arguably, it might play the most important role among all the economic players out there. I think it all starts for the financial industry to recognise that in the future, any value chain decision or any portfolio decision will be completely transparent with regard to its nature impacts. And sort of, let's just assume for a second that you have a financial industry that would be operating in a world where you can have access to all the financial capital in the world, but where you do not have a budget that allows you to meet a single tonne of co2 or that wouldn't allow you to convert or impact a single square centimetre of nature. What would you do if that is turns into the ultimate scarcity. And there are many places on Earth where this is not such a faint vision, sort of you would do anything to create value either in a net positive or nature positive way, or to have the trusted rights to do that, because you can demonstrate that you have created nature uplifts somewhere else. So financial institutions, I think have the responsibility to steer capital flows to wherever climate risks and nature risk are lowest and where the uplift is highest. And with that, they would be really catalytic sort of to build a new version of Wealth of Nations. And also financial institutions would not have to have any fear opening a newspaper anymore, because they would be a major catalyst for that better economic model and for that better societal model.

Eva Cairns

Yeah, yeah. What would you say are your biggest ambitions for the Landbanking Group? If you could wish for anything? What would it be?

Martin Stuchtey

I mean, it's just today that there's a conference from the global environmental facility in Gabon, in Libreville, Gabon, is they call it the broccoli of Africa, because it's essentially one of the most forested countries on earth, in in Africa. And currently, the country has two choices, either to do what's happened everywhere else and to lose a significant part of their forests, or to leave them and to protect them. If they decide to cut it down. It could eventually stop the river Nile from flowing. And so we all have the imagination, what that would need mean, politically, economically along all dimensions. And I think we all have the imagination that we really should be prepared to pay almost everything for such a scenario to take place. Now, at the same time, the many people are sitting in Libreville today, also colleagues of mine, and asking themselves sort of where is the financial instrument, where are the capital flows, that are funding us to maintain this critical piece of infrastructure, this very valuable asset as conversation that you might not have for any other kinds of assets. But here we have it. Now, a dream would be with the Landbanking Group and together with the financial sector in the future, to be able to say, look, the proven uplift that the government and the people of Gabon are producing is, in fact, accruing to nature capital accounts, because we have measured it with best of science, and the attribution rights for you as an investor to have funded that amount of nature, uplift or preservation is something that is attributed it to you, you can hold it, you can even trade it as an asset, that that would be wonderful in the short run we as a, as a company, we want to demonstrate that we can completely change land management, by moving towards structured assessment MRV, we by using towards outcome based elements by using to an asset concept by using two accessible markets, everything that I talked about, and to show that really money flows from willing buyers, to land stewards who deserve it for their ecological practices. And to show that this works across many biomes and ecosystem and categories. That's our long-term plan to get perhaps, a billion hectares onto our system. And so eventually, that treating nature well is our next source of wealth.

Eva Cairns

Yeah, absolutely fascinating ambition. And, you know, putting that value on nature and incorporating that into decision making is so critical. So I think it's absolutely brilliant what you're doing with the Landbanking Group, we do have to now draw the podcast to a close. One final question around again, the inspiration aspect what has inspired you on your journey maybe it still inspires and motivates you today that you would like to leave the listeners with which could be a book, maybe a person or an event something that readers can take away? What would that be?

Martin Stuchtey

Well, first of all, how did I get into that instead of having a decent career? Thanks for reminding me. As a child, I spent a lot of time in nature when I was six or eight, I don't know I got a book on Africa. And then was 15 I almost ran away from home I was almost gone. I had an internship that that I had been granted from a German professor called Bernard Grzimek, sort of with whom I told that I was 18 and I was allowed to go to in Serengeti National Park. Then later on when I was 18. I did that journey I went through 26 African countries, there is not a single piece of beauty on Earth, that I haven't seen in starts in Africa that gorillas, Ngorongoro, Okavango the Victoria Falls, the Cape of Good Hope. But some one of those that beauty I saw but I also saw that whenever there was depletion, it was out of sight to the rich, and it was a reality to the poor so that that changed my life. And then I was part of that generation that had the freedom to travel. And I had to the chance to see all that beauty around all the different continents, I have six children, and, and I just can't bear the thought that that they won't see the same beauty. And I'm very inspired by sort of to buy this idea. And that's probably also sort of what's driving us when we sort of when we try to turn our farm into a sort of small piece of paradise. And when we develop the Landbanking Group with its more strategic ambitions. I think that recovery is possible. And perhaps, rather than a book or a film, just take the one sentence or take the short speech that David Attenborough delivered to COP 26 I guess it was in Glasgow, whereas he during my lifetime, I have seen constant decline, that during your lifetime, you have the chance to see a wonderful recovery. I think that's really a realistic dream. And I would like to experience how we can actually bring nature back and also bring dignified human living conditions back. And that is something that we can all do in small, but also hold ourselves liable to a much bolder and bigger vision.

Eva Cairns

Martin, what a fascinating conversation. Thank you so much for being with us today. It's been a real delight to have you on our podcast. Thank you so far. You have been listening to the Abrdn podcast sustainability inspires aiming to help you get inspired and get involved to all those who have taken time to tune in many thanks for listening. I hope you enjoyed this episode. You can find all our podcasts on our website, tune into our next podcast until then goodbye for now.

Disclaimer

This podcast is provided for general information only and assumes a certain level of knowledge of financial markets. It is provided for informational purposes only and should not be considered as an offer investment recommendation or solicitation to deal in any of the investments or products mentioned herein and does not constitute investment research. The views in this podcast are those of the contributors at the time of publication and do not necessarily reflect those of Abrdn. The companies discussed in this podcast have been selected for illustrative purposes only, or to demonstrate our investment management style and not as an investment recommendation or indication of their future performance. The value of investments and the income from them can go down as well as up and investors may get back less than the amount invested. Past performance is not a guide to future returns, return projections or estimates and provide no guarantee of future

Investor and Financial Advisor

Institutional

Podcast

transcript

Next steps

Related articles

Sustainable Development Goals in action: Coats Group

Thematic equities: the next frontiers in AI

Impact in focus: through the lens of public markets

China’s clean technologies: the risks and opportunities of oversupply

Future Minerals: From underground to building blocks of tomorrow