“We are rewiggling capitalism,” Rob Gardner, CEO of nature-focused asset manager Rebalance Earth, jokes with Pensions & Investments while explaining the link between restoring natural river bends, peatlands and other parts of nature, and finance.
“Nature has the ability to solve problems,” he said, before launching into detail of how sphagnum moss has liquid-holding power equal to about 20 times its dry weight, and also has the potential to reduce flooding risk.
The basic premise of the boutique asset manager is to deploy assets from an infrastructure fund that invests to restore nature, with a focus on water and helping to solve flooding, drought and quality issues.
To do that, Rebalance Earth wants to deploy £10 billion ($12.4 billion) over the next 10 years to restore natural infrastructure in the U.K., reducing and mitigating climate and nature-related risks. The team plans to launch its fund this summer.
The plan then is to sell the benefit of that restoration and risk mitigation to corporations that may be at risk of the ill effects of not making that change, he said. “We have got to convince people that this solution is as good as or potentially better than building more flood defenses.”
For corporate clients, nature is positioned as a "business-critical infrastructure for managing climate and nature-related risks, staying ahead of regulation, and creating long-term value," Gardner said. Those companies pay for ecosystem services that directly reduce physical risks, such as flooding and biodiversity loss, "and strengthen their license to operate with regulators, customers and employees."
The model is build on outcome-based payments linked to the company's assets, revenue at risk and supply chain exposure, he explained. Businesses fund nature-based infrastructure-restored rivers, oyster reefs and other solutions that have measurable outcomes like flood mitigation and carbon storage, with Gardner giving the example of a utility company investing in upstream wetlands in order to cut water treatment costs and reduce storm overflows.
The idea is these outcomes are monitored and integrated into corporate risk frameworks and disclosures — such as corporate sustainability disclosure requirements, for example — giving "clear pricing based on deliver and co-benefits value," Gardner added.
For investors, Rebalance Earth aims to build portfolio resilience and deliver financial, natural and social returns. "It's nature as infrastructure. It's how we create a world worth living in," Gardner said.
He and the team have identified three key jobs for Rebalance Earth.
The first is to raise money from pension funds to deploy, which is where the firm’s focus has been up to now. Executives think they can make a return of 8% to 12%, he said.
The first job has been focused on the local government pension funds in the U.K. — the manager secured in September investment from the about £20 billion West Yorkshire Pension Fund, which took a 25% stake for which the fund paid more than £5 million — but a handful of U.K. and U.S.-based endowments and foundations are also in play. “If we can execute this in the U.K., the model we are building is replicable around the world,” Gardner said.
The team is now turning to the second job: Help companies that have a risk related to water in some way — be it flooding or drought — to realize that there are different solutions to chemicals, for example, and show them how the risk profile can be changed through a nature-based solution.
One option in that is to “rewiggle rivers to protect roads,” for example — restoring natural floodplains that may have been interrupted for buildings or roads — “and a byproduct is it protects biodiversity” and also brings carbon sequestration benefits.
The third job is “getting them to pay for it.” Gardner said he’s in conversation with a number of grocery stores and utility companies on the benefits, but declined to name those firms.
He is pushing on an open door. The U.K. government last month published Environment Agency research outlining new evidence of natural flood management benefits. Then there are the actual numbers: The costs associated with flooding are also staggering, he explained, with flooding costing U.K. businesses £1.4 billion every year, while the government spends £800 million annually on flood defenses.
Tech needs
It's not just the concept of connecting nature, asset owners and corporates that Rebalance Earth is pioneering; it’s also developing new technology in the process.
The firm is busy developing a Geospatial Predictive Analysis Platform, helping to visualize and identify water risk. “It is an Aladdin for nature,” Gardner said, referring to asset manager giant BlackRock’s global technology business.
The GPAP can model flood risk for sites, demonstrating the risk of flooding to a particular industrial estate, roads or other locations. That can then be used to figure out business interruptions and what the business continuity risk is associated with a particular company.
The entrepreneur Gardner — known among global asset managers and pension funds as one-half of the team behind U.K. consultant Redington, recently sold to U.S. insurance and benefits company Arthur J. Gallagher — is “all-in” on his mission of making nature an investable asset.
While CIO at U.K. wealth manager St. James’s Place, Gardner personally invested in Rebalance Earth, at the time under the guidance of Rebalance's co-founder and Chief Technology Officer Walid Al Saqqaf.
The two have been working to pull together a team of well-known people in their respective fields.
From the investment management world, Gardner has brought in Eoin Murray, formerly head of investment at asset manager Federated Hermes, as CIO of Rebalance Earth. Murray is also pursuing a Ph.D. in nature and investment. From the commercial world, he’s added Anne Reaney, who is leading commercial strategy — a key part of the effort.
To make sure the science is right, he’s teamed up with Neil Entwistle, a professor of river science and climate resilience, as head of science. Their paths crossed in their university days, when both were part of the Alpine Glacier Project, which researches and records meltwater quality and quantity in the Alps.
“We needed someone who was a river expert,” Gardner said of Entwistle, who works four days with Rebalance Earth and the other at the University of Salford. His role is “really important, as we need someone who is grounded in the science of our solution.”
And of course, a venture requires capital and financial backing.
Gardner has that in the form of the about £20 billion West Yorkshire Pension Fund, Bradford, England, which in September took a 25% stake in Rebalance Earth. At the time, then-WYPF CIO Leandros Kalisperas said in a news release: "Investing in Rebalance Earth is crucial for fostering innovative solutions and backing U.K. growth. As a large asset owner with a long-term horizon, we have a responsibility to provide direct capital to nature as infrastructure and to start to address critical issues like climate change adaptation and resilience here in the U.K.”
'Hustle muscle'
There’s a lot to do, but Gardner has outlined three values that guide the Rebalance Earth team. The first is “hustle muscle. We’ve got five years til 2030, and we’ve lost 75% of biodiversity. We need to get on it and execute solidly,” he said. The European Union's biodiversity strategy for 2030 aims to work toward restoring Europe's nature loss by that date, with specific actions and commitments.
The second value is “radical candor” — that means he expects the team to be “locking horns, and we don’t have time to not call each other out if it (an idea or concept) is not good enough. We don’t have time to waste,” he said.
And the third is to “have fun” — something that’s evident on the Rebalance Earth Instagram page, which shows frequent updates with photos featuring field trips and other content. Recent visits include London’s first fully accessible urban beaver reintroduction site, based in Ealing; and Plymouth after Rebalance Earth entered into a nature-restoration partnership with Plymouth City Council. The council and the manager will collaborate with Ocean City Nature, an at-arm’s-length council-owned “habitat bank,” to design and fund investable propositions.
Of the business, Gardner said: “I’m in my element… I get to combine my two loves: geography and finance,” referring to his undergraduate degree in geography.
Already convinced on the urgent need to take action on the effects of climate change — “for me, the turning point was COP26,” Gardner said. The COP26 conference marked the first time that the link between climate and biodiversity crises were recognized.
And with that final thought, Gardner invites P&I into Rebalance Earth’s London-based office to see some Sphagnum moss in action.
