NAB: Providing an impact investing solution for Australia’s largest water basin
UN Global Compact Network Australia | March 22, 2017
National Australia Bank Limited (NAB) is one of Australia’s largest banks, with operations throughout Australia, New Zealand, Asia, United Kingdom and USA. NAB has made significant corporate responsibility commitments outlining environmental wellbeing as one of three key priorities alongside financial inclusion and resilience and social cohesion. To help protect the Murray-Darling Basin, NAB has invested in a fund led by The Nature Conservancy which seeks environmental, social and economic returns.
The Murray-Darling Basin is Australia’s food bowl, with farm produce from the area now accounting for 39% of Australia’s income derived from agriculture. With an estimated 4 million Australians also relying on the Basin for their residential water supply and numerous other projects such as hydroelectric dams springing up along the waterways, little consideration was given to the environmental and cultural impacts of this activity.
In 2016 a group of investors, farmers, environmentalists and Indigenous groups have joined forces to launch a unique program to help protect the Murray-Darling Basin for future generations.
As Australia’s largest agribusiness bank (30% of market share) NAB recognised the opportunity to provide innovative financial solutions to help support the financing of the water fund. With a vested interest in supporting the development of Australia’s Impact Investment market and understanding the economic and financial value on the services a healthy environment provides (through its Natural Value strategy) NAB sought to find a funding solution.
“The impacts of degrading our natural capital, including water, pose significant challenges for our economic prosperity. Vice versa, by investing in building our natural capital, we can enhance business resilience and productivity.” Sasha Courville, Head of Social Innovation, NAB.
With $5 million in debt finance from NAB, The Nature Conservancy in partnership with the Murray-Darling Wetlands Working Group and Kilter Rural has established the Murray-Darling Basin Balanced Water Fund which provides water security for farmers, while also protecting culturally significant wetlands that support threatened species and ecosystems. The Water Fund was the first social impact investment for conservation in Australia, where investors sought both economic and social returns, and its work in the Murray-Darling is ground breaking.
“The Nature Conservancy and NAB are working together with farmers and local communities to demonstrate a new approach to water sharing. We’re proving for the first time anywhere in the world that you can grow food and fibre and you can restore wetlands at the same time. Looking after nature is critical for the health of Australia, not just for the health of nature but for the health of the economy and the health of people.” Rich Gilmore, Country Director, The Nature Conservancy
After over 100 years of debate over how to balance the needs of people and nature in Australia’s fragile ecosystems, impact investment is one way the private sector can contribute to economically and environmentally sound solutions.
How does the Water Fund work?
The Fund is the first water investment fund in Australia to allow investors to achieve the multiple objectives of securing water for agriculture, realising a financial return and restoring threatened wetlands through a single investment.
The Fund invests through Water Entitlements – permanent water rights to exclusive access to a share of available water which the Australian Government’s Murray-Darling Basin Water Authority issues and facilitates trade in – which can be bought, sold or leased. The Fund generates financial returns through the annual lease of Water Entitlements, the trade of Water Allocations (specific volumes of water allocated to a Water Entitlement), and through the long-term appreciation of the Fund’s portfolio of assets. The Fund then sells or leases the majority of the annual temporary Water Allocations back to the agricultural community, while donating the remainder of the allocations to the environment each year. Environmental and social objectives are achieved by returning water to wetlands. The Fund is open-ended, with no fixed term.
The Fund aims to have the following conservation outcomes:
- Improved waterbird and native fish habitats including breeding habitats
- Improved health for wetlands, floodplain forests and woodlands
- Sustainability of plant and fish refuges
- Increased wetland plant health and growth
In addition to environmental outcomes, the restoration of environmental flows will help to conserve sites of important Aboriginal cultural and spiritual value.
You can read more about NAB’s approach to natural value here: https://www.nab.com.au/about-us/corporate-responsibility/environment/natural-value