Impact Podcast | How do we price the value of nature?

KANINA BLANCHARD: Exclusive insights, actionable strategies, and ideas that ignite change.

You're listening to the Ivey Impact Podcast from Ivey Business School.

JULIAN BIRKINSHAW: Hello and welcome to Dialogue with the Dean. The inaugural series on the Impact Podcast. I'm Julian Birkinshaw, Dean of the Ivey Business School. In this series, I speak with Ivey's leading faculty to explore the research shaping business and society today. On this episode, we're looking at what happens when finance meets the climate crisis and when Indigenous leadership reshapes how we think about value, stewardship, and sustainability.

My guest today is Diane-Laure Arjaliès, Associate Professor of Managerial Accounting and Control and Sustainability, and the founder and lead researcher of Ivey's Sustainable Finance Lab. Her latest work focuses on the Deshkan Ziibi Conservation Impact Bond, a pioneering collaboration between Indigenous and non-Indigenous partners in Southwestern Ontario. It's a bold experiment in reimagining conservation finance, not as a tool for extraction, but as a vehicle for restoration, relationships, and reconciliation.

Diane-Laure: welcome to Dialogue with Dean. I'm looking forward to the conversation.

DIANE-LAURE ARJALIÈS: Thank you.

JULIAN BIRKINSHAW: So we will start, as we usually do, with just a little bit about your background and what brought you to Ivey in the first place?

DIANE-LAURE ARJALIÈS: So, I'm a French person and also French Canadian, and I was doing my studies in Paris at ESSEC Business School. And then I started my tenure track at HEC Paris, and I happened to go to a conference at Harvard on sustainability. And there I met Tima Bansal.

And so I came back to Paris, and everybody asked me, "so what about Harvard?" I said, "it was good. But I discovered Ivey and a group of people there, and they're really, really cool." And then a few months later, Tima came to me and she told me, "we're opening a position." And I was like, okay, like, you look great to me. And so I decided to cross the ocean.

JULIAN BIRKINSHAW: Wonderful. We're going to crack open a number of your studies in some depth, but let's just start at the broad level. Sustainable finance. What do we mean by that? Because that's a pretty broad term.

DIANE-LAURE ARJALIÈS: So what we call sustainable finance is quite easy. It is how we put finance at the service of the sustainable real economy. So basically you put the capital markets, the evaluation, the allocation of capital toward the financing of sustainable real economy. Not speculation. Not short term.And so sustainable finances, any means, any type of financial instruments, any accounting practice that's going to be conducive to that goal.

JULIAN BIRKINSHAW: And we'll get into this later in some detail. But the immediate question some finance people have is: why should I be putting my money into stuff which, almost by definition, is not going to give me such a good return, or at least a much slower return?

DIANE-LAURE ARJALIÈS: So it's always like the 1 million question. What is going to give you returns> And I think there have been strong meta analysis right now over the past two decades that show that what we call ESG or mental, social and governance criteria or responsible investment doesn't prevent you from making money. So, you're not going to earn more money, but you're not going to earn less money.

But what you have to think is sustainable finance is not for the short term speculators. Sustainable finance is really for asset owners. Universal owners like pension funds, institutional investors like bank or asset management companies. Those are people who have large portfolios, who have some time horizon, that can be sometimes five years, ten years, sometimes 20 years, 25 years of your pension funds. And if you in this situation, you need to manage your risk and your portfolio in way that returns will be generated over time on a regular basis.

JULIAN BIRKINSHAW: So, today we're not focusing on that. I think of that more as if you like passive investing in sustainable activities. Today is much more about active investing. In other words, doing something actively with money in order to make a difference.

Before we get into your specific projects, you run our sustainable finance lab. Presumably that lab is all about doing research in this area? Or is it actually about trying to influence practice?

DIANE-LAURE ARJALIÈS: So it's both. It's a learning lab. So what we do is that we develop research partnerships. And so we try a new type of financial products, new type of accounting incentives as well. And we test them with partners. But what we focus on, we really focus on three topics.

We focus on nature based solutions, economic reconciliation with indigenous peoples, and gender lens investing.

JULIAN BIRKINSHAW: Perfect. Which is a nice segue to the specific project we're going to talk about.

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JULIAN BIRKINSHAW: Deshkan Ziibi Conservation Impact Bond. We need to unpack that term. Let's first of all what do we mean and what is Deshkan Ziibi?

DIANE-LAURE ARJALIÈS: So Deshkan Ziibi is the Ojibwe name for the Thames River here in London, Ontario. It is also the name for Chippewa of the Thames First Nation, Deshkan Ziibi. So, it's important that we use the original name because that was an English name brought by colonists.

JULIAN BIRKINSHAW: Indeed. And I moving from one London to the other, I now live on the River Thames as I think of it. But you're right, you're right.

There's an original name, and that's what Deshkan Ziibi means. I apologize if I'm pronouncing it.

DIANE-LAURE ARJALIÈS: So you're living on the Deshkan Ziibi river. This is what you can now say.

JULIAN BIRKINSHAW: Okay. I will start saying that. Thank you.

So, conservation impact bond. So that is a term which most people do not understand. So let's unpack that.

DIANE-LAURE ARJALIÈS: So we know from the research, and there have been a few articles published in nature by conservation biologist, we know that the best way to be climate resilient is to bring back nature. You know, that's the best sequestration. We have carbon, you put a forest, you put a wetland, is sequester carbon, and they release oxygen. It's almost free. It's fantastic. The issue is nobody wants to finance nature because it's cheap. And basically you could build real estate, you could build industrial land, instead. You know, you can make a lot of money of that land. So what would you protect?

JULIAN BIRKINSHAW: It's one of the quotes in one of your articles, a dead tree is worth more than a living tree. If that's your kind of worldview.

DIANE-LAURE ARJALIÈS: Yeah. And that's true. So a dead tree is worth more than the tree that is alive. So what we try to do in conservation finance, or we call that also nature based solution finance, is how are we going to reverse this? How are we going to put value, trees that are alive? And not only commodities you can sell and transform?

So, what happened is when we work on nature based solutions, we need to find some financial instruments where are we going to create a transaction of some sort where some people will be willing to pay for the protection and the restoration, and some people are going to be willing to pay those investors for their investment. So that's what we'll do with a conservation impact bonds. It's a pay for performance product. So we have investors, they're going to pay upfront for the restoration protection. And then we have outcome payers or accelerators. Those are not going to pay for financial returns. They're going to pay for non-financial returns. So the social returns, the environmental returns. So they still have returns. They're just not like a monetary return.

JULIAN BIRKINSHAW: So the first group on the left of the diagram, in my mind, you've got financial investors who, as we talked about earlier, are expecting to get a return on that investment. They're taking some risk. Yeah that is money at risk. But assuming the project works out, they will get a return, a financial return. And, it's usually this is positioned as a bond? So they're going to get a yield as a bond?

DIANE-LAURE ARJALIÈS: Yeah. It's usually it's going to like follow the yield on the bond market okay.

JULIAN BIRKINSHAW: Yeah. Good. But on the other side of the diagram you've got these impact investors. Whatever you called them. What is the return that they're getting? Because are they getting some sort of... is it a philanthropic thing? Whereby we're doing it for the good of society rather than for the good of our financial bottom line?

DIANE-LAURE ARJALIÈS: So, we call them outcome payers because they pay for outcomes or accelerators because they help accelerate the restoration of the lands. So those people or organizations vary in their motivations. So we might have people who do that because they believe in it, like maybe a philanthropic or they just love nature, you know? So they're just going to do it as a foundation. And they're rather do the impact bond because they're going to pay only if it's successful. So it's a non risk investment to them. So unlike a grant when you give the grant to a nonprofits you don't know whether it's going to be successful.

JULIAN BIRKINSHAW: So you still going to believe that doing this is the right thing. But, there is this at least some sort of incentive sort of built into the system that makes sure that it delivers on its objectives.

DIANE-LAURE ARJALIÈS: Yeah. So those people were like foundations. They're going to pay for it when, and they're going to pay only if it's successful.

It's a pay for performance. And the success is being told by the impact metrics that we helped design it at Ivey. But, we also have two different types of organizations that are not philanthropic. You have high net worth individual, but you also have corporations who might have an interest. Like here, you can imagine in Southwestern Ontario, which is the most biodiverse place in Canada, but also where the freshwater reserve, the biggest one in the world.

And so we have a lot of factories coming here to have access to water. It's really a key asset. So there might be corporations like factories who want to have a well-functioning green infrastructure because they rely on water. You can have agrifood companies that rely on to pollinators. So there are likely to invest in this product because again, it's only of the successful that they only if it's successful and they can guarantee them, a well-functioning green infrastructure.

And the last type of people who invest in as other competitors are the governments. So again for the governments, they like it because they have, objectives. So the Canadian government, as many OECD countries have 30 by 30, which is the protection of 30% of land and water is by 2030. And again, for them, it's great. They pay only if it's successful, you know, and they don't take the risk.

JULIAN BIRKINSHAW: Okay. So that's a conservation impact bond. And my understanding is this is quite a pioneering approach that you've taken here. And it's an attempt, as you say, to to use sort of financial capital, which is used to doing things in a different way and applying it to take conservation seriously. And what does success look like in terms of conservation? I mean, is it just, are we are we replanting or are we just simply defending, you know, the natural habitat? I genuinely do not know.

DIANE-LAURE ARJALIÈS: So that's really interesting because conservation has been a really colonial practice. You know, it's definitely the settlers came and the first national parks was Yellowstone. And the idea was to keep intact this land of trying for the next settler. So, you know, there was this notion of protection of national parks. And so the idea of protection, of course, and conservation in the Western perspective was you're going to put human beings aside and you're going to let nature be.

The truth is, that is not the most efficient way, you know, especially here, because you have human beings. And there's also some research there shows that if you are able to name plants, the plants are more likely to survive because you pay attention to them. So if you recognize plants or trees, you're going to build a relationship. And you're going to be more careful about the word that surrounds you. So the approach of success and the way we do it is not only but planting. Of course, you have to get ecosystems. But it's about the restoring the relationships. The relationship between ecosystems together. So for instance, you have, some nations and part of the region that may have native plants, and we're going to take those seeds and run them to the other part of the region because they need some diversity of genetic here.

So we have relationship between ecosystems themselves, building ecosystem corridors. So one of the things we're working on is having corridors, so the animals can cross the region. And you might not know, but animals can actually cross London. So that's why sometimes you have bear that are lost year during the summer comes from north. Or deer. So this notion of relationship of ecosystems but also the notion of relationship between people and ecosystems. So you human beings and the ecosystems, but also indigenous peoples and non-indigenous peoples as a reconciliation.

JULIAN BIRKINSHAW: And we'll come to the Indigenous people point in the next segment. But, you're essentially measuring biodiversity as one of your indicators. Am I am I correct?

DIANE-LAURE ARJALIÈS: Yeah. So we have five and this has this impact assessment has been designed as a co-creation with the different partners.

So everyone was at the table, the financier, the conservationists from a Western science perspective, the conservation is from the Indigenous science perspective, us of course. And, what we agreed upon, we did a what we call a theory of change, which is basically what does success look like and how do we achieve this success? And as we were working on that, we actually designed five type of metrics.

And each metric goes through a relationship. So, one will be like connecting opportunities because also one of the success is to create jobs. So this project has created jobs. We created for instance, that is succeeded to create the land guardians project, which is used at Chippewa up the Thames First Nations who are being paid just to work the lands.

It's also nature connectedness, a relationship field. Of course, the number of actors planted, which is good with native species, but it's more about it's broader than just a plantation.

JULIAN BIRKINSHAW: And so you've been working on this project for, for five years or whatever. I mean, where have we got to? I think you said that as a pilot, it has succeeded. Is this something that's now being done in other parts of Canada?

DIANE-LAURE ARJALIÈS: Yeah. So that was the first pilot. The second pilot was Long Point. And that has been successful as well. And now we're working on a zone wide CIB, which is will be like all the regions. So something at the larger scale. What is interesting is that it's become a blueprint for the federal government. We be contacted by people in BC were interested in launching this fund. We've been contacted by other organizations, even in New Zealand, and Australia. And, I think what was of inspiration to those people is that it was community-led. And it was Two-Eyed Seeing, so they have an Indigenous lens and the Western lens. And I think this is really what attracted people.

JULIAN BIRKINSHAW: Got it. And I mean, for me, the thing I find attractive here is that this is an innovative approach to solving a problem that we all recognize. Trying to kind of use, if you like, traditional financial kind of instruments, but using them in a creative way to do things which we couldn't do before. So I do think it's a fascinating model.

*MUSICAL BREAK*

JULIAN BIRKINSHAW: And, I'm going to now switch to the other side of this project, because you've touched on the fact that this was done in collaboration with Indigenous people. Chippewas of the Thames and others, You use this concept of Two-Eyed seeing, which I think basically means that there's, you know, one eyes are kind of almost like a traditional Western capitalist mindset. The other eye is presumably an Indigenous worldview about how we as humans sort of interact with nature. Is that is that right?

DIANE-LAURE ARJALIÈS: Yeah. So Two-Eyed Seeing is a Mi'kmaq concept. And it was coined by Elder Albert Marshall, a Mi'kmaq in Nova Scotia. So it's really important to acknowledge where this concept comes from and bring it back to the Indigenous elder who designed this. And the idea of the concept is that you're going to have the best of Western knowledge and the best of Indigenous knowledge, and we're going to combine it for improve outcomes for everyone. So to get a better world, you know.

JULIAN BIRKINSHAW: And the part of the paper I found particularly interesting is you talk about the sort of the extractive mindset, if you like, that's sort of embedded in a lot of capitalist thinking, which is that, you know, we are we are getting value out of the land by extracting minerals and growing crops and stuff. And, I think, saying that a regenerative mindset, perhaps that's not quite the right word, but the regenerative mindset rather than the extractive mindset is a hugely complementary point of view for us to understand things better. Is that right?

DIANE-LAURE ARJALIÈS: Yeah. And I think many resources are natural resources. So if should we're not extracted them beyond the rates of regeneration, you will have them forever. One of the issues is that human beings have extracted natural resources in there where there was totally overcapacity. And so this is what we had in Newfoundland. There was no more cods and the fisheries collapse, and the community collapsed. You know, it could have been well managed. So we would have cods for ever.

So first we have to make the distinction between natural resources that can be renewed, a lot of resources like this and natural resources like once you took them like fossil fuel that forever gone. So, for the natural resources that can be renewed and there's a pace of regeneration, then the idea is how do you how can I respect this? How are you going to share you extractive models in a way that's going to protect the regeneration, update the systems?

JULIAN BIRKINSHAW: As you think that through and as I say, you've got this beautiful example of a practical project that is seeking to essentially bring together traditional financial investors with people who are concerned about the community, how do we how do we take that Two-Eyed Seeing into other aspects of what we teach at business school?

DIANE-LAURE ARJALIÈS: So, last summer we had a reconciling workshop. So we were co-teaching with leaders from Indigenous communities, so Indigenous elders, Indigenous knowledge holders, and us faculty. And we co-taught for one week.

JULIAN BIRKINSHAW: So you had our students in a room with you as well, alongside Ivey students?

DIANE-LAURE ARJALIÈS: Yeah. So we had Ivey students, and we had also Indigenous students also from community. So it was a very a fantastic experience, both for our students, and their use. And so we were co-teaching during the full week and so we could teach the same case, but through different lenses. So we have already done it, you know, so we can do it again.

JULIAN BIRKINSHAW: And how did that work? Because, I mean, it's for the students who are used to a particular worldview, this must have been a bit of a shock. And it takes quite a lot of time to not sort of to not always just sort of try to bring everything back to your starting point. And what we're trying to teach, I think, is critical thinking. We're trying to service assumptions. We're trying to show that there's more than one way of viewing a problem. And I guess that's what you were you were trying to do?

DIANE-LAURE ARJALIÈS: Yeah. I mean, first there's a Truth and Reconciliation process to which the universities have committed. And so it's a political requirement. And it's also a constitutional right. So, I think it's our duty as well to open our teaching, our research, impact towards reconciliation and inclusion of indigenous voices in a way that empower them instead of subjugating them

So, that's the first reason why we should do that. Is it easy? No. Are we facing new forms of teaching, a new form of research? For sure. And then we have to co-investigates with our indigenous partners to try to find the right space, to find the right way of inviting Western listeners to the to the audience as well. So it's really a lot of listening. It's a lot of trying as well. But I think what matters as well for our students is that they come prepared. So we prepared them a bit in advance, you know, because you have to be somehow educated. To be frank, when they embark on this journey, if they're really genuinely interested in listening, then there will be changed for the better. Like they're really, rich and they see things differently.

And again, we're in the situation right now. Like, I know we've been talking a lot about the U.S. and the economic recession. I mean, we have Indigenous partners, communities in these countries that know a lot about resilience. They have a lot to teach to us. You know, there are those two out of most of the biodiversity loss left on the planet. The Oneida Nation here, Oneida Nation of the Thames, they're known for the being the longest democracy in practice in the world. So I assume they can tell us also about democratic practices. So, it's about us listening to them and learning but also making room for them to empower the communities and be active actors there.

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JULIAN BIRKINSHAW: So there's a lot we've covered today. Let me just ask you for a couple of parting thoughts. If there's one kind of key insight from the conversation, I mean, the earlier part of the conversation that listeners should take away, what's that?

DIANE-LAURE ARJALIÈS: Yeah, for the listeners, I think it's the importance of financing nature based solutions. It's really important that people realize that we need to invest in our green infrastructure and then to do it, especially in Canada, but also in Australia and New Zealand, South America, we need to really bring alongside our Indigenous partners. Again, they are 6% of the population worldwide, and the stewards of 80% of the biodiversity left on the planet. So 6% and 8o 0%. So clearly to have some knowledge. So we're not going to be able to fight this climate crisis and this biodiversity loss crisis alone. We need everyone at the table. We need the investors, we need accelerators, we need researchers. It's a it's probably the largest crisis we'll have ever seen. Biodiversity loss is even more difficult than the climate crisis. And it's going to be essential for our success as a society. But also for everything; it's giving our food, it's giving our medicine. It's giving everything to us. So we need to really work togeth

JULIAN BIRKINSHAW: And what are you working on now? I mean I'm guessing there's a huge research agenda around this?

DIANE-LAURE ARJALIÈS: Yes. So, as I said, at the Lab we're working on nature based solutions. So conservation finance, but also we're working on regenerative agriculture. Because, of course, helping farmers transition from industrial farming to more regenerative practices is really important for food sovereignty. But also for biodiversity loss. We're working also on economic reconciliation with Indigenous people. So right now we have a project, and we're looking at what happens on capital markets and how Indigenous partners are being brought forward on that, or not, and what we could do about it. And we're just launching with Laurel Steinfield a new trend, which is gender lens investing, which might be with VC.

JULIAN BIRKINSHAW: Wonderful. And that will be a topic for another podcast, no doubt. Thanks.

JULIAN BIRKINSHAW: You've been listening to Dialogue with the Dean from Ivey Business School. My sincere thanks to Diane-Laure Arjaliès for sharing her insights and valuable work at the intersection of sustainable finance, conservation, and Indigenous leadership. And thank you for joining us. If you've enjoyed today's episode, be sure to subscribe and stay tuned for more conversations with Ivey faculty on the ideas shaping business and society. Until next time, goodbye.

KANINA BLANCHARD: This was Dialogue with the Dean an Ivey Impact Podcast series. For more insights from Ivey, including thought leadership on critical issues and additional podcast episodes, visit IveyImpact.ca or subscribe on your preferred podcast platform. Thanks for tuning in.