Tokenising Biodiversity: The Construction and Scaling of Rewilding Tokens
Lead Research Organisation:
University of Oxford
Department Name: UNLISTED
Abstract
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| Description | This grant gave us the resources and space to explore a new and relatively untested financial instrument for nature recovery, which also generates broader lessons on the role of digitalisation in nature financing, as well as identifying key building blocks to a market to support nature recovery. The grant also allowed us to present our preliminary findings for get feedback and enhance visibility for our project. Owing to the novelty of the concept, we have found that stakeholders are generally open to contributing to the research project and provide candid reflections to our discussions. The grant presented a tremendous opportunity to discuss various disciplinary approaches towards understanding what 'nature market' is or can become in the future. Importantly, it allowed us to uncover the deeply varied and contested definitions of what 'nature market' entails and should achieve. The grant allowed us to carve out safe spaces for discussing the limitations of disciplinary approaches in this field, as well as potential implications for exclusion or obfuscation of the sensitive groups when designing global nature investment instruments. At the beginning of the project, we saw two key challenges to nature financing. First, there is a dearth of innovative market instruments and architecture that could facilitate the construction of bankable project pipelines for nature financing, creating a significant barrier to unlocking private finance to support nature recovery. Second, challenges remain in measuring, reporting and verifying nature recovery outcomes, which could fuel mistrust in deploying sustainable finance strategies to support nature recovery, especially in light of greenwashing and impact-washing concerns. Both challenges have been associated with the lack of appropriate data, which can be explained by the current challenges in weighing approaches within biodiversity indicators and indices. Focussing on non-fungible tokens, our project begin to uncover the design, functionalities and demographies of this rapidly developing and highly decentralised market. While we acknowledge that the NFT world is highly decentralised and heterogenous, we identified a typology of nature NFT models. We uncovered the potential of blockchain in storing and reporting verified nature recovery processes in (near) real-time, which enhances the credibility of nature recovery investment tools. We also found that nature tokens have the potential of appealing to a broad range of actors. On the one hand, it appeals to new group of NFT investors that are enticed by the wide variety of value propositions offered by digital financial instruments. On the other, as the financial sector become increasing familiar and comfortable with the concept of NFTs, nature NFTs provide a potential solution for bundling typically small-scale and highly fragmented nature recovery and/or rewilding projects into investable and scalable financial instruments. To this end, our findings bore broader implications on exploring the potential of digitalising sustainable finance. Another key theme emerging from this project is the urgent need for regulatory guidelines on nature investment and in NFT trading. The lack of strong governmental commitment to nature recovery and aligning nature financing with broader climate goals has proven to be a chokepoint for private sector actors to commit to innovative solutions to nature financing. Likewise, despite growing pockets of interest in nature-positive NFTs, the lack of regulatory guidelines on the nature of this asset class is proving to be a hurdle for broader financial institutions participation in this novel asset class. The grant has allowed us to understand the key landscape of nature NFT financing - including its current development, potential and challenges. By uncovering key gaps in our research knowledge and regulatory support, this grant has built a solid foundation for setting a future research agenda to hone in on more specific issues such as the divergence of regulatory definitions of NFT across geographies. |
| Exploitation Route | This grant has facilitated research and innovation in two key areas of the nature-positive financing agenda. First, this grant allowed us to explore the range of potential and challenges of deploying digital finance solutions to support nature financing. On the one hand, the combination of smart contracts and various monitoring methods allow for incorruptible monitoring, verification and reporting of progress at a granular scale. Expanding nature financing to the digital sphere also attracts a wider range of financial actors - such as digital art collectors and token traders - that may not be involved in the formal financial system. Specific token designs, such as the presence of a dashboard, membership to a community of token holders and access to the land asset that is being recovered, can provide an education platform or a sense of 'connectivity' to nature for investors that are otherwise physically distance from nature. On the other, our research also shone light into some unresolved controversies and ongoing challenges to deploying digital solutions to nature financing, including the carbon footprint of blockchain technology, the dearth of understanding of the full range of potential of smart contracts to create a credible financing instrument, and a general lack of familiarity and trust in the digital financing space. Second, this grant has allowed us to explore generalisable challenges to constructing nature marketplaces, including agreement over scientifically robust and usable metrics, deployment of MRV technologies, matchmaking and bundling bankable projects with investors, and the need for regulatory support and policy 'nudges'. We found that digitalisation provides solutions to some of these challenges, but regulatory support for nature financing and innovative digital financial instruments remain a key hurdle that ought to be the top of future research priority. As we have alluded to above, this grant enabled an in-depth collaboration with an industry partner, Ecosulis Ltd., to focus on uncovering the best practice in deploying NFTs to finance nature recovery. In the process, our engagement with interviewees as well as seminar and conference participants opened up important conversations about token design, market design, monitoring, reporting and verification (MRV), as well as regulatory support. The project support by this grant, importantly signalled to a lot of industry workers academic interest and scientific support in nature recovery, which was deemed important in enhancing and safeguarding the credibility of nature finance. |
| Sectors | Environment Financial Services and Management Consultancy |
| Description | 1 - Expected impact is significant one, both for society, economy and ecology, however, we only explored the potential of this research direction. We discovered the ways to analyse and summarise existing and emerging trends in nature/biodiversity NFTs, including the indicators of their trustworthiness. 2 - in the report 3 - requires further analyses on the efficient pathways for engagement of FIs and relevant public groups 4 - falls into emerging and groundbreaking area of green Fintech, and all its associated controversies, risks and opportunities |
| First Year Of Impact | 2022 |
| Sector | Digital/Communication/Information Technologies (including Software),Environment,Financial Services, and Management Consultancy |
| Impact Types | Societal Economic |
| Title | NFT marketplaces |
| Description | NFT marketplaces dataset. |
| Type Of Material | Data analysis technique |
| Year Produced | 2020 |
| Provided To Others? | Yes |
| Impact | Scraped data off the NFT marketplaces |
| Title | Nature Tokens Marketplaces Script |
| Description | We developed a suite of scripts for exploration of NFT marketplaces (OpenSea, Foundation, Nifty, Rarible, SuperRare etc), specifically focusing on nature/biodiversity/climate-related assets. The main purpose of this work was to initiate proper understanding of structure, trading trends and potential issues within the NFT ecosystem while providing valuable insights for further research. Each marketplace has its unique features, supported blockchains, and focus areas, so we wanted to distill the choice preferences of marketplace depending on the specific needs of the buyer or seller, including the type of NFT they're interested in, the blockchain they prefer, and the community they want to engage with. |
| Type Of Material | Computer model/algorithm |
| Year Produced | 2023 |
| Provided To Others? | No |
| Impact | The development of the Nature Tokens Marketplaces Script, aimed at the intersection of blockchain technology and environmental conservation, has several notable impacts: (1) Facilitating environmental funding (these platforms can direct significant funding towards environmental conservation projects. By tokenizing nature-based assets, such as carbon credits or protected land areas, they provide a financial incentive for both conservation efforts and sustainable practices); (2) Increasing transparency and trust (blockchain technology's inherent transparency and immutability can enhance trust among stakeholders. It provides a clear and verifiable record of transactions, ensuring that funds allocated for conservation efforts are used as intended and that the environmental assets represented by tokens are preserved or restored accordingly); (3) Market access and liquidity (by creating a marketplace for nature-based tokens, these platforms can increase liquidity and market access for environmental assets. This could potentially widen the pool of investors and participants interested in funding conservation efforts, from individual supporters to large corporations seeking to offset their environmental impact); (4) Awareness and engagement (these platforms can raise awareness about environmental issues and engage a broader audience in conservation efforts. By connecting environmental assets with the global blockchain and NFT communities, they can attract attention and support from individuals who might not be reached through traditional conservation channels); (5) Innovation and collaboration (the development of nature tokens marketplaces encourages innovation in both the environmental sector and the blockchain industry. It fosters collaboration between conservationists, technologists, policymakers, and the public, potentially leading to new solutions for environmental challenges); (6) Economic incentives for conservation (by monetizing environmental assets and conservation efforts, these platforms provide direct economic incentives for preserving biodiversity, reducing carbon emissions, and supporting sustainable land and water management practices.). All these factors were considered during design of the script, which will evolve as an open source tool. |
| Title | Nature recovery tokens |
| Description | Comprehensive desk based dataset of more than 100 nature recovery tokens. This includes who issues the Tokens, what is the objective, how is the money being used, what is the governance structure, what are the benefits of holding those tokens, what type of people would be investing in them. |
| Type Of Material | Data analysis technique |
| Year Produced | 2021 |
| Provided To Others? | No |
| Impact | N/A |
| Description | Ecosulis |
| Organisation | Ecosulis |
| Country | United Kingdom |
| Sector | Private |
| PI Contribution | Contributed to the design of the token together in an iterative process. |
| Collaborator Contribution | Gave assess to a comprehensive desk based design of over 100 existing tokens. Received feedback from CEO and senior management on best practices. |
| Impact | Unearthed some of the key issues in the token industry. Through the research process, we co-design the token, which is a new financial instrument. Developed a typology of existing biodiversity tokens and, from this, drew up the list of best practices into that token built into the token design. |
| Start Year | 2021 |
| Description | Interviews and Feedback from Commercial, Finance and Academic Organisations |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | We opened the blackbox of how biodiversity tokens work, the current landscape of token and market development, the key strengths & weaknesses of using tokens as a financing tool for channeling private investment towards biodiversity objectives, as well as desirable token and marketplace design |
| Year(s) Of Engagement Activity | 2022 |
| Description | NbS Conference 2022 |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Poster session on the novel emerging financial instruments for nature conservation/restoration, hosted by the NbS 2022 Conference |
| Year(s) Of Engagement Activity | 2022 |
| URL | https://www.naturebasedsolutionsoxford.org/ |
| Description | Workshop shaping research priorities on nature finance |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | We organised a full day, invite-only workshop at Oxford to connect researchers and practitioners and discuss future research priorities on nature finance. Including a presentation of spatial finance work. Reaching an audience of >100 national and international stakeholders mainly in person but also through dial-in option. |
| Year(s) Of Engagement Activity | 2023 |