This week, we're joined by Torsten Thiele, the trailblazer in blue infrastructure financing. From the depths of the ocean to the frontlines of urban development, we dive deep into how investing in the sea could be a game-changer. Learn how nature-positive projects, from preserving mangroves to enlarging wetlands, promise resilience and financial rewards.
Our discussion takes us to who's catching this wave—from city mayors to development banks. We also tackle the obstacles, like the shortage of ecologists in engineering projects and municipal resistance to novel solutions. All this while shedding light on opportunities for scaling up awareness and action. Intrigued? Cast your net and reel in this episode for a deep dive into a future where finance, ecology, and urban planning coalesce.
This week, we're joined by Torsten Thiele, the trailblazer in blue infrastructure financing. From the depths of the ocean to the frontlines of urban development, we dive deep into how investing in the sea could be a game-changer. Learn how nature-positive projects, from preserving mangroves to enlarging wetlands, promise resilience and financial rewards.
Our discussion takes us to who's catching this wave—from city mayors to development banks. We also tackle the obstacles, like the shortage of ecologists in engineering projects and municipal resistance to novel solutions. All this while shedding light on opportunities for scaling up awareness and action. Intrigued? Cast your net and reel in this episode for a deep dive into a future where finance, ecology, and urban planning coalesce.
David Meyers: Well, here we are. I’m so glad to be here at IMPAC5 with Torsten Thiele and Kim and myself, and we’re excited to have another 4Nature Podcast discussion. Let’s start with some background on who you are, and how did you get into this ocean financing space that we’re so active in these days?
Torsten Thiele: Sure. Very happy to be here. So, I spent a lot of time financing infrastructure and looking at the complexities of how regulation and finance adapt. And having worked on various parts of the planet, most recently in Africa, I realized there was a big blue space where a lot of the financing was still in the earlier stage. And I had spent some money in that blue space because we funded subsea cables. And that made me think about what else could one do there given me all these environmental necessities.
David Meyers: Right. Now blue infrastructure has become such a buzzword. Can you give us your definition of what you’d consider blue infrastructure?
Torsten Thiele: I would love to because I think I may have been part of the people who invented that buzzword. It’s really trying to explain that infrastructure finance is, of course, a very large part of what we’re doing. So over the next 20 years, we’ll spend 80 trillion on infrastructure. If we do that without understanding its impacts on nature, we will clearly end up having a big issue. So if we turn this around and say, here’s a huge opportunity to invest pro-nature and we can use the understanding of nature and nature based solutions in integrating risk reduction, building resilience, working for adaptation, it really gives us and entirely different outlook.
So step one, it means that you are aware of your context when you build a wastewater treatment plant, a railway track near the coast, that if you cut through the mangroves and cut them off, that is terrible. But if you understand that the mangrove protects your infrastructure, that is a real opportunity. Now that’s the first step, understanding, integrating, bringing these opportunities into the financing structure.
The second step, which I’m particularly excited by, is it actually improves the underlying financial dynamics of the project. And so for me, blue infrastructure is a project that is thought through as a nature positive investment opportunity that in its overall financial structure is more resilient, more adapted to change. And therefore, just a better project for people, for nature and for financial investors.
Kim Bonine: I’m curious who have been found to be most receptive to this idea of nature positive, blue infrastructure in terms of some of the key actors making decisions around infrastructure, the governments, or developed -- finance institutions? What’s kind of the receptivity to these ideas, and where do you see there being barriers or maybe gaps in information or capacity?
Torsten Thiele: It’s really interesting that there are these three big groups who can start to see the possibility but each one also identifies gaps in how to approach it. So, of course, if you are already managing a coastscape, if you are, say, the mayor of a coastal city, you understand that you need to rethink your structures with climate change, with the need for development in a way that is nature positive. So, you already have the mindset around it. But your concern is that finance is complex enough, how can you get the learning, the tools to actually implement that?
The multilateral development banks are a great entry point to actually work in this space. And there, what I found was that there is real interest in educating the project officers. So, you have people who work on the environmental side to understand these parts, but you also have the project officer who has to get the financing through, go to credit committee. And so we’ve had really interesting discussions and capacity building efforts at that level working with the development banks.
But I think a really interesting driver is actually in local communities and small innovative companies. Because often they are left out of that space and they only see the venture capital as sort of the entry point, trying to find small scale funding on a standalone kind of basis. And that’s really difficult in the coastal space. Even microfinance for coastal communities, fisheries is a very space.
Now, if they can be integrated in these projects, and all of a sudden, it is understood that their innovation, their activity is actually part of solving a bigger issue and part of a financing envelope; so that they become the sub suppliers, the supporters, the delivery agents on this bigger picture, it really is in their interest. But you need somebody to design all of that. That’s been a challenge, but I think we’re starting to see in the first projects that think in that scale.
David Meyers: That’s really interesting. What I’ve been hearing is that there’s two main barriers to getting these concepts really implemented. One of them being that the large infrastructure design is done by engineers, not ecologists. And so part of it, I guess, must be educating the engineers or at least bringing ecologists onto the engineering team so they can even understand what sort of an integrated blue-green approach might be.
And the second is that even if you have development finance institutions that are providing financing and you can educate those project officers and get them in, ultimately, it’s the municipalities or the sovereign agents that are setting the investment criteria or doing the calls for proposals. And often, they’re resistant to these innovative approaches and would rather just build a big seawall rather than think about communities.
And you know, you got down to the communities and I love that. I want to go there, but let’s start at the top here. Where are the pressure points and where are the key levers of change? Who do we need to convince to make this scale at the -- bigger than the scale that you talked about earlier?
Torsten Thiele: I think these are two excellent questions. On the engineering side, what we found is by creating these gray-green infrastructure communities of practice we are getting that kind of learning. Because in the end, this needs to be in the engineering code, every engineer needs to know that.
Now what I found fascinating is that in certain aspects, so like flood control, for instance, we are there. The engineers understand that so, for instance, when Rotterdam port got expanded, they actually increased the wetland area by 10 times because that was the financially viable solution. These were hard-hitting engineers who got it. So I think we just need to go through these different nature based services, including biodiversity, explain how those values work and then get it in the engineering codes, build these communities. So it’s hard work, but I think we can show them the numbers, show them the outcomes, it really functions.
Now that leads then to that second question, how can we get the municipalities who often themselves don’t have any access to funding, they don’t have their own fundraising capacities; how can we get them to use these arguments to facilitate access to them to national funding sources or multilateral funding sources? And that’s why I like this idea of this coalition around the Development Climate Institute.
Essentially, I’m putting the challenge to them to say, look, we all know you need to grow, but you will only get the global commitment to more capital into the development finance space if you can show us that you’re delivering on sustainability, that you’re living on climate change adaptation. So here’s a pathway that we are offering you to engage on the subnational level through the development finance umbrella.
And I think that then also is attractive for national governments because it’s an additional funding source and also capacity source. Because addressing this type of challenge always at the national level, just buying too much political and planning capacity. So, we need to bypass that, build the overall capacity, including at that local subnational level.
Kim Bonine: That’s great. I’m really glad you mentioned that question talking about how to get these conversations and decisions sort of upstreamed in the planning process -- there’s so much of infrastructure development, I know when I’ve spoken with colleagues in different development banks in, say, the safeguards division, they talk about how they don’t even get to hear about the project. It’s already been planned, it’s already been started, and they feel that they are more in a position to just say yes, no, put up blocks, increase costs, and it ends up being a more contentious relationship rather than them being able to all be in the same area and then asked what are our goals, how can get there in a more nature positive way. So, I think these movements towards that are incredibly positive.
What has been your experience, or what’s your view when you’re looking at more private investment in infrastructure development where you have more private actors, or maybe different levers - or what are the leavers - and national governments or national actors… what is kind of the entry point?
Torsten Thiele: I think that’s very interesting longer term challenge. And I think to address that challenge, one really has to understand that finance is very much a time driven process. So large infrastructure, generally speaking, has a different funder for the earlier stage, for the actual construction phase versus the longer term operational stage.
And what I’m very keen on is to help longer term investors, i.e., the people who come in when the thing’s built and it functions to understand and appreciate that natural capital is one of these long-term places to put your money.
And so we want to convince pension funds, we want to convince those large infrastructure investors that there is something here as an asset class. Because the early funders will only be able to do this if they have an exit, and the exit has to be that [inaudible 00:11:02]. So we will have to put quite a lot of effort into bringing people in who can understand this phasing of these processes.
And that is why it’s so important that over time, once these structures are built, these additional values and services are properly accounted for. And so that’s why this whole work around ocean accounting, natural capital is all part and parcel of creating that longer term stability so that it becomes an investable proposition, and effectively, a new asset pass.
David Meyers: Yeah. I mean, so with all of the climatic changes that we’ve been seeing going on in the world, you would think that engineers and municipalities and everyone would be aware of the need for maintaining flood plains and maintaining coastal protection and coral reefs, mangrove, things like that, but I’m not seeing a change in behavior happening very quickly in that regard. It seems that every time a disaster hits, we go, “Oh, yeah. We really probably should have not put those levees in and shouldn’t have kept the flood plains there.”
So I guess my question is, how do we really ramp up understanding in this space? Because a lot of the solutions that you’re talking about, a lot of the blue-green approaches are not only cheaper in the design and construction phase, but they’re definitely cheaper in the maintenance phase too. So, like, to me, it’s a no brainer, but how can we really scale this up quickly and build awareness?
Torsten Thiele: So I think what we’ve tried is to identify multiple ways to promote those kinds of thinking. One is to actually have very concrete pilots in the [inaudible 00:12:44], but actual projects where you can show it. I think that’s one path.
Another pathway is to use tools such as insurance structures as a way to price some of this. So that you can say, look, on this coast, things are done properly, and you can insure your house because there’s a structure behind it. There are other places where the insurance companies wouldn’t even go because there is all that risk and it’s no longer insurable. So, that becomes a really relevant hardcore price point. So, I think that’s an important route to think about insurance and parametric insurance and all these models around that.
And then third, it’s really finding the front runners. So, we have a number of countries who are now committing to a much larger protection and have a real interest to have not just mitigation but real effective adaptation in finance. And so if we can show in Barbados, if we can show in Belize, if we can show in the [inaudible 00:13:47] and others that these models work, I think the more reluctant group of countries will come on board.
And so scaling in a way is not a linear [inaudible 00:14:01]. For me, scaling is about creating sort of positive network effects, where you do it in one place, something else pops up, and all of a sudden, it becomes easier for all of us. So, that’s what we have to achieve to get to the critical mass, multiple points ventures.
Kim Bonine: What do you see as the role of technology in helping, particularly in thinking about small island states, in helping them develop different pathways of development that might be more high-tech, or sort of a blue-green enterprises, livelihoods, this kind of role of technology might open up other possibilities that change with this pathway. And have you seen that happen, what do you see as some of the potential for that?
Torsten Thiele: I very much believe in what I call leapfrogging. So, I think small island states have a real opportunity to do things like marine based renewables. That is the technology that is evolving. But if you put it right next to some big solar plant, the price points aren’t quite there yet. But if you’re on a small island, you can replace your diesel generators with marine wave energy, or other technologies like that to see real changes.
And so, similarly, the whole data side is so much more crucial if you are far away, so connectivity actually allows you to do things differently from a distance and at a smaller scale. One of the big problems that a small island has is, for instance, if you want to have a waste management side, you need a certain size. If we can containerize it, if we can bring technology to do that on a smaller scale, it fits many more islands.
So, I think this whole ability that comes from tech to think modular, to bring new much faster processes in there, to base yourself around much more of a software type approach. It’s a huge opportunity and changes the dynamics about where you are and what you do. And I’m very excited by that.
David Meyers: One more question maybe for me is just, you know, you talk about these communities of practice. Can you give some examples and how can people find out more about these different communities practice? I know that Conservation International is involved in one. And what do you think are the most interesting and where should people go to find information here?
Torsten Thiele: Yes. So, the gray-green infrastructure is the community of practice. That whole concept is really growing, and I think the finance sector is particularly in need of more of that exchange. And I think what is so nice is a community of actors that isn’t just of one discipline. So, I’ve had some really interesting discussion that brought more social science, for instance, in the way you communicate.
A lot of what people think of as ocean solutions came from the natural science space. But it’s about -- it’s about how people use information. So, we want those types of communities of practice to grow, and we have lots of information available, for instance, the Blue Natural Capital or [inaudible 00:17:08] side and other similar opportunities. So, let’s go and let’s build those.
Kim Bonine: Yeah. That’s great. And there’s now a natural capital accounting community of practice in Africa, and I think the World Bank and others are working on a coalition of ministries of finance for climate action, so I think that there is a lot of movement in that space, which is really exciting. Yeah.
David Meyers: Yeah. Well, thank you so much, Torsten. It was great to have this conversation, and we look forward to seeing how this builds and grows and seeing what’s next.
Torsten Thiele: Great. Thank you.
Kim Bonine: It was a pleasure.