Case Study

The investment value of rainfall in the Amazon: The initial steps of Earth Security

In 2011 Earth Security partnered with the Stockholm-based Tällberg Foundation to bring investors and scientists to the heart of the Ecuadorean Amazon. The goal was to explore the world’s first oil-for-nature sovereign finance deal being planned by the government, and the implications for aligning global finance with nature.

Exploring the value of the Amazon’s rain

The Amazon’s hydrological function – scientifically documented but largely unknown to the world of finance – offered an opportunity for economic decision-makers to recognise the value of this natural asset.

The world’s largest rainforest is known as the lungs of the planet, as it emits 20% of the Earth’s oxygen. What is less well known is its ability to regulate rainfall patterns. The Amazon pumps 20 billion tons of water per day into the atmosphere, and these so-called ‘flying rivers’ spread rain across South America’s agricultural land, Brazil’s hydropower generating sector, and as far north as the western United States.

Creating more agile regional cooperation systems

In 2011 Earth Security partnered with Fundación Gaia Amazonas in Colombia – a pioneering conservation organisation promoting an ambitious transnational conservation corridor. Our collaboration sought to build a case for a transnational governance system for the Amazon that would involve all eight Amazon sovereign countries. Earth Security and Gaia Amazonas developed and presented the proposal at high-level events with Scandinavian ministers and business leaders in Norway and Sweden, in collaboration with the Tällberg Foundation.

Breaking the walls of ecological risk

Later in 2011, at the Falling Walls Conference in Berlin, Earth Security’s founder Alejandro Litovsky presented a case for integrating the Amazon’s rainfall-generating capabilities into the finance sector’s understanding of risk and risk modelling – an agenda to be developed with local investors and insurance companies in Latin America. Speaking at a conference on scientific breakthroughs, he argued that in order to embed ecological risk into mainstream financial systems, scientific analyses should be repurposed so they can be understood and operationalised in investment decisions.

“Alejandro Litovsky, the founder of Earth Security, warns that deforestation in the Amazon will lead to investment risks in Latin America’s hydropower and agribusiness sectors.” - BBC World (2012)

Incorporating the value of rain into the financial system

In 2012 Earth Security partnered with the UN Principles for Responsible Investment to organise a session at their annual conference in Rio de Janeiro. This convened global investors, including HSBC and Sumitomo Mitsui, with the Brazilian Space Agency. Entitled ‘Praying for Rain’, the discussion built a bridge between science and finance. It covered the ecological risks that the loss of rainfall due to deforestation could pose to Latin American investment portfolios in hydropower and agribusiness – two key resources on which Brazil’s economy depends. Two years later, systemic droughts hitting southern Brazil force the rationing of electricity.

Identifying the evidence and partnering with mainstream institutional finance platforms to bring about systemic change remains an ongoing priority.