In another life, Robert Gardner says he might’ve been a glaciologist. He studied glaciers up close during his time at Oxford but landed in finance. For years, he built a career and reputation in the pension space, founding and growing the investment consultancy firm Redington, which was acquired by Alther J Gallagher this past October. Now, Gardner has gathered his decades of experience into his biggest challenge yet: changing the way we value nature.
When Gardner attended COP26 in Glasgow, the conference was mainly focused on discussions around net zero, oil and gas and renewable energy. While an essential part of the green transition, he was more interested in the state of the planet’s biodiversity. According to the WWF, there has been a 73% decline in the average size of global wildlife populations in fifty years (1970-2020). As he learned more about the rewilding movement and different economists’ work on how we value nature, he was “fascinated by why […] we value nature more dead than alive. Why is a forest elephant worth more for its tusks dead than alive in increasing the biodiversity of the rainforest and acting as a pollinator?”
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Rebalance Earth (RE), which Gardner co-founded in 2020, seeks to solve this problem by turning nature into an investable asset class, allowing cashflow to be derived from it. RE wanted to focus less on carbon, where the main payment ecosystem service exists, and de-risk this sort of responsible investment from politics where it could. Companies can pay for nature, not just because they want to, but also because they need to. And for that, there needs to be a problem.
In the UK, that problem is water. “Too much, too little, too dirty,” Gardner says. “How can we use nature as infrastructure, instead of building more water treatment plants and flood defences? How can we use nature to solve that problem?” One of the solutions RE is pursuing is the restoration of peatland, a wetland ecosystem that could act as a sort of sponge for excess water. It is part of the company’s returns framework: where is the demand? Who is going to pay for it? What is the nature-based solution? What’s the inspiration?
Evolution of climate finance
Headlines would have you believe that, given all the other problems the world faces, ESG investing is in decline. Between a global pandemic, the rise of geopolitical conflict and changes in global leadership, it may feel like the financial institutions that made major pledges in the early years of ESG have allowed it to fade away. In June 2024, for example, Barclays reported that clients withdrew $40bn from ESG equity funds. According to Morningstar Direct, BlackRock, Deutsche Bank AG’s DWS Group and Invesco are some of the firms that have significantly reduced new ESG funds.
Widespread accusations of greenwashing have also led to a more public discussion about the limitations of ESG, particularly in its first iterations. At an industry event for investment managers and asset owners in late 2024, a panellist highlighted that at the beginning of the ESG craze “some [in the finance industry] might have thought more about marketing messages rather than the very realistic impact on investment results.”
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By GlobalDataGardner agrees that the term ESG has gone out of style. But, he explained how the mix of politicisation and exaggerated pledges that gave it a bad name has far from stopped the green transition.
For him, the start of the ESG trend “goes back to ethical investing, which was about exclusion and not holding certain assets. Then it evolved into, what are the negative externalities that we’re not understanding in the businesses that we’re investing in? And let’s bucket these in environmental, social and governance (ESG).” According to S&P Global Market Intelligence, most ESG funds outperformed the S&P 500 in early 2021. Gardner said that “there was a period of time where it looked like I could invest money, make money and do good.” However, the impact of global conflict on oil prices and the economic strain from Covid-19 caused ESG funds to flail in 2023.
In his view, one of the main issues when ESG came into the limelight was that it was too broad. There was a sense that “everyone’s trying to solve everything.” Mounting pressure on institutions to address many institutional problems caused them to overpromise with their pledges.
That said, he would advise us to “caution the noise” and remember that most financial players have a time horizon of a couple of decades, not just the next few years, which means they have to account for how climate change will affect their returns. That is one of the reasons pension funds, which can often plan for the long term, have still been active in climate mitigation investments. RE, for example, is 25% owned by West Yorkshire pension fund, which manages £20bn ($25bn). Importantly, Gardner notes, the attitude has shifted from preaching to practicality.
“We’ve gone from the kumbaya, doesn’t it feel good to do ESG, to, let’s focus on what we can do and make a difference in our own backyard. And our backyard might be the UK. How can we help cities like Plymouth and Manchester […] become more resilient – sustainably, environmentally and economically?”
He is confident that even the big actors that received the most criticism for greenwashing aren’t shying away from the problem.
“The BlackRocks, the big US banks, the reality is they’re doing more to think thoughtfully about this stuff than they ever were, but what they’re not doing is running around talking about it.”
Rebranding ESG
Environmental groups, from grassroots activists to high-ranking corporates in renewable energy, have been contending with what a second Trump presidency will mean for their work. However, Gardner believes that some shifts towards sustainability have become far too institutionalized for a Trump presidency to stop them. Indeed, global investments in renewable energy have almost tripled since 2015.
He agrees there has been a sort of rebranding of ESG, particularly as a growing number of natural disasters have shown the cost of not having mitigation strategies. Spain’s CaixaBank calculates that the damages caused from the Valencia floods could subtract between 10 and 20 basis points from the country’s GDP in the last quarter of 2024.
“Let’s focus on adapting which will help with mitigation. Let’s rebrand it as energy security. Let’s rebrand it as creating jobs. I bet a year from now, we’ll have a picture of Trump with wind farms in Texas saying, look at how many jobs we’ve created.”
Gardner points to some examples of this already happening in the US. Florida Governor Ron de Santis, for example, banned the words climate change from Florida state laws, “but is funnelling millions of dollars into climate resilience. So, I think a lot of it is doing the same thing but just using different words.”
In his view, framing environmental investing through ideas of security and resilience makes it more approachable to people and places where ESG has become a sort of boogeyman.
“Do you think Texas or Florida want to be more resilient? Yes. If by being more resilient we also help address climate change, no one’s going to push back against that. I think people just don’t like having their noses rubbed in it. People don’t like being told what to do.”
In terms of RE’s long-term vision, Gardner says the plan is first to prove that the model can work in the UK. Once they do that, they would want to launch a European fund and then go global.
“Once we’ve got that, then we’ve got a scalable, repeatable model that we can take anywhere in the world.”
