Sliced: Why Smart Investments Start with Ecological Understanding

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A couple of weeks ago, a dear friend of mine, who works in impact investing, told me about a project he was evaluating. On the surface, it looked promising – a tree-planting venture in a South American country designed to generate economic returns and restore degraded land. But one detail gave me pause. The project involved planting eucalyptus trees. I immediately raised a concern – eucalyptus isn’t native to the region. Even with the best intentions, introducing non-native species can have serious environmental consequences. To his credit, he had already flagged the issue and was taking a hard look at the long-term ecological implications. That’s exactly what responsible investing in nature requires due diligence not just on the numbers, but on the biology and ecology.

That conversation led us to reflect on a cautionary example closer to home. We both live in Spain, and one of the most instructive case studies of non-native tree introduction is Galicia, the rainy northwestern corner of the country where he and I walked El Camino de Santiago together just last year. Despite being the wettest region in Spain (some areas receive up to 4,000 mm of rain annually), Galicia experiences more wildfires than any other region. Nearly half of all hectares burned in Spain between 1983 and 2016 were in Galicia. How does that happen in such a lush environment? Although not the only reason, eucalyptus is a major factor.

Originally introduced in the mid-19th century for ornamental and landscape purposes, eucalyptus quickly adapted to Galicia’s temperate, humid climate. Over time, and especially from the 1940s onward, its cultivation ramped up to serve the growing pulp and timber industries. Economically, it made sense. Ecologically, it turned out to be a dangerous gamble. Eucalyptus trees are pyrophytes, so they thrive in fire-prone conditions and actually use fire as part of their reproductive cycle. Their leaves and bark contain highly flammable oils, and the trees shed a significant amount of dry matter that accumulates at their base, creating a perfect fuel bed. Fires in eucalyptus forests spread twice as fast as those in native oak forests, and embers can travel up to two kilometers, triggering secondary fires.

The risk is compounded by socio-economic dynamics. Rural depopulation has led to poorly managed or abandoned eucalyptus plantations, where undergrowth and deadwood build up unchecked. Monoculture plantations reduce biodiversity and undermine the natural resilience of the landscape. Despite mounting scientific evidence and increasing calls from environmental experts and firefighters to limit eucalyptus expansion, economic incentives continue to drive planting, often with minimal regulatory oversight.

This example underscores a vital lesson – when investing in nature-based projects, particularly those involving tree planting or afforestation, it is essential to understand not only the financial model but also the ecological context. The wrong species in the wrong place can undo much of the intended benefit, and in some cases, create new hazards. That doesn’t mean we should avoid nature-based investing. Quite the opposite. But it demands a rigorous, thoughtful approach. Ask whether the species is native or ecologically compatible. Investigate fire risk, biodiversity impacts, long-term land management plans, and the involvement of local communities. Make sure there’s a credible environmental assessment, not just a compelling business plan.

The story of eucalyptus in Galicia isn’t just a local issue, it’s a global cautionary tale. But it also highlights how smarter, more responsible investing practices can make a difference. My friend’s instinct to dig deeper and consider the long-term ecological impact is a model for how all of us – investors, consultants, project developers, and citizens – should engage with nature-based solutions.

If you’re interested in exploring this topic further, I recommend checking out some excellent resources, such as the Galician Society of Natural History’s position, and investigative pieces like this report on wildfire risk. They offer insight into both the science and the policy issues at play.

In short, investing in nature is one of the most powerful ways we can address climate change and biodiversity loss, but only if we approach it with humility, knowledge, and respect for the complexity of ecosystems. Let’s plant the right trees, in the right places, for the right reasons.

Interested in connecting with us on climate finance, impact investment, climate solutions strategy, or carbon credit development and commercialization? Book a 30-minute conversation with Gordian Knot Strategies here to discuss how we can support your goals.

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