Investors can help bridge the gap needed to develop nature-based solutions - a suite of actions or policies that help to tackle climate change, according to Ritchie Thomson, senior responsible investment associate at Aegon Asset Management.
But Thomson added that these projects did not typically attract private investors, for a number of reasons, including deal size, revenue streams and the risk/return profile.
Thomson said: “Climate change and nature are fundamentally connected: on one hand, unmitigated climate change can lead to significant loss of biodiversity and on the other hand, if the current rate of nature loss and degradation continues, the effects of climate change will be amplified, potentially leading us beyond climate tipping points.
“Nature has the potential to be an invaluable partner in our fight against climate change; indeed it is estimated that the biosphere and oceans currently sequester around 55 per cent of anthropogenic GHG emissions and this is where nature-based solutions come in.”
Nature-based solutions (NbS) are actions to protect, sustainably manage and restore natural and modified ecosystems. Some examples include afforestation, mangrove protection, agroforestry and green roofs and walls in urban areas.
Thomson said although there was debate around the exact climate mitigation potential of NbS, there was broad consensus that the magnitude of that potential was large.
He added: “Unlike engineered-based mitigation solutions, such as carbon capture technology or direct air capture technology, NbS exist today and are cost effective to implement.”
“Investment in NbS has thus far been mainly the domain of government or philanthropic funders, but there is a significant funding gap relative to what is required. Private investment can help meet this gap.
“However, for a variety of reasons, such as deal size, revenue streams and risk/return profile, these projects often do not attract private investors. The exception to this is the carbon offset market, where corporates can offset their own emissions by purchasing NbS carbon credits that remove carbon from the atmosphere.
“Although carbon offsets can play an important role in mitigating climate change, companies must ensure that reducing their emission footprint is central to their decarbonisation strategy before offsets are used.”
