The next decade will be of pivotal importance in terms of efforts to tackle the global climate and biodiversity crises, and to provide safe and secure future livelihoods for populations. Projections based on preliminary estimates of 2022 emissions levels indicate that, at the beginning of 2023, there were only nine years to go until atmospheric greenhouse gas emissions reach the threshold at which global warming surpasses the higher ambition 1.5°C target above pre-industrial levels that was laid out in the Paris Agreement.
How land is used will be crucial to efforts to limit global warming to 1.5°C, as well as to protecting biodiversity. All analysed pathways cited by the Intergovernmental Panel on Climate Change (IPCC) as being compliant with the 1.5°C target involve the rapid decarbonization of both the energy system and heavily emitting industries such as the aviation and construction sectors (on average accounting for 74 per cent of emissions reductions in modelled pathways that reach global net zero greenhouse gas emissions) and the removal of greenhouse gases from the atmosphere through negative-emission technologies (26 per cent). It is estimated that half of this greenhouse gas removal can be achieved from carbon dioxide removal via shifts in agriculture, forestry and other land-use (AFOLU) practices. The remainder should result from lowering emissions of non-carbon dioxide greenhouse gases, such as methane. Again, the AFOLU sector will contribute to this shift.
Changes in land use will also be critical to tackling biodiversity loss. At and following COP26, 145 national leaders signed the Glasgow Leaders’ Declaration on Forests and Land Use, which committed them to ‘working collectively to halt and reverse forest loss […] by 2030 while delivering sustainable development and promoting an inclusive rural transformation’. At the 15th United Nations Biodiversity Conference (COP15), held in Kunming, China and Montreal, Canada, in two phases between 2021 and 2022, signatory countries to the Kunming–Montreal Global Biodiversity Framework agreed to collaborate in protecting 30 per cent of the world’s land and restoring 30 per cent of the world’s degraded ecosystems by 2030.
It is anticipated that nature-based solutions – activities that protect, manage or restore ecosystems to generate multiple biodiversity and social benefits – will constitute an important tool in efforts to manage land use to meet climate and biodiversity targets, while also protecting livelihoods. Nature-based solutions cover a wide range of land-use activities: examples include the restoration of mangrove forests in coastal wetlands to improve resilience to storm surges, or the transformation of semi-degraded lands for the sustainable production of commodities for local communities.
The United Nations Environment Programme (UNEP) estimates that it would cost up to $11 trillion invested in nature-based solutions between 2022 and 2050, alongside rapid mitigation of emissions from the energy and industry sectors, to limit global warming to 1.5ºC. In the same report, UNEP also estimates that meeting this challenge will require investments in nature-based solutions to triple in value terms by 2030. While this funding gap could be addressed through the private sector, accessing increased flows of private sector capital may require nature-based solutions to deliver market rates of return. By tapping into mainstream investment flows that are committed to climate action, nature protection and ecological restoration, the current reliance of nature-based solutions on public funding via grants and concessional financing would be reduced.
UNEP estimates that it would cost up to $11 trillion invested in nature-based solutions between 2022 and 2050, alongside rapid mitigation of emissions from the energy and industry sectors, to limit global warming to 1.5ºC.
Existing commitments on the part of many investors to improving the environmental and social outcomes of their business-as-usual activities may help to close this financing gap. Investor coalitions such as the Glasgow Financial Alliance for Net Zero (GFANZ) – which has assets of $130 trillion – ask signatories to commit to collaborating on an economy-wide transition to net zero emissions. Along with supporting initiatives which aim to rapidly reduce greenhouse gas emissions from energy-related sectors, some private financial institutions have committed to activities that aim to stop or reverse natural habitat conversion and biodiversity loss. By the end of 2022 some 126 financial institutions had signed up to the Finance for Biodiversity Pledge. This aims to achieve the reversal of biodiversity loss by 2030. Signatories commit to collaborating and sharing knowledge, engaging with investee companies, setting (and disclosing) targets and reporting publicly on their biodiversity impact.
While these initiatives reflect the growing momentum in the private sector for fighting biodiversity loss, they have not yet translated into sufficient investment in nature-based solutions at the scale needed to fully address these challenges. Multiple avenues must be developed in order that nature-based solutions projects can secure funding and scale activity.
For example, finance could be unlocked for some types of nature-based solutions by generating revenues from providing environmental services (as happens, for example, in schemes involving carbon or biodiversity credits) and combining them with revenues created in forest product supply chains (see ‘Investments in nature-based solutions’, Table 1). This is a growing opportunity for finance, as products grown in forests constitute part of a broader shift in supply chains across sectors as diverse as construction, pharmaceuticals, fibres and plastics towards inputs that are derived from biological materials rather than from fossil fuels. Such products are included in what is known as the bioeconomy. The European Commission describes the bioeconomy as ‘all sectors and systems that rely on biological resources – animals, plants, micro-organisms and derived biomass, including organic waste – as well as their functions and principles’.
The private forestry sector could play an important role in linking the global bioeconomy and local nature-based solutions, by creating investible ‘nature-positive’ investment opportunities to channel institutional finance to nature-based solutions. The relationships between the bioeconomy, nature-positive actions and nature-based solutions are depicted in Figure 1.
