Why we need an ‘everything, everywhere, all at once’ approach for financing nature

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Akanksha Khatri, Head, Nature and Biodiversity, World Economic Forum, Jack Hurd, Executive Director, Tropical Forest Alliance, World Economic Forum

• The IPPC’s latest climate change report warns that limiting global warming to 1.5ºC will not be possible without immediate emissions reductions.
• Natural climate solutions have the potential to provide a third of the climate crisis mitigation needed by 2030, but only if we act now.
• We need climate action on all fronts including the voluntary carbon market, which can be an invaluable source of financing for nature.

Limiting global warming to 1.5ºC will not be possible without immediate and large-scale emissions reductions, warns the Intergovernmental Panel on Climate Change (IPCC) in its latest update, the AR6 Synthesis Report: Climate Change 2023.

Labelled a ‘final warning’ and ‘survival guide for humanity’, the IPCC’s report underlines the risk of inaction action across all areas of the economy, while also laying out a roadmap for avoiding catastrophic temperature rises.

Alongside a broad range of actions for decarbonization, it reiterates the critical role of nature. Indeed, natural climate solutions (NCS) are still able to provide a third of the climate crisis mitigation needed by 2030, but only if we act now.

Natural climate solutions consist of a broad range of actions to protect, sustainably manage and restore natural ecosystems to address social, economic and environmental challenges – and provide human and biodiversity benefits.

The most recent research indicates that NCS can provide 8-14 billion tonnes of emission reductions by the decade’s end.

The IPCC report makes the same point: conservation of 30-50% of the earth’s land, freshwater and ocean areas would not only protect biodiversity and carbon sinks such as forests and wetlands, it would also ensure ecosystem services related to food and health.

But these ecosystems are at growing risk given the speed at which the climate crisis is already changing our planet. Without protecting and restoring nature, the risks are immense – to our economy as well as planet. An estimated $44 trillion of economic value generation, over half the world’s total GDP, is moderately or highly dependent on nature.

We must manage landscapes and nature in a smarter way

The United Nations Environment Programme’s State of Finance for Nature 2022 report found that current finance flows to nature must double by 2025 and triple by 2030.

While the climate benefits alone would warrant the billions of dollars of investment needed, investing in nature provides other valuable benefits, such as increased resilience to climate impacts, provision of clean air and water, restoration of degraded lands and support for sustainable livelihoods.

Despite all these mutually beneficial outcomes, NCS have come under intense scrutiny recently, with several recent reports and investigations specifically examining their role in the voluntary carbon market, where carbon emitters can voluntarily offset emissions by buying carbon credits from initiatives that remove carbon from the atmosphere.

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Yet, natural climate solutions are much more than just carbon mitigation tools, and carbon markets are just one way of funding them. Many of the required actions are simply about changing the way we manage our landscapes and doing things smarter.

There are a broad range of things that can be done across the economy to transform our food and land use systems – and move towards a nature-positive economy.

This means reforming agricultural subsidies. Developing green financial products. Exploring the potential of biodiversity credits and other innovative mechanisms. Increasing efforts to reduce commodity-driven deforestation and build sustainable supply chains. Rethinking public policies and programmes for overseas development assistance (ODA). Adjustments to taxation policies. Factoring CO2 emissions into project financing decisions.

Voluntary carbon markets a critical tool for financing nature

These are all efforts that we must urgently act on. But, at the same time, we can’t turn our backs on one of the most viable, scalable and ready-to-deploy solutions to deliver both climate action and much-needed finance for the developing world.

Simply put, the voluntary carbon market has the potential to mobilize, at speed and scale, billions of dollars a year in additional climate finance for developing countries that removes carbon or cuts emissions that helps the world stay within the warming limits of the Paris Agreement, and that benefits communities and ecosystems more broadly.

The value of the global voluntary carbon market reached $2 billion in 2021 and could be worth between $10-40 billion per year by 2030, with perhaps two thirds of this channelled into natural climate solutions. Carbon markets could deliver up to 32% of the global cumulative potential of NCS and 10-12% of the overall mitigation needed by 2030.

However, in the last three years, only 1.2% of the annual cost-effective potential of NCS has been unlocked by the voluntary carbon market. We are leaving viable solutions, and billions of dollars of climate finance, on the table. The risk of letting perfect be the enemy of good is growing more and more serious.

While it is crucial to reduce the number of low-quality NCS credits on market, the real threat is creating an environment where we think it is less risky to ignore a viable climate solution. This logic simply doesn’t hold up.

Instead, we need to push forward with support for high-integrity credits – in concert with the broad sweep of other actions listed above – to help scale to the 99% of climate action from NCS that the world needs.

This includes championing efforts to introduce more consistency and transparency in the market, as well as to develop more robust and meaningful partnerships with Indigenous peoples and local communities.

Inaction the biggest risk on climate change

Hopefully this latest IPCC report gives us a valuable perspective on where the greatest risks lie, which is through inaction.

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How is the World Economic Forum fighting the climate crisis?

The World Economic Forum’s Centre for Nature and Climate accelerates action on climate change and environmental sustainability, food systems, the circular economy and value chains, and the future of international development.

• Through the Global Plastic Action Partnership, the Forum is bringing together government, business and civil society to shape a more sustainable world by eradicating plastic pollution.
• Global companies are collaborating through the Forum’s 1t.org initiative to support 1 trillion trees by 2030, with over 30 companies having already committed to conserve, restore and grow more than 3.6 billion trees in over 60 countries.
• Through a partnership with the US Special Presidential Envoy for Climate John Kerry and over 50 global businesses, the Forum is encouraging companies to join the First Movers Coalition and invest in innovative green technologies to enable net-zero emissions by 2050.
• The Forum is bringing global leaders together to reduce the environmental impact of value chains and make the $4.5 trillion circular economy opportunity a reality. The African Circular Economy Alliance is funding circular economy entrepreneurs and circular economy activities in Rwanda, Nigeria and South Africa, while the Circular Electronics in China project is helping companies reduce and recycle 50% of e-waste by 2025.
• Since launching in 2020, the Forum’s open innovation platform UpLink has welcomed over 40,000 users who are working on more than 30 challenges crowdsourcing solutions to the climate crisis.
• More than 1000 partners from the private sector, government and civil society are working together through the 2030 Water Resources Group to ensure availability and sustainable management of water and sanitation for all by 2030. The group has facilitated close to $1 billion of financing for water-related programmes.

Contact us for more information on how to get involved.

In his speech that announced the UN’s Acceleration Agenda at the launch of the IPPC report, UN Secretary General António Guterres warned, with reference to the recent Oscar-winning movie: “In short, our world needs climate action on all fronts – everything, everywhere, all at once.”

This should include a critical role for natural climate solutions – to be funded by all means necessary, including the voluntary carbon market.