The “Restore Our Earth” 2021 Earth Day theme serves as yet another reminder of devastating effects of industrialisation, deforestation and pollution (among many others) on our planet. It is a clarion call for urgent action that goes beyond mitigation and adaptation measures, but rather restorative interventions that focus on natural processes, green technologies and innovative thinking. The theme also dispels the myth that climate action should only focus on mitigation and adaptation to address climate change, but instead urges consideration of action and interventions beyond these measures.
“Natural-based solutions are palpable measures that can help in reducing carbon emissions, preventing coastal storms, sea-level rise, inland flooding and extreme heat.”
But what kind of natural processes or interventions can be used to address the myriad effects of climate change? The International Union for Conservation of Nature (IUCN), the World Bank Group and the World Resources Institute (WRI) define nature-based solutions as “actions to protect, sustainably manage, and restore natural or modified ecosystems that address societal challenges effectively and adaptively, simultaneously providing human well-being and biodiversity benefits.”
Natural-based solutions are palpable measures that can help in reducing carbon emissions, preventing coastal storms, sea-level rise, inland flooding and extreme heat. A few examples include;
- Reforestation – can sequester billions of tons of carbon dioxide, whilst also providing cleaner water, cleaner air and flood control
- Coastal wetlands – mangroves, tidal salt marshes and seagrass meadows can draw in carbon which can remain in the soil for thousands of years
- Peatlands – the waterlogged soils can prevent breakdown of organic material in the soil, which traps carbon underground
- Green roofs – a living landscape created by plants on building roofs which collect 40-80% of rainfall and so, reduce flooding
- Urban tree canopies – similar to reforestation but for urban settings, can absorb a significant amount of rainfall and reduce urban flooding, whilst also providing cooling to combat the ‘heat island effect’ and sequester carbon
These also have significant economic returns, result in immediate job creation and protection, given that about 1.2 billion people are employed in ecosystem services globally, such as farming, fishing, forestry and tourism, to name a few. Moreover, the World Economic Forum writes that mangrove forests can save about $80 billion annually and protect up to 18 million people.
In auctusESG’s latest Blue Financing: Water for Future white paper, a recommendation to strengthen integrated water resource management was to adopt nature-based infrastructure solutions.
“Nature-based solutions for water management, and climate change mitigation and adaptation, which are low-cost, scalable interventions…include natural, green and blue infrastructure solutions which make for more resilience and lower-cost interventions,” it stated. Continuing, it said, “benefits of these range from increase in replenishing and recharging of groundwater to improvement in the quality of water due to increase in filtration and reduced water pollution.”
“The absence of clear and standard definitions or taxonomies that aid in understanding nature-based solutions, which results in a lack of standardised metrics that can easily and cohesively measure the impacts of these interventions.”
Despite the benefits of these solutions, including their low cost, the uptake in funding for nature-based interventions has been shockingly low. The Public International Funding of Nature-based Solutions for Adaptation found that as little as 1.5% of all public climate finance has been directed towards nature-based solutions in developing countries.
The lack of financing is underpinned by challenges such as subjectivity in the space. The absence of clear and standard definitions or taxonomies that aid in understanding nature-based solutions, which results in a lack of standardised metrics that can easily and cohesively measure the impacts of these interventions. Subjectivity in the broader sustainable finance, ESG or climate finance space has been a significant detriment, given that it has led to hesitation from investors and consequently, a lack of an uptake.
Scaling nature-based solutions is fundamental to Earth Day’s “Restore Our Earth” call to action. As seen in the broader sustainability and development space, multi-stakeholder participation provides more holistic and comprehensive solutions to some of the biggest global challenges. This being said, how can nature-based interventions be financed? Here are a few recommendations through the lens of each stakeholder.
Governments, regulators and policymakers
- International or inter-governmental collaboration to develop taxonomies on what constitutes ‘nature-based’ solutions or indices, and metrics can help bring some level of standardisation and clarity to the space.
- Governments can dedicate special allocations or earmark funding for nature-based infrastructure interventions to support such solutions.
- Inter-governmental collaboration can also yield technical assistance, capacity building and upskilling in markets where is a need.
- Governments can encourage greater private sector participation by opening up nature-based infrastructure projects to private companies through PPP models.
- In spirit of transparent reporting and disclosures, governments can articulate which of their policies, expenditure or regulations are targeted towards encouraging or implementing nature-based solutions through tagging (similar to SDG tagging).
- Financial institutions can prioritise and incentivise nature-based solutions such as lower interest rates to borrowers, and fund relevant projects.
- Financial institutions can participate in blended finance structures and provide credit enhancements and guarantees to facilitate private sector capital mobilisation
- Financial institutions can work with local municipalities to facilitate fundraising either through structuring financial products such as municipal bonds or development funds, where the capital can be allocated to nature-based solutions in the local community.
- Investors can articulate nature-based solutions as a priority in their investment approach and stewardship code, which will allow them to direct capital to projects or organisations that work towards implementing nature-based solutions.
- Investors can work with regulators and policymakers to push for greater and more comprehensive reporting and disclosures by investee companies.
- Investors can work collaboratively within investor groups to engage investee companies in focusing on nature-based solutions.
- Investors can also focus their capital on innovative green technologies that can facilitate such solutions.
- Local communities can work with municipalities to raise capital for local-level implementation of nature-based solutions such as tree planting to create urban tree canopies or living shorelines for coastal regions
- Local communities and municipalities can also work towards regulations or policies that encourage buildings, or apartment complexes to integrate nature-based infrastructure solutions such as green roofs or rain gardens
- Awareness campaigns about nature-based solutions can educate the community on these simple, low-cost solutions and promote climate literacy