The global spotlight has been firmly on Glasgow this month following the most important climate talks since 2015, the UN’s COP26. The conference opened with strong commitment to conservation with world leaders promising to end deforestation by 2030.
The agreement follows new data released in the Conservation Finance 2021 report signalling a surge in interest in conservation finance that delivers a return on investment. The report finds that 70% of investors are planning to invest substantially more in conservation in 2021 compares to 2020 – an increase of over 10%. This comes at a time when an increasing number conservation project developers are seeking 85% more funding in 2021 than in 2020.
Yet the conservation finance market is still nascent. Some evidence suggests investors are awaiting more bankable conservation projects, but with critical forest being lost at a staggering rate and climate and biodiversity tipping points fast approaching, more private and patient capital is needed now to generate financial and ecological returns.
Why investors should back bankable conservation projects
According to the World Economic Forum, around half of the world’s GDP depends on natural services. The connection between economic abundance and healthy eco-systems is undeniable. Despite the relative newness of the conservation finance market, the interdependence the global financial system has on natural systems is evident.
But these natural systems are declining at an unrelenting pace. Critical ancient forests are being lost in vast tracts through deforestation to support global supply chains, in more frequent forest fires and to make way for agricultural land use. Without a sustained and sizeable injection of private capital to protect and recover these forests, global economic prosperity is in jeopardy.
Despite a greater awareness of conservation investment opportunities, capital returns are a key concern for the growing pool of potential investors. This poses the risk of delaying mobilisation of vital finance for projects that have multiple benefits, beyond the traditional ROI.
Investancia’s pongamia tree propagation programme perfectly demonstrates this. The pongamia tree propagation produces a number of outputs that are the basis for good environmental practices and sustainable, profitable business models. The propagation programmes, based in Paraguay facilitate the growth of the pongamia trees, which mature quickly to absorb carbon dioxide faster than many other trees, have a positive impact on land and produce a seed that has multiple bankable applications. The tree propagation programme is a breakthrough that is still in its scale-up phase. Yet through corporate equity, Investancia can scale this facility to increase the production of the trees. By extension this will produce more nature-based carbon removals, more low-carbon feedstock for sustainable aviation fuel and increase the byproduct bioprotein, which lowers methane gasses when applied as cattle feed.
All of these results yield good returns for investors, but they take time, and will not produce an immediate windfall. However this doesn’t discount the myriad of co-benefits that their investment will have for communities, biodiversity and climate.
Preserving Paraguay’s threatened primary forest
Climate investors can play a critical role in preserving some of the world’s most vulnerable ecosystems. Ecosystems like Paraguayan Chaco, one of the most rapidly deforested areas on earth. This could be catastrophic for efforts to curb climate change. In June this year, researchers at the Humboldt University of Berlin found the Chaco stores up to 19 times more carbon than previously thought.
Moreover, forest destruction in the Paraguayan Chaco between 1985 and 2013 released over 800 million metric tons of carbon dioxide emissions into the atmosphere. This is comparable to other deforestation frontiers in the Amazon and South-East Asia. As a result, there has been increasing pressure from climate scientists to place more international importance to be placed on the region.
Quadriz offers bankable land investment opportunities in the Paraguayan Chaco to combat the mounting pressures of forest destruction. Through Quadriz’ REDD+ carbon offsetting programmes, investors can save primary forest from the immediate threat of deforestation.
This not only protects the Chaco’s rich carbon sinks and keeps greenhouse gases in the ground, it also preserves the habitat of some of the world’s most vulnerable species. Earlier this year, Quadriz captured footage of the elusive jaguar in the Chaco as part of its biodiversity monitoring project. Threatened species like the jaguar are declining in the Chaco. But there is cause for hope. Quadriz’ REDD+ Corazón Verde del Chaco is located in the middle of one of the region’s last jaguar corridors and through carbon finance, is working to protect it.
Earlier this month, Shell released a report which outlined the need for the carbon market to triple in capacity to meet demand for offsets. This comes after the annual Ecosystems Marketplace report recorded a projected market value of $1bn for the first time. While this is not an equitable financial market for investors, it mirrors the increased awareness and interest in bankable projects in the conservation space.
The market signals are there, and the environmental science is clear. There is increasing appetite for investments that deliver returns whilst ensuring fundamental natural capital is protected. If climate asset investors can take a long-term view and deploy patient capital, there is a real chance that nature can be protected and form part of the solution to keep global temperatures within 1.5C of warming.