How to overcome the barriers to scaling nature-based projects

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A research report commissioned by the Food and Land Use Coalition outlined a set of recommendations, built to address the various barriers to scaling nature- based projects. These recommendations have a deliberate focus on businesses and their partners but will be impossible without urgent and fundamental fiscal and policy shifts, not only by tropical
forest countries, but by all countries whose economic and environmental footprints leave a mark on the forest frontier.

FOR FARMERS, FOREST STEWARDS, LAND HOLDERS AND THEIR INVESTORS

1. Establish businesses focused on ecosystem restoration and protection and leverage all value streams to improve returns and cashflow timings. First and foremost, the recommendation is for new actors to enter the space of regenerative businesses. Business models that place restoration and protection of natural capital at the centre of their value proposition not only provide the means to better understand the complex benefits provided by nature but are also a future-proofed and resilient investment. Nature-based business models offer the chance to generate a diverse and integrated set of revenues, across different time-scales. With some of these being available very quickly, and others maturing over time, natural production systems can provide effective diversification, reducing the exposure to production risks (such as disease) and market fluctuations (driven by factors out of control of the individual producer) to which monocultural production systems are vulnerable.

2. Partner with local communities to reach markets for their regenerative products. Indigenous groups and other local communities are a major land holder across the tropical belt and have, through many generations, built unique knowledge of surrounding nature and ways to harness products and benefit in a long-term and balanced way. Their scale of production, unfamiliarity with national or international markets and business approaches are some of the challenges holding them back from fully monetising this knowledge. So- called “market access players” can unlock these value chains by establishing the needed industrial processes to produce marketready products and applying their business skills, networks and access to capital, hence allowing communities to access new markets.

3. Secure land tenure and sustainable intensification services for local communities. There is clear evidence of the positive effects of secure land tenure on productivity, forest protection, fire prevention and other broader social and economic impacts. Across the tropical forest frontier, national governments are putting in place regulations to support land
tenure for smallholders and indigenous communities. However, these groups often need help in order to secure their legal rights. The private sector can facilitate land tenure processes in their supply or production areas, which in turn will lower their own operational risks. Combined with sustainable intensification and support on best agriculture practices, the plantation holder can help increase economic productivity for the local communities, and thereby stabilise the landscape.

4. Invest in ecosystems as a risk management strategy. Both the management and understanding of environmental risks, including forest impacts, remain inadequate. Companies with direct exposure and reliance on natural systems, agricultural and commodity producers in particular, should invest in protection of natural ecosystems and active restoration
to secure the environmental services they deliver; services such as pollination, clean water and climate regulation on which their businesses depend. Not only this, sustainable investments today can protect organisations from future regulatory or reputational risk in relation to environmental liabilities or externalities. To deliver the appropriate results of ecosystem management, it is crucial to incorporate it into business processes (for example, in employee performance management). Targets should be explicitly linked to natural
capital rather than current measures which are heavily focused on financial capital.  This is just as true for plantation managers as it is for purchase departments, marketing
teams and executive decision-makers. Protecting non-production areas secures their core environmental services, ensures the partners are compliant with current and future
legislation and allows them to secure a positive consumer reputation. The establishment of wildlife corridors further mitigates one of the core risks for their young rubber trees: the risk of destruction by migrating elephants.

5. Direct research and innovation budgets towards solutions which mimic nature. Four billion years of evolution has created exceptionally complex, interrelated and dynamic natural ecosystems which regulate and deliver environmental services.  However, humanity’s understanding of this complexity is limited – from a lack of understanding about individual
components of the system (e.g. species), to their properties (e.g. chemical make-up) to how they interact (e.g. the dependence of different elements of the system to each other). By investing to understand these systems, humanity can unlock a vast and untapped library of solutions.

FOR THE FINANCE, INSURANCE AND COMMODITY TRADING SECTORS

6. Establish innovative and/or concessional finance and insurance mechanisms and trading platforms to scale regenerative practice at ground level. An increased focus on regenerative businesses can be a future-proofed and resilient investment. As stated above, natural production systems can provide effective diversification, reducing the exposure to production risks (such as disease) and market fluctuations which are driven by factors out of control of the individual producer and to which monocultural production systems are
vulnerable. In addition, natural production techniques provide protection from regulatory or reputational risk in relation to environmental liabilities or externalities. However, few  finance, insurance and trading houses are proactively engaged in this area, and significant further engagement is required by philanthropical and development finance. These institutions need to invest dedicated resources into understanding the opportunity and build up internal capacity to engage with this new and increasingly important area. Capturing the full benefits and opportunity will require new tools, systems and expertise.

7. Embrace real-time, open-access information systems to enable better risk management of environmental externalities in existing portfolios and value assessment of regenerative
businesses opportunities. Many members of the financial sector have signed up to sustainability standards and rely on certification to inform their portfolio choice. More is needed. The financial sector can take advantage of its portfolio position to invest into information systems that might not be economically attractive – or feasible – for the individual producer. Remote sensing and other technology solutions provide increasingly better and cost-efficient ways to understand our natural systems and assess risks in the land
use value chains. Intelligent algorithms allow processing of previously unthinkably large volumes of data and to begin an era of “radical transparency”: where the true nature of environmental and social impacts is understood by users through the provision of standardised, credible and easily accessible information. This can lead to a larger focus on regenerative practices and increased risks associated with unsustainable ones.

FOR BUSINESS ASSOCIATIONS, ROUNDTABLES AND OTHER CONVENING INSTITUTIONS

8. Encourage and endorse moratoria and similar policy and voluntary business initiatives to motivate better land use planning. Businesses should anticipate future requirements to pay for environmental externalities and liabilities, both historic and anticipated. Moratoria of different kinds are a first step towards this, and are widely used by policymakers to signal the value of nature and incentivise protection. Moratoria should be endorsed and actioned by the business community involved in deforestation-risk practices (e.g. production of agricultural commodities) to help build better land use practices across the sector, and create a level playing field for change. Therefore, detailed land use plans, and environmental
externality calculations should be used to set ambitious and future-proofed targets. Tools and technologies must be further invested in which better define forest types, characteristics and values, to distinguish natural forest areas requiring full protection from fully degraded or agricultural land which can be targeted for production or restoration.

9. Implement systems of payments for environmental services. Associations can incentivise regenerative practices by implementing a voluntary system of payments for the delivery  of environmental services and penalise environmental externalities and liabilities. Payments for environmental services (PES) can tip the financial equation to make regenerative
practices more economically attractive than destructive ones for the individual farmer, and hence provide the catalyst for scaling these models across value chains.

FOR MARKETING AND SALES PROFESSIONALS

10. Connect consumers with nature and people. There is a global rise of climate awareness that is catalysing individual action, from climate demonstrations to climate-conscious
consumption patterns. By implementing previous recommendations such as reducing the number of steps in a value chain through market access players, to leveraging today’s
technology, consumers can be linked directly with individual farmers and foragers, as well as the nature on which those farmers and foragers depend. Creating this link meets
the increasing consumer demand for more ethical value chains that help solve the climate crisis. It provides all actors with better information, increasing transparency, fairness
of pricing and enables more responsible consumer behaviour. This is also an enormous opportunity for marketing and sales professionals to truly connect the consumer with the origin of everyday products (such as food, beverages, fuel, cosmetics, furniture, medicine) and to tell human, climate and biodiversity stories behind each product. The most creative companies already have the opportunity to provide consumers with exclusivity of supply down to an individual farmer, plant or tree level. A novel and powerful way to retain consumers.

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Carbon offsets – avoidance and removals

‘Stop the tap before mopping up’ Vertree is focused on nature-based solutions (NBS) as a key part of the fight…

‘Stop the tap before mopping up’

Vertree is focused on nature-based solutions (NBS) as a key part of the fight against catastrophic climate change. Carbon offsetting schemes provide critical finance to NBS projects. Among these, carbon offset projects that reduce emissions from deforestation and forest degradation in developing countries (REDD) provide the most immediate, tangible and sustainable climate impact available. Emission reductions from offset projects must be measurable, additional, and be as permanent as human intervention can guarantee. The focus of this note is to explore the increasing bias of carbon offset buyers for carbon removals over avoidance credits.

Avoidance credits are defined as certified emissions reductions from projects that reduce emissions compared with the most likely course of action – the baseline scenario. REDD+ projects reduce forestry loss and preserve the existing biomass and embedded carbon beyond historical trends. Other avoidance projects include renewable energy and carbon-capture from flue gases. In each, current emissions are reduced by improved alternatives, but existing CO2 is left untouched.

Removal credits are defined as emissions offset projects that adsorb additional CO2 back from the atmosphere in order to remove the greenhouse gas potential. This includes photosynthesis of all kinds, into timber, peat, seagrasses as well as engineered methods such as direct air capture and accelerated mineral weathering.

Global deforestation, at around 13 million hectares per year, makes up 8-12% of net emissions. As such it ranks 3rd after the USA in the country league tables. Preventing mature forestry loss, along with wider ecosystem destruction is therefore a priority for any climate strategy.

A tree stores very little carbon in the first 10 years of its life (figure 1). In any afforestation project, the bulk of the carbon captured is during the middle phase, from 15-40 years after planting to maturity, with early growth rates at a third of peak potential.

Cutting down a hectare of mature tropical forest releases an average of 629 tonnes of CO2 which will take more than a lifetime to regrow. Over the first 10 years of new planting the recapture is less than 80 tonnes CO2 per hectare.

The carbon budget (figure 2) shows that emissions must halve by 2026 to stay within 1.5 degrees of warming. This means that we do not have the time to continue emitting whilst we wait for new trees to grow and store carbon later. The atmospheric ‘pot’ will boil over in the interim.

The Oxford Principles for Net Zero Aligned Offsetting illustrate this point well (figure 3). Removals will be required, but avoidance is urgent today.

Trees grown for carbon capture – often fast growing, densely packed Sitka (spruce) or Eucalyptus (gum) trees are less favourable for wider forest benefits (apart from timber production). The recently released IPBES report argues strongly for tackling climate change and biodiversity loss together, and to this end REDD+ projects are increasingly focused on species conservation and habitat improvement. The CCB Gold framework provides certification of biodiversity co-benefits in voluntary offsets.

Vertree works with high-quality REDD+ projects with verified baselines and genuine emissions reductions. Our work helps preserve tropical rainforests alongside the wildlife and communities that live within them. These actions are critical to combat climate change today and over the next 10 years.

A premature focus just on removals, whilst well intentioned, means that immediate action to reduce forest emissions could be neglected at huge risk to the overall climate change pathway.

 

Sources: 

European Commission, REDD+ initiative 
2018 World Resources Institute, By the Numbers: The Value of Tropical Forests in the Climate Change Equation
Vertree, based on Journal of Environmental Management, Carbon in the Vegetation and Soils of Great Britain 1995 
2020 figures, World Resources Institute Global Forest Watch. Fored Pulse: The Latest on the World's Forests
IPCC quoted Brown et al. How Much Carbon Can Be Sequestered by Global Afforestation and Reforestation?
The Oxford Principles for Net Zero Aligned Carbon Offsetting
2021 The IPBES IPCC Co-Sponsored Workshop on Biodiversity and Climate Change
The Climate, Community and Biodiversity Alliance
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How to protect and restore natural capital assets through nature based solutions

Despite our dependence on healthy land, and on coastal and marine ecosystems, we are depleting them at an alarming rate,…

Despite our dependence on healthy land, and on coastal and marine ecosystems, we are depleting them at an alarming rate, which undermines the resilience of our economies and exposes humanity to natural liabilities, including the increased risk of zoonotic disease spillover  or simultaneous breadbasket failure. Protection and restoration of natural assets is therefore an essential foundation for a resilient economic system, in both urban and rural areas. The World Economic Forum, in collaboration to SYSTEMIQ, reports below.

Nature-positive policy opportunities:

Invest in Green urban infrastructure: use public and private investments to transform cities into engines of innovation, resilience and prosperity by integrating nature into their design.

Cities today face huge challenges: ambient air pollution claims more than 4 million lives annually, and there is overcrowding, congestion and enormous resource pressure with reliance on extracting “surplus” natural capital from the countryside. By 2050, 68% of the world’s population is expected to live in cities, but 60% of urban areas are yet to be built, which presents a huge opportunity for directing investments into nature-positive infrastructure, such as:

Expanding public green spaces through large-scale planting, conversion of brown sites into ecological conservation areas and the creation of green corridors alongside existing infrastructure. Increased green space has a host of benefits, from creating jobs, to reducing urban temperatures and crime, to improving citizen health and well-being, to driving productivity and innovation. There are many micro-examples of cities investing in nature to enhance resilience, improve liveability and create jobs that could be replicated many times over. For example, in Medellín, Colombia, the local government has planted 30 green corridors around the city, helping to reduce average city temperatures by 2°C. Similarly, the local government in Durban, South Africa, developed a landfill site into an ecological conservation area and employment programme. Each of these opportunities will create localized jobs, strengthening the interest of local constituencies in supporting ecological outcomes. To seize this opportunity, governments need to invest in smart urban planning and central government should work with municipalities to help them put the right financing structures and public-private models in place, with local value-capture mechanisms (from rates to property development equity models) used to share the economics equitably.

Using nature-positive infrastructure design to enhance the resilience of urban environments. Constructed ecosystems, including green roofs, bioretention systems and constructed wetlands are artificial, custom-built components of green infrastructure that are becoming more common in cities. The government of the city of Salford, UK, invested more than $12 billion in a constructed flood storage wetland (of more than 5 hectares) to protect almost 2,000 homes from flood risk, boost access to green space and increase biodiversity.

On a smaller scale, green roofs can reduce energy costs, capture storm water to reduce flood risk, create habitats for urban wildlife, reduce air pollution and urban heat, and even produce food. The market for green roofs is currently worth $9 billion and is set to grow by 12% annually through to 2030. Costs are falling, due to a combination of innovation and
government support; in Singapore, for example, costs fell from around $105 to $70 per square metre between 2016 and 2018, and the city’s 72 hectares of rooftop gardens and green walls are expected to triple by 2030.

Other opportunities include installing permeable pavements and cycle lanes that allow rainwater to pass into the underlying soil to reduce flood risk, support urban tree health (reducing air pollution) and provide natural water treatment.

Local governments can send a clear market signal for such green urban infrastructure by including requirements in planning permission for new buildings, and by rolling out installations across publicly owned assets.

Mobilize for large-scale Ecosystems Protection and Restoration, to mitigate growing risks from nature loss and climate breakdown, create jobs and boost rural livelihoods.

There is no pathway to achieving the goals of the Paris Agreement, nor to the Sustainable Development Goals (SDGs), without immediate protection and restoration of important ecosystems, particularly forests and wetlands  mangroves, peatlands and marshes).

Natural forests store 40 times more carbon than plantation equivalents and are hotspots of biodiversity, yet the rate of tropical forest loss (one football pitch every six seconds in 2019) has remained high for the past two decades. Mangrove forests provide more than $80 billion per year in avoided losses from coastal flooding and directly protect 18 million people in coastal areas. They also contribute $40–50 billion annually through fisheries, forestry and recreation benefits. Every $1 invested in mangrove conservation and restoration generates a benefit of $3, with conservation of existing mangroves yielding significantly higher benefits (88:1) than restoring degraded ones (2:1). Peatlands cover just 3% of the world’s land but store up to 25% of all soil carbon. Currently between 1 and 2 billion tonnes of carbon dioxide are lost from peat soils a year, despite limited benefits from the economic activities that disturb them.

Restoring degraded forests generates between $7 and $30 in economic benefits for every $1 invested. It is also a relatively low-skilled and labour-intensive exercise – an attractive proposition today with global employment forecast to decrease by up to 240 million jobs as a result of COVID-19, with Asia potentially worst hit.35 Similarly, there is a 10:1 return from mangrove conservation and restoration. Overall, new research suggests that expanding protected and conserved areas to at least 30% of our planet will result in financial and economic benefits exceeding the costs by a factor of at least 5:1 – 30% protection of our planet leads to increased economic output averaging $250 billion annually and generates additional non-monetized economic benefits from ecosystem services averaging $350 billion annually by 2050.

Some countries are already seizing these opportunities as part of their stimulus measures: Germany allocated $700 million for forest conservation and management; New Zealand aims to create 11,000 jobs in restoring wetlands and riverbanks, removing invasive species and improving tourism and recreation services on public lands; and the World Bank is providing $188 million and technical assistance to promote ecosystem restoration and disaster resilience in Pakistan, with the potential to mobilize 65,000 youths and labourers to
establish 12 new national parks. For conservation and restoration schemes to reach speed and scale – moving from individual, often subsidized, projects to systemic change that can mobilize private-sector ingenuity – both sticks (taxing pollution, closing off free access to natural resources and eliminating perverse incentives for land conversion, regulation and enforcement) and carrots (spatial planning, payments for ecosystem services designed to optimize environmental benefits, reforming agricultural subsidies, access to relevant public goods such as satellite monitoring data) are needed.

Protect and scale Ecotourism infrastructure to preserve the sector’s jobs and economic value and pave the way for further growth.

Prior to the COVID-19 pandemic, ecotourism was one of the fastest-growing subsectors of the travel and tourism industry, which was growing at a rate 40% faster than the overall global economy in 2019. Most ecotourism occurs in or around protected areas, which are estimated to receive 8 billion visits a year, generating revenue and supporting local livelihoods. The economic prize from supporting and scaling the nature-based tourism economy is evidenced by the case of Costa Rica, where the sector was growing by
more than 6% per year pre-COVID-19, contributing more than 13% of GDP and generating around 28% of direct and indirect employment. This has been supported by a raft of progressive policies – including the elimination of cattle subsidies (reducing pressure on forests) and the introduction of payments for ecosystem services.

But this source of economic value is now at risk. The global tourism industry is forecast to contract by up to 25% in 2020,  with annual costs to the (largely wildlife-based) African tourism sector projected at $50 billion and 2 million job losses. Urgent action is required to support this sector in the short term. Governments should provide emergency funding and grants to private-sector enterprises, community-based organizations and conservation NGOs to maintain the integrity and functioning of the assets (aesthetic landscapes, iconic megafauna and biodiversity-rich ecosystems) upon which the industry relies. But for the sector to flourish in the longer term, it will require diversification of income streams for natural assets, most importantly through payments for ecosystem services as well as enforced protected areas. In the absence of a concerted effort to rescue this sector, an increase in land-grabbing, deforestation, illegal mining and wildlife poaching can be expected, further fuelling the vicious cycle of nature loss and economic risks.

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Understanding regenerative business models

Identifying the most effective area for intervention is only the first step. Creating the mechanisms and incentives to keep forest…

Identifying the most effective area for intervention is only the first step. Creating the mechanisms and incentives to keep forest standing, and to encourage forest restoration, is what can transform today’s largely degenerating forest frontier into a productive, resilient and globally valuable forest economy. Creating such an economy requires a combination of well-enforced regulatory and fiscal policies and socio-economic incentives that reward sustainable management and protection of forest more highly than single-use extraction.

In the tropical forest context, regenerative models generate value from the protection and restoration of forests. In doing so, they provide tangible incentives to keep forests standing,
or even to regrow them over time. Accoring to a research commissioned by the Food and Land Use Coalition,  the varied models which exist can be grouped into three key categories:

• Models which create value from standing forest

• Models that incorporate forest protection into agricultural production

• Models which create value from re-growing degraded forest

Therefore, for each of the land categories described in our “Sealing the forest edge where it is currently exposed” article, – standing forest, the agricultural zone and the degraded zone – a corresponding category of regenerative business model exists.

Category 1: Creating value from standing forest

WHAT ARE “VALUE FROM STANDING FOREST” MODELS?

These models depend upon harnessing the high variety, value and productivity of naturally growing forest products and environmental services in standing primary forest. They do not include timber plantations or other forms of man-made, plantation forests. When implemented, high-value, low-intensity value chains are created. They are high-value because the products and services which are produced by intact forests generate high market value per unit, and low-intensity because the impact on forest is minimal or almost non-existent.

WHY ARE THEY SO IMPORTANT?

The ecosystem value of primary forest is higher than any man-made attempt at recreating or mimicking it. Preserving standing forest has a twofold, additive impact: not only does it maintain the extraordinary array of products and services provided by forests, it also prevents the negative impacts of their disappearance (which produce some of the most harmful environmental impacts on the planet). Furthermore, standing tropical forest provides the home, livelihoods and cultural heritage of millions of indigenous community members.

Category 2: Agricultural intensification with a mandate to protect and preserve

WHAT ARE “AGRICULTURAL PRODUCTIONPROTECTION” MODELS?

These models involve improving production efficiency, and therefore reducing the environmental impact, of agricultural activities in proximity to forest landscapes. To do so, improved agricultural practices (particularly sustainable intensification) are combined with effective land use planning, robust local governance and incentive and reward mechanisms for forest protection. The result is increased productivity per hectare, the protection of forest with highest conservation value and in some cases the restoration of previously degraded land. As sustainable intensification is implemented, a gradual shift towards regenerative agriculture is required. This has the potential to maintain yields, while at the same time promoting soil health, reducing use of chemical inputs, and increasing the diversity of healthy, planetfriendly foods produced and consumed. Productive regenerative practices combine traditional techniques, such as crop rotation, controlled livestock grazing systems, low-till agriculture and cover crops, with advanced precision farming technologies and new bio-based fertilisers and pesticides. New technologies that drive productive regenerative agriculture are continually emerging.

WHY ARE THEY IMPORTANT?

Agricultural expansion, both by smallholders and larger organisations, is the dominant driver behind more than half of all tropical forest loss. Finding business models that can both deliver enhanced agricultural output and mitigate forest loss can deliver “triple wins”: rural development; domestic economic growth; and protection and restoration of forests on a large scale (and all their associated benefits, including those directly necessary for agricultural production such as water cycles, pollination, etc.)

Category 3: Creating value from forest regrowth on degraded land

WHAT ARE “VALUE FROM FOREST REGROWTH” MODELS?

These models centre on restoring previously degraded land and returning that land to a state that is as close as possible to natural forest. They use a diverse mixture of regrowth vegetation that increases both above- and below-ground biodiversity and biomass. They do not include monocultural plantations. By mimicking natural ecosystems, and by working with species that are particularly well suited to specific environmental conditions, forest regrowth models can restore increased environmental and economic productivity.

WHY ARE THEY SO IMPORTANT?

There is an estimated 100 million hectares of degraded land within the forest frontier alone. The natural productivity and value of this land has been severely impacted, reducing its economic, social and environmental value. Restoring degraded land can support livelihoods and increase economic productivity by restoring soils and water, deliver climate change mitigation by sequestering carbon and enhance biodiversity and other key ecosystem services outcomes (clean water, reduced erosion, enhanced soil fertility, etc.).

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