Climate change is reshaping economies, ecosystems, and communities. Human activity plays a key role, as it has significantly altered natural environments and contributed to the consequential stock of greenhouse gas emissions. But in addition to the direct emissions effects, our activity has limited the ability of natural systems to absorb, store, and sequester carbon from the atmosphere, while reducing the effectiveness of natural features and landscapes that protect communities from climate impacts. Once-vital natural systems including forests, wetlands, and coastal habitats are being degraded and destroyed, which worsens carbon emissions and reduces adaptive capacity.
Nature-based Solutions (NbS) are actions and projects that work with nature to address pressures that society places on natural resources, providing benefits for both human well-being and biodiversity. In the context of global and local challenges to mitigate emissions and build adaptive capacity, NbS have emerged as critical tools to protect, restore, and sustainably manage ecosystems. Recent years have seen shifts in supporting NbS projects due to track records of delivering community benefits that span environmental, social, and economic outcomes.
Terra Global Investment Management, a U.S.-based social enterprise and fund manager, has been dedicated to NbS since its founding in 2006. The organization is a global leader in NbS, with operations that range from program design and development, land-use greenhouse gas emission quantification, and climate finance. Its project track record spans across 40 countries throughout developing and emerging economies. We had the opportunity to speak with Leslie Durschinger, Founder and CEO of Terra Global Capital, who shared valuable insights into the power of Nature-based Solutions and how effective deployment and support for NbS projects can help address critical environmental, social, and economic challenges.
Why Nature-Based Solutions are Needed
Every additional 0.5 degrees of global warming increases the intensity and frequency of extreme heat, heavy precipitation, and droughts. And the difference between a 1.5 degree increase and a 2.0 degree increase in temperature is a Global Mean Sea-Level (GMSL) rise of 0.1 meter higher, which could expose an additional 570 cities and 800 million people to rising seas and storm surges. If temperatures rise above 1.5 degrees, many natural adaption measures will lose their effectiveness as climate impacts will overcome them, resulting in further ecosystem losses.
Human activity plays a large role in our escalating temperatures and climate hazards. Human driven land use change affects more than 75% of the world’s land surface. According to the World Resources Institute, deforestation and ecosystem degradation account for nearly 25% of global greenhouse emissions with around 10 million hectares of forest lost annually, an area approximately the size of Iceland.
These losses can impact much more than the climate system. They weaken our ability to grow food, access water, and withstand floods and storms. For instance, mangrove losses (about 35% globally since 1980) significantly reduce coastal resiliency, endangering millions. Economic studies show degraded ecosystems already cost the global economy over 5 trillion USD per year. Meanwhile by 2030, 150 million people per year could need humanitarian assistance related to floods, droughts, and storms.
While these environmental challenges are global, local and regional context play a key role, given that ecosystems, climate risks, governance systems, and social dynamics vary dramatically across geographies. As Leslie Durschinger told us, when developing projects in a new country, you need to understand, “What are the local dynamics of land-use? What are their land tenure laws? Where are they in passing carbon laws? How willing is the government to engage for approvals? There are a whole host of issues that impact a region and a country’s risk level when developing NbS solutions and bankable projects.”
What NbS Can Deliver
Nature-based interventions can offer a unique triple benefit: mitigating climate change through emission reductions and removals, capturing and storing carbon dioxide from the atmosphere, and enhancing social and ecological resilience to current climate hazards. NbS projects span from wetlands protection to bioswales to agroforestry. Constructing wetlands can protect areas from floods and droughts while capturing atmospheric carbon – wetlands store 30% of all land-based carbon despite covering only 3% of the earth’s surface. Mangrove restoration can support climate mitigation and adaptation since mangroves act as natural carbon sinks and absorb carbon dioxide from the atmosphere while their roots can absorb impacts from waves to shield coastal grounds from erosion.
When they are smartly designed with a purpose of delivering mitigation and adaptation results, NbS projects can deliver numerous benefits. The UN Environment Programme estimates NbS could provide up to 30% of the cost-effective carbon mitigation needed by 2030, and could deliver around 5 GtCO2 removals per year by 2030. Meanwhile, their protection against economic costs from climate hazards could deliver savings to developing countries amounting to 393 billion USD by 2050. In March 2022, the UN adopted 14 resolutions to strengthen actions for nature to achieve the SDGs, and this has trickled down to initiatives at the national, regional, and local levels.
New technologies are enhancing these efforts, in the design, monitoring, and evaluation of NbS. Remote sensing can monitor deforestation, while artificial intelligence can improve carbon reduction quantification and transparency. Leslie Durschinger told us about a technical advancement for a community-led project in Colombia. “The program has supported the mobilization of community-based patrolling where community members with territory of almost 700,000 hectares that have been trained to use smartphone apps to monitor and protect forest areas. The community-basedpatrolling also supports the community members in learning new technologies, skills, and generating income. This delivers better monitoring data than the previous paper records because it is coming electronically from the ground and geotagged.”
NbS have proven effective in many respects, with strong technical and scientific backing. But given the nature of NbS, which typically occur at the local level, more is needed to scale these solutions to deliver the potential impact they offer.
Unlocking Private Capital for NbS
Capital investment is one such area needed to drive NbS forward. Despite their numerous benefits, NbS remain underfunded in international climate finance systems. Currently just 139 billion USD are invested in NbS annually, which is one-third of the amount needed to reach climate, biodiversity, and land degradation targets by 2030. Overall, this amounts to just 3% of global climate finance according to the UN.
Part of the difficulty in NbS investment is the lack of appropriate funding mechanisms and the limited awareness in the revenue potential of existing NbS projects. Given the longer timelines for many NbS projects, there is perception of longer-term risk to secure the early funding needed to kickstart new projects, particularly in developing regions. Private sector investment currently represents just 11% of NbS finance flows, which will need to scale if the finance gap will be bridged. Current private sector financing is largely in the form of investments in sustainable supply chains and biodiversity offsets. Less has focused on the potential impact investments from projects that can generate equal parts environmental and financial gains, and lead to improved social outcomes.
As Leslie told us, “Beyond delivering high quality carbon credits, well designed projects deliver alternative community income streams and provide employment opportunities. These local income streams accrue to communities are not included as part generating of investor returns. Our fund looks at projects and programs that generate risk-adjusted returns from generating and monetizing carbon credits, allowing us to invest in community-based projects at scale, not projects that are timber or agriculture plus carbon projects, but instead climate mitigation driven projects.”
Identifying and scaling NbS solutions that can provide the triple environmental, social, and economic benefit is not easy. In many cases it requires a combination of technical expertise and integration with local communities and wider market dynamics. Leslie mentioned, “we have remote sensing and GIS experts, foresters, rural development specialists, agronomists, biodiversity specialists, software and models to predict carbon and navigate the market standards that are always changing and evolving.”
Forward Outlook
While the market standards for NbS are changing, so too is the demand for NbS projects and programs. NbS now account for nearly one-third of voluntary carbon market issuances, while financial frameworks such as the EU’s Just Transition Mechanism are mainstreaming NbS into corporate finance.
One of the top criteria for successful NbS adoption and towards a just transition are economically viable projects and programs. For many NbS programs, this is achieved through the generation of carbon revenue to fund ongoing activity. Global forecasts project voluntary demand for VERRs, or Verified Emission Reductions and Removals, to increase considerably with demand for reductions at 903 MtCO2e and demand for removals at 2,235 MtCO2e by 2050. The price growth for both reductions and removals have high upside.
Good NbS funds are designed to meet this demand by supporting high-quality VERRs, with direct investments in NbS projects that reduce deforestation, increase tree cover, and convert to low emission agriculture. Given its quality projects and multiple co-benefits, the fund deploys capital and works with governments, NGOs, community groups and local private sector project developers to deliver strong returns. And Leslie Durschinger mentioned collaboration on NbS is key. “Broadpeak and its expertise at the intersection between development and impact investing has been very helpful for us… Their focus aligns with Terra Global’s mission that we have had since our founding, included in our very first operating agreement, to attract private sector capital to nature-based solutions which will deliver on a just transition to net zero.”
