28 Oct 2022

How to scale high-integrity nature-based climate solutions

Nature based solutions
TEM   |   Carbon Policy   |   Carbon Pricing   |   Climate Change

This week our team attended the renowned Carbon Market Institute’s Emissions Reduction Summit. I joined a plenary session discussing nature-based climate solutions and shared my views on how we can leverage the incredible benefits and impacts of these projects.

There are two elements of the carbon market that we need to get right: integrity and scale.

The gap in the Paris Agreement target of 1.5C is monumental. The gap is estimated at 17-20 billion tons by 2030. A significant proportion of that needs to come from nature-based solutions. Estimates are that this will require an increase of at least 590% in annual climate finance to get on track for the goals of the Paris Agreement.

Many of the barriers associated with scale in nature-based solutions, revolve around two key themes: trust and risk. For scale we need investment, and for investment we need the risk of investing to be better defined and articulated:

  • Where does the investment in nature-based solutions fit in your strategy or investment mandate?
  • What is the value of the asset, what are the fundamentals of the market and the expected returns? What are the standards and programs?

For scale with integrity, we need trust. You can understand why nature-based solutions make sense, you can agree with the potential and the urgency required, but if you don’t have trust in the market, in the governance framework, confidence in the systems, standards and registries, treatment of landowners and traditional owners, and importantly your trust in your partners, scale will continue to be a challenge.

In our experience, TEM has over 150,000 hectares of nature-based projects under ownership and management, and a loyal client base that we supply offsets from these projects, and I can assure that those themes have been paramount in the level of investment that we’ve been able to channel into the projects.

In our framing of the investment to secure third-party finance, we have successfully:

  • defined and articulated the value of the asset
  • translated the fundamentals of carbon pricing, the legislative framework and the underlying data for the returns from carbon and nature, compared to the returns on other land use
  • Demonstrated the land is more valuable because the returns from nature and carbon are greater than other land use on its own

There is currently a wide and growing menu of options for land managers to get involved in nature-based climate solutions. The growing set of opportunities signals an increasing move to more sustainable land management practices. However, the menu of options is also incredibly complicated for individual producers and even large agribusiness or investors to navigate, and it is not a one size fits all approach. Indeed, there are a complex array of options to consider. But we are dealing with a complex problem, so many options have arisen because this is not simple.

There is a balance between standardised approaches and diversity of approaches, to ensure we scale quickly, but also collect every possible emission reduction available. Not everything is going to be incentivized by methodologies, grant funding for instance is necessary in certain circumstances.

Much of the demand that we have seen in the voluntary market is not because of some fundamental shift or emergence in one particular tool or another – it is the result of pressure for action, but also a lot of hard work in educating the market, and translating the opportunity and the risk for landholders, for investors, for corporates to actually act.

For corporates, part of the risk is understanding where nature-based solution offsets fit into their net zero strategy. Understanding how they fit into the values of the organisation and the broader sustainability goals. Aligning portfolios with areas of impact is vital for example with organisations who are already committed  to planting native forests or supporting traditional owners through a Reconciliation Action Plan (RAP).

In my experience, the reason why people have invested in nature-based solution projects at TEM is because they have an acceptable level of trust in us. Trust in our credible project partner, trust in our signatory status to the code of conduct, our B Corp certification, our RAP. Trust that we are regulated by and compliant with AISIC and other regulators.

Integrity is also fundamental.

It’s not enough simply to have a nature-based solutions project that follows the methodology. Integrity goes beyond the base requirements. It’s a continuous process of achieving best-practice, filling the gaps in the legislative framework or mainstream practices. For nature-based solutions its critical to look beyond carbon, and take as much action as possible to also measure (and monetise and value) the other benefits delivered.

At TEM, we uphold integrity by undertaking comprehensive environmental mapping, we identify the key environmental values, significant vegetation mapping, species identification and we allocate a budget for the protection and management of those environmental values, and prioritise them. It’s about making nature and culture the core part of the investment not just on the periphery.

Everyone in this industry impacts the scale of investment in nature-based solutions – whether you realise it or not – that’s the private sector, the Government agencies, the universities, the NGOs, the services firms and analysts – the way you conduct business, the quality of the information you produce, the partnerships you make, the design and implementation of the policy, the decisions made will either lead to a landscape that attracts investment and behaviour change, at scale, or it won’t.

It doesn’t matter whether you are up on stage, in the paper or the one crunching the numbers behind the scenes, the quality of your work matters.

Alex Lewis is TEM’s Chief Commercial Officer; crafting the world’s finest portfolio of premium offsets, unrivalled attention to detail, best hair in the business.