UBS has partnered with a nature-focused non-profit to better understand how to limit impacts to nature in clean energy investments, with the findings released on Thursday.

The report “Climate meets nature” aims to help investment managers identify key ways to minimise impacts on nature as a result of the energy transition, taking a pragmatic and scientific approach to understand the climate-nature nexus.

The research focuses on investments in wind, solar, and bioenergy, highlighting key nature-related risks that these projects can present, such as upstream impacts in the solar value chain from mining and transport, and the growing issue with processing end-of-life wind turbines.

Through minimising risks to nature, investment managers will be better prepared to meet environmental regulations and respond to growing client interest in nature, said Lucy Thomas, head of sustainable investing for UBS Asset Management, during a press briefing launching the report earlier this week.

As much as 55% of global GDP – equivalent to about $58 trillion – is moderately or highly dependent on nature, according to consultancy PwC, with the investment world increasingly aware of the need to consider nature impacts in asset management strategies.

Private finance for nature increased from $9.4 billion to over $102 bln in the past four years, according to a recent report by UNEP F1. It found that some $1.45 tln could flow into nature finance by 2030, helping to close the nature-finance gap as defined by the Kunming-Montreal Global Biodiversity Framework (GBF) to protect 30% of land and oceans by 2030.

Meanwhile, solar PV generation is expected to surpass 8,000 terawatt-hours (TWh) globally by 2030, a fourfold increase on today, and generation from wind power is expected to exceed 7,000 TWh by 2030, up from just under 3,000 TWh today, in line with the International Energy Agency’s (IEA’s) net zero emissions scenario.

The three main impacts on nature from renewable energy development identified by the report were land use and site management, habitat loss and damage from raw material extraction and use, and managing the input and output of waste.

For example, growing feedstock for biofuels requires significant land use, mining for electric vehicle batteries requires significant mining disturbance, and around 14,000 wind turbine blades globally will need to be decommissioned in the next couple of years.

To mitigate these impacts, the report advises stakeholders to improve land management practices, to carry out lifecycle analysis, and to recycle and repair materials to reduce waste production.

CREDIT USE

Philanthropy can play a key role in investing in more innovative sectors and emerging economies where traditional finance is not yet ready to step in, Tom Hall, managing director and global head of social impact and philanthropy at UBS, said during the briefing.

For example, UBS is supporting family offices to make philanthropic investments in the avoided deforestation of mangroves, with potential use of carbon credits to make the business model investable, he said.

The bank is bringing together a number of family offices on a collective philanthropy venture to support smallholder farmers develop more environmental models and generate carbon credits, with potential impact across tens of thousands of hectares of mangrove plantations, he said.

KEY FINDINGS

The report’s key findings aim to support investment managers in limiting their impact on nature when investing in clean energy.

In solar PV, for example, as much as 70% of the nature-related impacts are estimated to come from the upstream, including from the impacts of mining and transport, while the actual solar project itself has a lesser impact, said John Willis, director of research at Planet Tracker.

In the wind industry, which, according to the IEA has experienced a 14% annual growth rate in recent years, the end-of-life impact of wind turbines can be particularly detrimental to nature, making opportunities for recycling increasingly important, he told the briefing.

Vestas’s work to tackle the breakdown of epoxy resin, from which wind turbines are made, will go a long way to helping the industry solve the recycling conundrum, he said.

Understanding these issues can help investment managers focus on the right opportunities to minimise impact to nature, such as careful selection of upstream sourcing and seeking opportunities to recycle turbine blades.

The report recommends questions stakeholders like investors can ask when considering a renewable energy project, such as what actions do you take to minimise the climate impact of bioenergy feedstocks, and to what extent are wind farm lifetime extension activities being planned to reduce reliance on virgin materials.

TRADE-OFFS NATURAL

The speed of the energy transition will entail trade-offs with nature, but given the explosive growth of clean energy forecast, it’s important to minimise these nature-related impacts as much as possible, said Thomas.

Global energy investment is expected to surpass $3 tln this year, according to the IEA, with two-thirds of that going to clean energy investments.

By 2028, solar PV capacity additions are expected to total 672 gigawatts, which will mean a massive increase in solar module production and hence a significant nature-related impact in the upstream value chain, said Thomas.

Deciding where to source materials from and where to site projects to minimise nature-related impacts will consequently become increasingly important, she said.

Any variation from best practice can negatively impact operations and potentially lead to opposition for the energy transition, such as revocation of permits that stop projects from moving ahead, Thomas said.

Regulatory scrutiny on nature impacts, such as with the EU’s Corporate Sustainability Reporting Directive (CSRD) and EU Deforestation Act, will require that companies understand their supply chains much better, with those who do better placed for a larger market share, she said.

Learnings from the Planet Tracker report will help investors improve their due diligence on investment decisions and will also help UBS better support its corporate clients, while it’s also intended to help asset operators make decisions that positively impact nature too, said Thomas.

By Bryony Collins – bryony@carbon-pulse.com