Total investments in the natural capital asset class could rise to $1 trillion or more over the next two decades, on the back of revenues from outputs including biodiversity markets, investor New Forests has said.
Nature-based real assets are converging into an asset class that offers potential solutions to climate change, nature decline, and renewable resources, Sydney-headquartered New Forests said in a paper published on Wednesday.
“The new natural capital asset class with exposure to agriculture and timber markets, carbon pricing, biodiversity markets, and options for renewable energy development is drawing substantial investor interest,” said the global investment management company.
These sources could raise “$1 trln or more” in investments within two decades, it claimed in a press release. The figure spanned total investments globally, not annual figures, from research finalised in June, the investor told Carbon Pulse.
“To make this rise in investment a reality, it is critical that the economic and policy signals are fit for purpose,” said David Brand, chair of New Forests.
A standardised accounting for carbon, and metrics for biodiversity, are needed to boost market-based approaches to climate and nature, said Brand.
New Forests managed A$11.7 billion ($8 bln) in assets across more than 1.3 million hectares, as of the end of 2023.
“There is a need to create value for nature, and price signals that make it more economically attractive to conserve and restore nature, than to destroy it,” New Forests said in the report.
Global recognition of the economic and environmental benefits of carbon and biodiversity projects, alongside demand for solutions, is growing, said Mark Rogers, CEO of New Forests.
“Where investment previously would be based on conventional returns from the sale of timber or agriculture produce, now there is exposure to carbon markets and biodiversity markets or payments, tradeable water rights, wind and solar farm leases,” said Rogers.
The international community has not yet agreed on the meaning of ‘nature positive’, with several initiatives launched over the last year with the aim of answering the question.
However, New Forests defined the term as “the conservation, restoration and enhancement of nature, reversing its decline by 2030, and achieving full and ongoing recovery of nature by 2050”.
GROWING DEMAND
In May, New Forests told Carbon Pulse it was preparing to potentially generate biodiversity credits by gathering nature metrics across 37,800 ha in Tanzania, Uganda, and Mozambique.
Global demand for nature-based solutions such as biodiversity markets is growing, New Forests said.
“At the international level, represented by the Convention on Biological Diversity and the Kunming-Montreal Global Biodiversity Framework, it seems likely that the commitment to achieve the long-term conservation of 30% of the world’s ecosystems will need market-based mechanisms.”
Different types of biodiversity credits or certificates could cover conservation, protection, and restoration, the investor said.
The International Advisory Panel on Biodiversity Credits, the Nature Finance-sponsored Task Force on Nature Markets, the World Economic Forum’s Biodiversity Credits Initiative, and the Biodiversity Credit Alliance are exploring approaches to international biodiversity crediting, it said.
By Thomas Cox – t.cox@carbon-pulse.com
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