London, Thursday 2nd December 2021 – Nature-based solutions can play a crucial role in limiting the impact of climate change on the agricultural sector, which faces increasing pressures in both adaptation to and mitigation of climate change, according to a report by the Centre for Climate Finance & Investment (CCFI) at Imperial College Business School in partnership with Standard Chartered.
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The Risks And Opportunities Facing The Global Agricultural Sector From Climate Change
The analysis is the second of a two-part report exploring the risks and opportunities facing the global agricultural sector from climate change. The authors warn that poorly designed solutions could create adverse effects such as increasing competition for land, food prices and risks to food security.
The report outlines the primary challenges for the success of nature-based solutions, namely ensuring funding, delivery of proposed climate benefits, and an overall attractive proposition to project developers. Using a cost analysis on three types of nature-based solutions in Brazil, the research identified that ‘good’ projects do exist, but their true costs may be underestimated due to misconceptions, limited scope, hidden costs, and non-technical and non-economic challenges and constraints. Higher prices can also translate to a reduced estimate of deployment potential than currently perceived by markets.
Nature-based solutions currently dominate the voluntary carbon market. The voluntary carbon market is expected to exceed $1 billion this year as part of a growing trend. According to a report by Finance Earth, only $20.75 billion of private capital is estimated to have flowed to “nature-positive activity and conservation investments” as of 2019, while the requirement for nature investment is estimated at around $700 billion per annum.
The authors argue that uncertainty should not be an excuse for inaction, with the carbon market currently representing a reasonable attempt at valuing natural benefits whilst the private sector has the opportunity for improving the quantity and quality of transactions in these markets.
Dr Alexandre Köberle, Research Fellow, Centre for Climate Finance & Investment at Imperial College Business School said, “Nature-based solutions offer a genuinely promising way to counteract the impacts of climate change on agriculture, but they should not be seen as a silver bullet. Many types exist, but fewer are economically competitive and fewer still are attractive to investors. So, it’s important investors carry out more stringent due diligence, and demand quality from the offsets they buy. By setting a high bar and being willing to pay for quality, investors have the opportunity to drive the value of the market for nature-based solutions and deliver social and environmental benefits beyond emissions reduction.”
Chris Leeds, Head, Carbon Markets Development, Standard Chartered said, “Quality and integrity are imperative so that carbon credits can deliver on emissions savings, environmental co-benefits and to protect from greenwashing and the increasing reputational risk for investors looking to do the right thing. Our goal is to bring integrity, quality and standardisation to make carbon credits more investable, sustainable and do what we want them to do – reduce carbon emissions as quickly as possible.”
Michael Wilkins, Executive Director, Centre for Climate Finance & Investment at Imperial College Business School added, “The ongoing partnership with Standard Chartered has enabled a series of research reports of which this is a key part of. The topics of carbon markets, nature-based solutions and resilience remain growing areas of climate finance research that we are actively pursuing, enabling industry to have a collectively better understanding of the financial risks and opportunities within the capital markets.”
The full report, Future of Food Part 2: Nature-based solutions and the quest for low-carbon and climate-resilient agriculture is available to download from the Imperial College Business School website. You can also download the first report in the series, Future of Food Part 1 –Risks to the Agriculture Sector.
About the Centre for Climate Finance & Investment at Imperial College Business School
The Centre for Climate Finance & Investment undertakes cutting-edge research on how capital markets are responding to climate change. Building on Imperial College London’s international reputation for multi-disciplinary analysis, the Centre is helping investors and policymakers overcome the lack of clarity about risk and return in clean energy, low-carbon technologies, and green infrastructure. Our mission is to help shape a global energy transformation through the fusion of business, technology and an entrepreneurial mindset.
Find out more at: imperial.ac.uk/business-school/climate-investing
About Imperial College London
Imperial College London is one of the world's leading universities. The College's 20,000 students and 8,000 staff are working to solve to the biggest challenges in science, medicine, engineering and business.
Imperial is the world’s fifth most international university, according to Times Higher Education, with academic ties to more than 150 countries. Reuters named the College as the UK's most innovative university because of its exceptional entrepreneurial culture and ties to industry.
Imperial staff, students and alumni are working round-the-clock to combat COVID-19. Imperial has nearly two thousand key workers, and is at the forefront of coronavirus epidemiology, virology, vaccine development and diagnostics. More than one thousand Imperial staff and students are volunteering to support the NHS.
About Standard Chartered
Standard Chartered Bank is a leading international banking group, with a presence in 59 of the world’s most dynamic markets and serving clients in a further 85. Standard Chartered is proud to partner with Imperial College London to support research, raise awareness of climate change and climate risk, and create industry-leading climate finance solutions. Standard Chartered is supporting the net-zero transition in emerging markets by engaging with a wide range of stakeholders including clients, governments, civil society, and academia. Standard Chartered is committed to playing its part in contributing, facilitating, and leading this dialogue across its markets.