Press Release: Nature and land use will make or break the climate transition

  • Inevitable Policy Response
  • March 14, 2024
Press Release: Nature and land use will make or break the climate transition

Unprepared investors at risk as national policies to halt nature loss and deforestation accelerate, doubling in the last 12 months

A leading policy forecasting body commissioned by the PRI, the $120tn UN-supported investor group, today publishes new global analysis of the trajectory of national environmental policies and their impacts on companies and investors.

The Inevitable Policy Response (IPR) forecast, built from detailed analysis of over 300 major policy levers and drawing on the input of over 100 policy experts, shows that progress on nature and land use will ultimately make or break efforts to achieve net zero.

It forecasts that half of global emission reductions by 2035 are set to come from the land use sector through a combination of policies to end deforestation, lower agricultural emissions, reduce food waste, restore degraded natural ecosystems, and scale nature-based solutions.

Policymakers are waking up to the critical role of nature, land and food to reaching climate goals, with the number of material and credible national policy announcements doubling in the last 12 months compared with the previous year, according to IPR (1). This marks a significant shift for major economies such as China, the EU, and Brazil (2). It underlines that a land transition as significant as the energy transition is now underway.

The analysis shows over 90% of nature-related policy developments tracked in the last year are in line with a pathway to a well below 2°C temperature outcome, the upper limit of the Paris Agreement. Russia and Argentina emerge as significant outliers, going against the tide of the global trend (2).

But, despite this significant momentum, IPR modelling suggests policy developments do not go far enough to put the world on a pathway to 1.5°C, the goal reaffirmed by nearly 200 governments at the UAE-hosted COP28. To achieve that, IPR highlights policymakers must act much more urgently in several critical areas, including ensuring an immediate end to deforestation globally in 2025.

This raises the stakes for the next 18 months, a period when governments are required to submit new, more ambitious national climate and biodiversity plans at two upcoming UN milestones, both hosted in ecologically ‘mega-diverse’ countries: COP16, the biannual biodiversity summit hosted this year in Colombia; and COP30 in Brazil in 2025.

Major risk and upsides for investors

Even as the energy transition has risen rapidly up the corporate agenda, the role of nature, land, and food in the climate transition remains underappreciated. Investors and companies around the world risk being blindsided by the ambition and rapid pace of new policies (3).

The analysis shows an increasing acceleration in policies to tackle deforestation: a source of 10% of global emissions, the majority of which is driven by commodities including beef, soybean, palm oil, timber, coffee, rubber, and cocoa.

This creates significant risk for ill-prepared companies and investors which have yet to eliminate deforestation from their supply chains and portfolios.

Taking into account wide land use transition risks, individual firms at the centre of the global food supply system could lose up to 26% of their value by 2030 unless they change business practices, with a sector average hit of over 7%, previous IPR analysis has shown. This is equivalent to permanent, non-cyclical USD$150 billion in losses to investors.

At the same time, nature-based solutions have emerged as a significant investible opportunity today, given their low-cost nature and potential for large-scale implementation. Accelerating policy will unlock even more value in the coming years, with overall land area utilized for nature-based solutions set to increase almost 10-fold from 2021 to 2035, nearly equal to 10% of global agricultural land today.

Currently only 18% of nature finance comes from private capital, this is 1/6th of private capital going to clean energy systems (Centre for Global Commons).  However, IPR analysis suggests increasing policy momentum will incentivise and spur the deployment of significant private sector finance, opening opportunities for investors. UNEP have calculated that to achieve 1.5°C approximately $4.1tn of finance is needed to nature-based solutions by 2050, representing a tripling by 2030 and fourfold increase by mid-century.  

As nature-based solutions grow dramatically, the IPR forecasts that the additional demands placed on land will be largely mitigated by significant improvements in crop yield, reductions in food waste, and the rise of alternative proteins. Failure to invest in such nature and land use solutions has the potential to dramatically amplify climate-related risks. The social risks of mismanaging the land transition and evolving land use in line with the IPR forecast, coupled with the economic cost associated with the decline in ecosystem services from nature breakdown could increase underlying climate risks by 2-3x by 2050 (Theia Finance Labs).

Patricia Espinosa, former Executive Secretary of the UNFCC and Chair of GFANZ Latin America, speaking at a launch event will say: “We are in a climate emergency and are entering into a critical period in the road to COP30 in Brazil. Nature, deforestation, and food systems are moving center stage as governments around the world seek to deliver on joint climate, biodiversity and sustainable development goals. We need to work urgently to stop deforestation. It will be key to unlock billions of dollars of finance in Latin America in particular, where there is enormous opportunity for nature-based solutions that deliver for climate, people, nature, and economic prosperity.”

Nathan Fabian, PRI’s Chief Sustainable Systems Officer, speaking at a launch event will say:“As the energy transition accelerates, it’s becoming increasingly clear that nature will make or break net zero. Indeed, climate and nature issues are intrinsically linked and represent significant and material risk factors for investors. Increasingly, the industry is aware of this pressure and investors are taking steps to manage down their exposure to these risks. An increase of investment in nature-based solutions is additive to a cycle whereby nature and climate-positive outcomes move closer together, and investors are better able to navigate their way through both issues.”

Andy Howard, Global Head of Sustainable Investment at Schroders, speaking at a launch event will say: “The new analysis published today reinforces our understanding that nature risk is an important driver of investment risk and returns. And that makes measuring and managing risks and opportunities stemming from deforestation, nature loss and land use an important part of our responsibility to our clients. At Schroders, we are working to protect and enhance the value of our clients’ investments, strengthening our understanding of the challenge, developing analyses of companies’ exposures and placing natural capital at the centre of our active engagement blueprint. Meanwhile, we are developing strategies to invest in the opportunity presented by the transition to a nature positive economy, which will require new ways of mobilising capital that benefit the climate, biodiversity and communities around the world.”

Notes to editors:

IPR enquiries:

Andrew Whiley, Communications Manager

M +61 0407420 064

Launch Webinar, hosted by IPR partner Planet Tracker Initiative can be viewed here.