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When Ecosystem Services Meet Climate-related Financial Risks

20 February 2024// Resources // NbS for Climate Risks Taxonomy

More than half of global GDP ($USD58 trillion) is dependent on nature, and over 90% of the world’s largest companies will be highly exposed to the physical impacts of climate change by the 2050s. Current frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) and the Task Force on Nature-related Financial Disclosures (TNFD) have brought these critical considerations of climate and nature into corporate governance and risk management practices. 

 

In parallel, the global push towards adopting and financing nature-based solutions (NbS) is accelerating. By 2050, NbS could sequester at least 10GtCO2 emissions per year, while re/afforestation could generate $USD800B in annual revenues.

 

Moreover, NbS have the potential to reduce the impact of climate-related financial risks and contribute to climate-related financial opportunities. Mangroves, for example, provide over $65 billion in flood protection, and protect 15 million people from being flooded each year. 

 

Could we make this potential impact more distinct by mapping (primarily) TCFD, and TNFD climate-related financial risks and opportunities, to the potential for ecosystem services provided by nature to reduce, control or mitigate a given risk? Or to contribute, improve, or increase a given opportunity?

 

 

With the overarching mission of mobilizing nature finance, Symbaiosys aims to complement current frameworks by connecting the potential impact of investing in nature to reduce climate-related financial risks—be they physical, transitional, systemic or otherwise.

 

 

Example 1: To mitigate the impact of hurricanes, investments in nature-based solutions that provide the following ecosystem services can be considered: Flood prevention, Prevention of extreme events, and Storm protection.

 

Example 2: To reduce insurance liabilities, investments in nature-based solutions that provide the following ecosystem services can be considered: Biological Control, Disease control, Pest control, Climate regulation, Energy (other), Hydro-electricity, Solar Energy, Erosion prevention, Fire Prevention, Flood prevention, Prevention of extreme events, Storm protection, Biodiversity protection, Animal genetic resources, Genetic resources, Nursery service, Refugia for migratory and resident species, Pollination, Pollination of crops, Soil detoxification, Waste treatment, and Water regulation.

Developing the taxonomy has sparked some interesting discussions and reflections internally. You can download the table below, or comment directly on the public draft–we’d love your thoughtful inputs.

 

 

According to research by S&P Global Sustainable1, the ecosystem services companies most depend on are:

 

  • Mass stabilization and erosion control: for example, when mangroves, sea grass and macro-algae provide erosion protection for coasts. This is the top dependency for four sectors in the S&P Global BMI: communication services, financials, information technology and materials.
  • Flood and storm protection: for example, mangrove forests that act as storm walls, buffering coastal areas from storm surges and flooding, and reducing property damages. This is the top dependency for: consumer discretionary, consumer staples, energy and industrials.
  • Bio-remediation: the function micro-organisms, plants, algae and some animals play in reducing or detoxifying contaminants from soil and water.  This is the top dependency for the healthcare and real estate sectors.
  • Climate regulation: provided by nature through the long-term storage of carbon dioxide in soils, vegetable biomass and oceans to regulate temperatures, humidity and wind speeds. It is the top ecosystem service dependency for the utilities sector. 

Whereas, examples of investable nature positive actions include: agro-forestry, aquaculture management, aquifer recharge, afforestation, reforestation and revegetation (ARR), cattle management, forest conservation, managed grasslands, peatland restoration, re-wilding, regenerative agriculture, silvopasture, soil carbon farming, sustainable and improved forest management, sustainable agriculture, watershed reforestation, wetland creation and restoration, wild fisheries management, and wildlife conservation.

 

Explore Further

Are you a nature project developer seeking funding? Or an institutional investor seeking high integrity nature investments? Sign-up for a free beta of our platform and explore our investment database, natural capital valuation calculator, and pre-indexed knowledge library on nature-based solutions and climate risks and opportunities. 

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