The volume of discussion about climate change has amplified over the past year, as the pandemic created greater awareness and acceptance that urgent action is needed. But what form should this action take? The much-needed transition to sustainable forms of energy is gaining traction, but there are other, harder-to-tackle areas that are not attracting as much attention.
The United Nations is seeking to address this gap with its Decade on Ecosystem Restoration initiative. But what is ecosystem restoration and could this worthwhile cause benefit investors?
The urgent need to restore damaged ecosystems
The planet’s ecosystems are fundamental to maintaining life on Earth. Yet, these precious resources and habitats are not always treated with respect. Decades of over use, over consumption and neglect have led to the destruction or severe degradation of many vital ecosystems. This is not sustainable – at the current rate of consumption, it would take the equivalent of 1.6 Earths to produce all of the resources that are used annually1.
Fortunately, it is not too late. Efforts around ecosystem restoration can prevent, halt and even reverse the degradation of ecosystems on every continent and in every ocean. Cutting back on air, ocean and water pollution, improving flood controls and making farming more sustainable could help combat climate change and prevent the mass extinction of species, but time is not on our side. Hence the urgency of the UN’s Decade on Ecosystem Restoration which will run from 2021 to 2030 in alignment with the deadline for the UN’s Sustainable Development Goals targeting poverty, hunger, health, water, cities, climate, oceans and land.
Safeguarding nature’s economic contribution
It is not always recognised, but nature is one of the world’s most productive economic assets. This means the threat to its ecosystems, including forests, grasslands and coral reefs, as well as the associated loss of biodiversity, could drain nearly USD 10 trillion from the global economy by 2050, according to UN estimates. These losses stem from declining crop yields and fish catches, as well as greater exposure to natural disasters.
Conversely, if action is taken to restore these threatened ecosystems the accompanying benefits will be economic as well as environmental. For example, the restoration of 350 million hectares of degraded terrestrial and aquatic ecosystems by 2030 could generate USD 9 trillion in ecosystem services and would also remove up to 26 gigatons of greenhouse gases from the atmosphere2.
Investment required to fuel ecosystem restoration
The UN’s Decade initiative aims to ramp up ecosystem restoration globally and put the world on track for a sustainable future. Not only will this involve building political momentum, but it will also lead to a raft of opportunities for businesses, communities and individuals that will require significant investment contributions.
In fact, estimates suggest ecosystem restoration could create USD 6 trillion worth of business opportunities by 20303 split across the three main socio-economic systems: oceans and water systems; land, food and forestry; and sustainable cities and buildings.
So, what might these opportunities look like?
Ocean and Water Systems
Aquatic ecosystems sustain the lives of billions of people, help regulate the climate, produce half of the Earth’s required oxygen and fuel the water cycle. Yet, despite their importance aquatic ecosystems are under threat. Tons of plastic waste is damaging the oceans; overfishing is threatening the sustainability of fish stocks; and our freshwater systems are being polluted by sewage and chemicals.
Thankfully this damage is not irreversible. With political agreement fishing can become sustainable; water consumption can be reduced by improved recycling and agricultural irrigation; and pollutants can be treated before they reach water systems.
Land, Food and Forestry
Terrestrial ecosystems provide the basis for life through food supply, habitats for organisms and biodiversity. Farmlands are arguably our most vital ecosystem, but food production is being placed at risk by over farming, excessive use of fertilisers and an over-reliance on a handful of plant species, with just nine – including rice, maize and wheat – accounting for two-thirds of the world’s total crop production4.
Science already offers an array of solutions, from vertical farming to improving crop efficiency and encouraging biodiversity. Yet these effective remedies currently lack scale and need to be adopted more widely to affect real change.
The increasing demand for agricultural land has also amplified deforestation and the draining of peatlands. Both of these ecosystems are critical in the fight against climate change and can easily be restored through the planting of native tree species on disused farmland, integrating forests within more urbanised settings and re-wetting degraded peatlands. These solutions are often low-cost and low tech but would be high in impact.
Sustainable Cities and Buildings
Urban ecosystems are also vital for how we live, but the associated pollution is responsible for 7 million deaths a year5. This doesn’t need to be the case. Cities across the globe are currently undertaking extensive programmes to move away from linear ‘take, make, waste’ models and transitioning to circular economies that focus on improving waste management. Clothing manufacturers are launching initiatives where consumers ‘borrow’ rather than ‘buy’ clothes, which can later be recycled and made into something else.
Urban waterways and woodlands are being cleaned up and developed to make cleaner, healthier public spaces, while permeable pavements and urban wetlands are being used to protect against flooding and pollution. Technological innovation is also leading to the development of smart cities, which can ease traffic congestion and support the wider use of clean energy.
Mobilising the investment community
The UN is right to highlight the need to restore our ecosystems and its efforts should mean that the topic receives the appropriate airtime at government level. But in order to truly achieve the desired impact, ecosystem restoration will need the support of all players, public and private. The alternative is just not an option.
At BNP Paribas Asset Management, we believe the investment community can play a major part in generating the necessary finance through a number of initiatives. It can raise awareness among professional and retail investors of the genuine opportunities that exist in the transition to a more sustainable world and can promote this theme by providing access to responsible investment solutions. It can also open dialogues with companies across sectors to ensure they improve their own environmental, social and governance standards.
We are fully committed to supporting the transition to a better, healthier, more sustainable world across all ecosystems. We are therefore seeking out the best opportunities that align with our investors’ long-term investment objectives, their interest in contributing to a greener future and towards having a positive impact.