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As investors worldwide commit to internationally established climate goals and develop strategies to meet 2030 and 2035 interim net zero targets, it is becoming clear that more needs to be done across the board to achieve the goals of the Paris Agreement to limit global temperature rise to 1.5°C.

It is well known that the climate crisis is exacerbated by inaction and underinvestment in the sustainable management of nature, including the consideration of vital water resources, forests, and biodiversity. Currently, finance flows to nature-based solutions are US $200 billion, only a third of the levels needed to reach climate, biodiversity, and land degradation targets by 2030 and are mostly financed by governments. At the same time, government scientists warn, “safeguarding biodiversity and ecosystems are fundamental to climate-resilient development, in light of the threats climate change poses to them and their roles in adaptation and mitigation.”  

In short, climate change and nature loss are separate but inextricably linked crises that both must be addressed.  

Allowing the continued degradation of these critical resources will accelerate and amplify the effects of the climate crisis. However, the opposite is also true. Climate resiliency, natural systems, and biodiversity are mutually reinforced through a positive feedback loop. When nature is deployed, it can help to tackle climate change, by contributing to absorbing and locking in vast quantities of carbon dioxide. Moreover, nature-based solutions can help communities better adapt to the impact of climate change by absorbing climate-related shocks and can have significant additional economic and developmental benefits and benefits for health and well-being. Mangrove ecosystems, coral reefs, and salt marshes, for example, can contribute to the prevention of coastal flood risk, as well as contribute to climate-resilient development through tourism or agricultural and aquacultural opportunities. 

There is more biodiversity in emerging markets and developing economies (EMDEs) which, when at risk of degradation and loss, poses a systemic risk to those economies. As a knock-on effect, impacts can directly jeopardize livelihoods in these regions, which typically include rural communities and indigenous people.  

So, what can be done to tackle this double-edged sword? 

Turning to investors 

Investors can act on these interlinked crises by exploring the potential nature impacts across their value chains and exploring how finance can best support nature-positive climate adaptation and mitigation solutions, particularly in EMDEs, engaging directly with investees to set safeguards in place to protect natural resources.  

That is why the latest Investor Climate Action Plan (ICAPs) Expectations Ladder includes actions on deforestation. It is designed to support investors by providing a framework with clear expectations in four interlocking areas: investment, corporate engagement, investor disclosure, and policy advocacy.   

One example of this in practice is a case study from one of Europe’s largest asset managers, Legal & General Investment Management (LGIM). The case study details how LGIM is considering deforestation specifically within its transition planning and taking action through a deforestation engagement campaign, writing to 300 companies from a set of deforestation critical sectors within its investment portfolios, outlining its expectations, their specific current performance against these, and explaining LGIM’s new deforestation voting policy. In addition, LGIM seeks to engage with policymakers at an early stage to help them identify and address emerging risks, so they can take transformative steps to tackle systemic market issues and accelerate progress on nature. 

In another case study, Sumitomo Asset Management, one of Asia’s largest and leading asset managers, has integrated deforestation into their formal ESG investment policy via corporate engagement and policy advocacy strategies. SMTAM actively engages companies on sustainable supply chains to address the issue of deforestation in the commodity supply chain. SMTAM is also an active participant in various investor initiatives collaborating on deforestation.  

Policy unlocking action on nature 

The other piece of the puzzle is policy. As with LGIM, climate advocacy and lobbying are essential tools in the investor wheelhouse to help turn the tide on nature. Investors call on companies and governments to support nature-positive policies. Investor policy advocacy can take the form of global calls for action, such as the Investor Agenda Global Investor Statements to Governments on the Climate Crisis.  

In 2022, the Global Investor Statement, signed by hundreds of investors around the world, recognized the need to address the climate and nature interlinkage, specifically calling on governments to end all deforestation globally. The 2024 Statement, set to be published later this year, will be even more comprehensive, as it calls for broader action on climate change and nature loss. 

Regardless of where an investor is in their climate journey, considering nature action as part of transition planning or policy strategy is vital in addressing portfolio risks and other challenges. If you are an investor, get in touch with a Founding Partner of the Investor Agenda to learn how you can continue to act on these critical issues including joining hundreds of investors in supporting the policies that will help achieve a climate-resilient, nature-positive, and just and equitable future.