Policy trends investors should watch in nature and land use

Inevitable Policy Response integrates nature and climate trends with expected global government responses to guide investors

Nature-related policies will increasingly impact the land use sector, according to forecasts by the Inevitable Policy Response (IPR) group, with effects filtering through the whole economy.

The prediction is part of UN Principles for Responsible Investment-commissioned IPR’s landmark forecast policy scenario (FPS), FPS + Nature, (FPS+N), which integrates nature and climate trends with expected global government responses to guide investors in policy direction.

IPR FPS+ N sees an increase in nature-related policies interacting with climate action across food, energy, nature-related goods, service and assets, supply chains and the global environment.

This is based on its analysis of responses to climate action and nature loss to 2030 and beyond to 2050, rooted in existing and emerging global policies.

The IPR FPS+ N report pointed out more than 190 countries agreed to adopt a global biodiversity framework at the COP 15 summit in Montreal in December 2022. 

See also: – COP15 agreement an ‘unambiguous message’ to finance firms

It added: “Government action on nature is increasing and a range of policies and regulations are being introduced to accompany action on climate.

“Policy action to achieve these commitments may create new risks but lead to new opportunities for companies and investors.”

Policy trends

Three key nature-related policy trends are highlighted by the report: protected areas, land restoration and ‘nature markets’.

Protected areas policy could see governments act to safeguard nature by strengthening regulation to protect land, according to the report.

Current trends suggest 20% of total global land area of high biodiversity and carbon value could be protected by 2030, it added.

On land restoration, governments may consider significantly increasing efforts to restore degraded ecosystems through national programmes, supplemented by private sector action.

This could involve restoration on 4% of global land area by 2030, according to the report.

‘Nature markets’ in the report describes the formalisation of nature-related targets, and the creation of market infrastructure and corporate demand to support the emergence of voluntary biodiversity credit markets.

Initially at the local and regional scale, IPR predicts this integrating with nature-based solution carbon markets. More focus on nature outcomes has the potential to increase the “quality” of nature-based carbon credits, it added.

Revenue potential estimates from the generation of biodiversity credits could be $18 billion annually by 2050, according to IPR.

Nature-based solutions could grow to reach $22bn in annual revenue in 2030, and $204bn in annual revenue in 2050, it added, as corporates and governments pursue cost-effective carbon mitigation options that also produce nature benefits.

Accompanying the launch of IPR’s FPS+ N policy predictions is a ‘value drivers database’, an open access resource for incorporating more than 80 land use value drivers for financial institution and policymakers.

This is to complement the previously released value drivers datasets for energy, land use and tropical soft commodities.

Mark Fulton, project director at IPR, said: “Biodiversity loss is fast emerging as a disaster that needs to be addressed now.

“The Inevitable Policy Response is unique in embedding biodiversity into a land scenario and interlinking with an energy scenario, all in a climate transition context.”

Daniel Gallagher, head of climate technical guidance at the Principles for Responsible Investment, added: “IPR Nature expands for investors an understanding of the growing interrelationship between climate, nature and land use outcomes and the impacts across multiple asset classes.”