Catherine Edet of STOA Infra & Energy

Concerns over integrity of demand is one of five barriers preventing nature-based solutions from attracting more investment, according to Catherine Edet, head of ESG at STOA Infra & Energy.

Increased investment in natural capital assets is now recognised as a critical part of addressing the climate crisis. Nature-based solutions could account for 37 percent of the cost-effective climate change mitigation efforts needed by 2030 to meet Paris Agreement goals, according to a report from The Forest Investor Club, a group convened by the US State Department to accelerate investment in nature.

STOA is an impact fund established by French state investor Caisse des Dépôts and development bank Agence Française de Développement in 2017 to finance infrastructure in emerging and developing countries. It has committed €600 million of capital to projects, according to its website.

On stage at Infrastructure Investor Network Global Summit in Berlin last week, Edet laid out her assessment of challenges that prevent further investment in nature-based solutions. She identified the following:

  • Lack of successful business models: “As an investor, it’s not always easy to find good and strong business models for NBS projects. If you look at the cost of the tonne of carbon at the moment, it’s less than $10 per tonne, which doesn’t really allow big developments or complex investments.”
  • Geographical disconnect: “Most of the NBS projects today are located in developing or emerging countries but most of the developers are located in the OECD countries. I think there is a risk of lack of understanding of the local context by the project developer.”
  • Investor unfamiliarity: “As an investor, if I have to do due diligence for a wind farm, I know very well how to do the due diligence and how to assess the project and also how to monitor the project after implementation. But for NBS, because the projects are very diverse in terms of project content or scope, it’s more difficult to have a standardized approach.”
  • Integrity of demand: “When you talk about carbon credits, you know that the mitigation hierarchy in terms of carbon is to always prefer avoiding carbon emissions for before we talk about offsetting or compensating the carbon emissions. And the risk in financing carbon credit NBS projects is that… if it’s too easy to offset, the off taker might prefer to continue with their current emissions and just pay to offset rather than trying to really reduce carbon [emissions].”
  • Understanding co-benefits: More needs to be done to consider the impact of projects outside of carbon emissions reduction, Edet said. “If you talk, for instance, about an NBS project which is focusing on carbon, I would be happy to see that this project has also some positive impact on biodiversity and localities… for me, a good NBS project will cover not only the climate or biodiversity but also community.”