Commitments by world leaders at COP26 to halt and reverse global deforestation have been welcomed by institutional timber and natural-capital fund managers.
Martin Davies, president and CEO of Westchester, said: “We welcome today’s commitments on deforestation, which draw on the combined efforts of over 100 nations and businesses to tackle a global issue.
“The evidence of the devastating effects deforestation is having on the environment could not be clearer, and finding nature-based solutions to this issue will be a key part of any deal to protect the planet.
“Over 10GT of carbon emissions can be saved annually by protecting our forests and pasture land, restoring wetlands and adapting and improving the management of commercial farmland and timberland.”
Davies, who is due to lead Nuveen’s planned ‘natural capital’ business, said the signing by 100 world leaders of the Glasgow Leaders’ Declaration on Forest and Land Use was a “good start, but hopefully the first of many similar commitments”.
He added: “Building on today’s announcement, research shows an additional area twice the size of India will be required for growing crops by 2050. More action needs to be taken to maintain and improve soil, landscapes, water quality and biodiversity in our farming practices to both adapt to and mitigate the risks of climate change.
“At Nuveen, our aim is to provide opportunities for investors to participate in the restoration, adaption and protection of the environment, whilst delivering compelling traditional return characteristics that have attracted investors to land based assets.”
Ladislas Smia, head of sustainability research at Mirova, said: ”The COP26 deforestation pledge is a first positive signal. In particular, it is reassuring to see that countries such as Brazil and Indonesia, which account for almost half of tropical deforestation, have taken part in this initiative.
“It will have positive consequences for the climate but also for biodiversity and local communities. This is a first step. We need to go even further if we want not only to avoid negative impacts of deforestations but forests becoming an ally in facing major environmental issues.”
Smia added: “To avoid the most serious consequences of climate change, we must reach carbon neutrality by 2050. This objective implies first and foremost a drastic reduction in the use of fossil fuels.
“It also requires reversing the trend in forestry by stopping deforestation as soon as possible and increasing forest cover instead. Achieving this goal implies State commitments. It also questions our eating habits: beef is responsible for more than 40% of deforestation, and oilseeds such as palm oil for nearly 20%.”
Mirova manages a Land Degradation Neutrality fund that invests in agroforestry, regenerative and sustainable agriculture and forestry on degraded lands in developing economies. Fund director Gautier Quéru told IPE Real Assets earlier this year that he expected natural capital to become a mainstream institutional asset class in much the same way to renewable energy over the past decade.
Meanwhile, a number of investors and asset management firms have pledged to help fight deforestation by using active ownership and stewardship to “catalyse actions to eliminate deforestation across supply chains”.
The companies include Aviva, Storebrand Asset Management, Generation Investment Management, JGP Asset Management, NEI Investments, Impax Asset Management, Church Commissioners for England and Boston Common Asset Management.
