New Report Highlights Significant Private Sector Opportunities in Scaling Natural Climate Solutions in Southeast Asia

The report spotlights the importance of NCS in climate change mitigation, challenges to NCS investments and country-specific opportunities for businesses

SINGAPORE - Media OutReach - 8 December 2020 - Conservation International, DBS Bank, National University of Singapore (NUS) and Temasek today jointly released a report on The Business Case for Natural Climate Solutions: Insights and Opportunities for Southeast Asia. The report was launched at a virtual session of Ecosperity Conversations, a series of sustainability-focused dialogues hosted by Temasek.

As the first-of-its-kind study done in Southeast Asia, the report highlights the opportunities for businesses to invest in natural climate solutions (NCS) -- climate mitigation technologies that harness natural processes to reduce or remove greenhouse gas -- to stimulate the implementation of NCS at scale. It also presents actionable takeaways for businesses to evaluate NCS opportunities and engage with the public sector in the region.

"To implement natural climate solutions at scale, we need public-private sector partnerships to deploy financial capital and preserve our natural capital. This report brings together perspectives from players across several sectors to define the investment case for natural climate solutions in Southeast Asia, a region among the richest in both terrestrial and blue carbon sinks." said Robin Hu, Head, Sustainability & Stewardship Group at Temasek.

The business case for NCS

According to the Intergovernmental Panel on Climate Change (IPCC), global warming is projected to reach 1.5°C between 2030 and 2052. This will have a long-term negative impact on natural and human systems, contributing to sea level rise and increased incidences of extreme and deadly weather events^[1].  

Studies have shown that NCS play an important role in mitigating these devastating effects. With the potential mitigation impact of 11 gigatons of CO₂ annually, NCS can provide over a third of the mitigation action needed to meet the Paris Agreement Targets by 2030^[2]. Yet, less than 3% of global climate finance is going towards NCS, signaling a need for investments to plug the financing gap needed for NCS to scale and reach the current climate targets set by governments to reach net-zero emissions by 2050.

The new report highlights the role that businesses can play in helping to bridge this gap, along with the following business advantages:

• The private sector has key, distinct advantages as an investor in NCS. Compared to the public sector, the private sector can often more rapidly deploy larger pools of investment that are less susceptible to political risks. It is also skilled in developing cost-effective models that are financially self-sustaining.
• Due to the speed and scale at which they can deploy capital, businesses are uniquely positioned to catalyse investment in NCS and stimulate a thriving carbon market by purchasing offsets. To ensure this resulting carbon market is effective, they should also commit to high quality credits and fair prices, support design and development costs, and engage in policy development and advocacy.
• NCS projects are comparable to engineered alternatives (such as carbon capture, utilisation and storage technologies) in terms of cost and return-on-investment, but are significantly favourable when non-carbon benefits such as other social, economic and environmental outcomes are considered. When implemented with the appropriate safeguards, NCS projects offer positive impacts far beyond carbon sequestration, such as biodiversity conservation and ecosystem services to local communities such as the provision of fresh water, food and disaster risk mitigation.
• NCS project risk can be reduced through policy advocacy, technology deployment, inclusion of cost buffers, and upfront community engagement.

"Many of the world's most carbon-rich ecosystems -- tropical forests, peatlands and mangroves -- are found right here in Asia. Nature provides the best and most cost-effective technology for removing carbon from the atmosphere but is vastly underfunded despite new corporate climate commitments that are being made every day. This report provides a clear roadmap for direct investment in natural climate solutions," said Dr Richard Jeo, Senior Vice President, Conservation International Asia-Pacific Field Division.

Opportunities for NCS in Southeast Asia

The benefits of NCS for the Southeast Asian region are striking. With its vast rainforests and dense stock of mangroves and seagrass, countries in the region possess highly favourable conditions for NCS investment and implementation in both terrestrial and blue carbon, including an immense potential for investable carbon. For example, a new study by the NUS Centre for Nature-based Climate Solutions this year has shown that protection of tropical forests in Southeast Asia could potentially generate a return-on-investment of up to US$27.5 billion a year.

Significant progress has been made to implement and incentivise NCS in Southeast Asian countries. Several countries are developing relevant regulations, presenting major opportunities for encouraging the inclusion of NCS. An individual country-level analysis that evaluates the most critical policies for NCS investments, including opportunities for policy engagement to scale NCS, is included on pages 61-64 of the report.

In addition to forest protection, reforestation as a climate solution could provide a significant portion of climate mitigation potential across Southeast Asia. Even after factors such as biophysical, financial, and land-use constraints are considered, reforestation in Southeast Asia can potentially contribute to removal of between 0.4 and 0.5 gigatons of carbon emissions per year^[3]. Across different ecosystems, Southeast Asia holds the highest density of carbon prospecting for NCS investments, including both terrestrial and blue carbon.

"The potential climate mitigation and financial payoffs of NCS are comparable with engineered mitigation solutions. If other co-benefits that NCS provide are considered, such as clean air and water, coastal resilience, biodiversity conservation, food security safeguard, and flood prevention, they present even greater benefits," said Professor Koh Lian Pin, Director of the NUS Centre for Nature-based Climate Solutions.

Putting NCS into play

To help businesses implement NCS, the report highlights five areas of action:

• Investment in NCS and offsets should be part of a broader portfolio of climate action that also includes decarbonisation, with the aim of reaching net zero by 2050 in line with the Paris Agreement.
• The private sector has a unique and critical role in scaling NCS: purchasing and committing to high-quality carbon credits; supporting business model development and technical innovation for project design, implementation, and verification; and supporting national and jurisdictional government priorities. This includes aligning with emerging national frameworks for NCS and providing clarity on ownership of credits to avoid double counting.
• Companies should apply a transparent price per metric ton that supports sustainable, 'high-quality' projects.
• Investing in deeper, science-based spatial analyses to quantify the full scope of both NCS and co-benefits captured would ensure a better and more targeted ROI, help measure impact, and potentially fetch higher prices.
• Blue carbon is a major opportunity in Southeast Asia but is still poorly represented in carbon markets. As they have limited scalable potential and geographic restrictions, businesses should identify and target areas where the co-benefits can be maximised.

Mikkel Larsen, Chief Sustainability Officer, DBS Bank, said, "Natural climate solutions present a compelling means to address climate change's threatening trajectory, particularly in Southeast Asia, and a collective effort across public and private players is key to bringing this to fruition. With the science, investors and other building blocks of this ecosystem falling into place, we are now reaching an inflection point where -- with the inclusion of the private sector's investment, innovation, and expertise -- we can greatly catalyse growth and drive change. More than ever before, the private sector needs to consider the interests of the communities they serve, rather than focusing primarily on shareholders. Not only is this the right thing to do, it also leaves the businesses well-positioned to mitigate potential risks and capture opportunities in this new frontier. At DBS, we're committed to supporting the development of industry collaborations and frameworks that will help pave the way for a more resilient and sustainable future."

The full report is available at https://bit.ly/3lTaBuz

About Conservation International

Conservation International works to protect the critical benefits that nature provides to people. Through science, partnerships and fieldwork, Conservation International is driving innovation and investments in nature-based solutions to the climate crisis, supporting protections for critical habitats, and fostering economic development that is grounded in the conservation of nature. Conservation International works in 30 countries around the world, empowering societies at all levels to create a cleaner, healthier and more sustainable planet. Follow Conservation International's work on Conservation News, Facebook, Twitter, Instagram and YouTube. 

About National University of Singapore (NUS)

The National University of Singapore (NUS) is Singapore's flagship university, which offers a global approach to education, research and entrepreneurship, with a focus on Asian perspectives and expertise. We have 17 faculties across three campuses in Singapore, with more than 40,000 students from 100 countries enriching our vibrant and diverse campus community. We have also established our NUS Overseas Colleges programme in more than 15 cities around the world.

Our multidisciplinary and real-world approach to education, research and entrepreneurship enables us to work closely with industry, governments and academia to address crucial and complex issues relevant to Asia and the world. Researchers in our faculties, 31 university-level research institutes, research centres of excellence and corporate labs focus on themes that include energy; environmental and urban sustainability; treatment and prevention of diseases; active ageing; advanced materials; risk management and resilience of financial systems; Asian studies; and Smart Nation capabilities such as artificial intelligence, data science, operations research and cybersecurity. For more information, please visit www.nus.edu.sg.

About DBS Bank

DBS is a leading financial services group in Asia with a presence in 18 markets. Headquartered and listed in Singapore, DBS is in the three key Asian axes of growth: Greater China, Southeast Asia and South Asia. The bank's "AA-" and "Aa1" credit ratings are among the highest in the world. Recognised for its global leadership, DBS has been named "World's Best Bank" by Euromoney, "Global Bank of the Year" by The Banker and "Best Bank in the World" by Global Finance.

DBS provides a full range of services in consumer, SME and corporate banking. As a bank born and bred in Asia, DBS understands the intricacies of doing business in the region's most dynamic markets. DBS is committed to building lasting relationships with customers, and positively impacting communities through supporting social enterprises, as it banks the Asian way. It has also established a SGD 50 million foundation to strengthen its corporate social responsibility efforts in Singapore and across Asia. For more information, please visit www.dbs.com

About Temasek

Temasek is an investment company with a net portfolio value of S$306 billion as at 31 March 2020. Our three roles as an Investor, Institution and Steward, as defined in our Temasek Charter, shape our ethos to do well, do right and do good. At Temasek, sustainability is at the core of everything we do. We actively seek sustainable solutions to address present and future challenges, as we capture investment and other opportunities that help to bring about a better, smarter and more sustainable world. For more information, please visit www.temasek.com.sg.