Unlocking nature’s potential:  the future of carbon removal investments

Though never a substitute for decarbonisation, carbon removal solutions could help investors achieve net-zero targets. Among these solutions are nature-based projects, which potentially offer a cost-effective and scalable method of removing carbon from the atmosphere.

Aviva Investors believes there is an opportunity for investors to develop a tangible path to net-zero emissions through access to impactful carbon removal credits. Direct investments into nature-based solutions projects that aim to enhance biodiversity and deliver social outcomes – alongside carbon sequestration – also have the potential to provide attractive returns while addressing key sustainability issues.

In recent years, companies have set out voluntary net‑zero emissions commitments, while countries have outlined their Nationally Determined Contributions to emissions reductions under the Paris Agreement on Climate Change.

As work behind these initiatives continues, opportunities are emerging for investors to potentially benefit from carbon removals whilst partaking in measurable biodiversity and social value creation, delivered through the restoration of nature at scale. A variety of projects across the carbon dioxide removal spectrum – both nature-based and engineered (such as through carbon-capture technology) – are being explored, with the aim of generating high-integrity carbon credits and providing alternative green and low-carbon investments beyond renewables.

Returns on these projects can potentially be generated in two ways: a) through traditional real assets revenue streams, such as land value appreciation and land-based commodities, such as timber; and b) through nature and carbon market revenues. Land is a finite resource, so moving early into nature-based carbon removal solutions can provide investors with access to nature restoration opportunities at scale, opening the door to new net-zero emissions aligned asset classes and the potential to hedge future carbon price movements.

Investors may want to demonstrate their impact through these investments, via objectives such as biodiversity enhancement, species protection and reintroduction, improved waterway quality, employment or public access. It is therefore vital that the investment partner embeds impact into their processes through design, prioritisation and measurement. Selecting the right partner to unlock these opportunities is vital.

The climate and biodiversity crises are global challenges. There is a growing climate adaptation gap, meaning that the most highly impacted countries, many of which are not responsible for significant emissions, struggle to attract financing. We believe, therefore, that it is important for us to support clients and projects in not only developed but also emerging markets.

We look forward to continuing to find and harness the opportunities of nature as an asset class. Managed well, these projects have the potential to support local economies and communities, as well as contribute to investment objectives and sustainability goals.

Discuss this in person? Joachim will speak at our Nature Positive Investment Forum