The Growing Business Case in India for Natural Climate Solutions
Ms Seema Arora
Deputy Director-General,
Confederation of
Indian Industry
Mr Swapan Mehra
Chief Executive Officer,
Iora Ecological Solutions
Pvt Ltd
An increasing number of Indian companies are recognizing the business case for Natural Climate Solutions (NCS) investments, with around 70% integrating NCS into their corporate commitments, shares Seema Arora and Swapan Mehra.
A new study conducted by the World Economic Forum in partnership with the Confederation of Indian Industry and IORA Ecological Solutions finds that an increasing number of Indian companies recognize the business case for natural climate solutions (NCS) investments. Yet clear regulatory frameworks, incentives and avenues for public-private partnerships are needed to translate this growing interest into increased private sector funding for nature.
We surveyed a sample of the country’s largest companies and found a strong commitment to sustainability: 89 per cent of respondents have a sustainability strategy and nearly half have a net-zero strategy. About 70 per cent have integrated NCS into their corporate commitments. These include investments in afforestation, reforestation, ecosystem restoration covering forests, grasslands, wetlands and mangroves, as well as agricultural land management.
When asked about the business case, companies expressed particular interest in the role of NCS in carbon sequestration to contribute to corporate net-zero goals, improve brand reputation, and increase business resilience.
This rising level of corporate interest holds promise at a time when 44 trillion USD of the global economy is at high or moderate risk from nature loss. Natural Climate Solutions (NCS) represent a key strategy to address the dual crises of climate change and biodiversity loss and strengthen the resilience of the world’s socio-economic systems. NCS encompass a range of actions aimed at safeguarding, conserving, restoring, and sustainably managing terrestrial, freshwater, coastal, and marine ecosystems while providing livelihood benefits. NCS could deliver up to one-third of net emission reductions required by 2030.
The stakes are high in a country where climate-related risks could cost the nation 3 per cent of its GDP annually, and an estimated 30 per cent of the land is degraded with significant consequences for agri-rural livelihoods. Commitments made under India’s NDC to the Paris Agreement as well as the UNCCD include creating an additional sink of 2.5 to 3 billion tonnes of CO2e through additional forest and tree cover and restoring 26 million hectares of degraded land by 2030.
Closing the NCS Funding Gap
Private sector investment is acutely needed. Today, as is the case globally, current investments in NCS in India are largely public sector driven and fall short of what is required. The total funding gap is substantial, with an estimated USD 161.9 billion required by 2030, in the forestry sector alone.
Yet our survey showed that significant barriers need to be overcome to unlock the full potential of corporate investment in NCS. Most companies (62 per cent) reported that their investments currently come from Corporate Social Responsibility (CSR) budgets and the majority are quite small (under USD 1 million). A further 35 per cent of corporates surveyed indicated that they invest in NCS to meet national or global mandatory regulatory requirements. This suggests that while companies recognise the potential business case linked to their core sustainability strategies and business resilience, this has yet to translate into investment decisions.
Four areas emerged that represent barriers to investment, but that respondents cited as factors that would influence their decisions to scale their NCS investments:
Clarity on Regulatory Frameworks:
Clarity on regulatory frameworks that enable NCS investments, including the green credit program, as well as the compliance and voluntary carbon markets, where companies need more information regarding the issuance, ownership, and international transfer of carbon credits.
Land Ownership Complexities:
Procedural support in navigating the complexities of land ownership and opportunities for trusted and functional multi-stakeholder partnerships including with state governments is needed.
High-Quality NCS Projects:
The availability of high-quality projects with clear environmental and social outcomes with strong monitoring, reporting, and verification (MRV) frameworks is crucial.
Sector-specific business case:
A stronger business case adapted to each industry sector that would help address concerns about uncertain returns on investment, high upfront costs, and a lack of alignment between the horizon of NCS projects and short-term financial priorities.
The Path Forward: Clear Policies and Public-Private Partnerships
At a time when India is developing new instruments, such as the regulatory carbon market and the Green Credits Initiative launched at COP 28, there is a huge opportunity for standardized protocols, policy clarity and avenues for public-private partnerships to enhance the effectiveness of NCS and incentivize further nature-positive corporate investments.
In summary, as an increasing number of businesses embed nature in their climate and sustainability strategies in India, the drivers of Natural Climate Solutions (NCS) investments are shifting. Consequently, there is a growing appetite among businesses to better understand how NCS credits can contribute to net-zero goals. However, to seize the opportunities presented by NCS and private sector investment requires clear frameworks, guidelines and incentives.
This article first appeared on the World Economic Forum website on 10 January 2024 as part of the World Economic Forum Annual Meeting. The findings intend to offer a better understanding of the current regulatory and investment landscape in India, highlight key opportunities and barriers for NCS investments, and put forward recommendations as an input to public-private dialogue.
