Sustainable land use in forestry and agriculture is critical to prosperous rural economies, inclusive development and dealing with climate change. But more than that, it is t is an enormous investment and growth opportunity for the private sector.
The importance of forests and agriculture to achieve the 2°C target of the Paris Agreement is undisputed. The consensus among scientists is that emissions reductions in agriculture, forestry, and other land use are “extremely important” to achieve global climate targets. From an economic point of view, forests and sustainable agriculture are often impressively cost-effective at-scale solutions to reduce emissions in the short term and getting to net-zero in the long term.What is more, new research by Chatham House suggests that agriculture and forestry may face an increasing risk of stranding assets– not only because of geo-physical impacts (droughts and desertification), but also because of regulatory and technology change.
Meanwhile, new analysis we commissioned with the economics advisory company Alphabeta suggests that realizing sustainable land use represents an annual investment opportunity of up to USD 160bn p.a., with return rates of over 10% attached to the majority of those investments. To put this in context: USD 160bn per year is roughly 60% to what is currently going into renewable energy. Seen in the context of a persistently challenging global investment environment, this can become an attractive alternative investment window for value and impact investors alike.
However, the amount of private sector investment which is currently directed towards key enablers of sustainable land use is quite limited. The key question therefore is: what are the ingredients for this emerging investment opportunity to materialize at scale?