2021 Top 10 in Natural Climate Solutions
2021 was a year of great momentum for climate at large, and for natural climate solutions. Even as the impacts of climate change on our natural systems felt closer to home than ever - from heat waves, to hurricanes, to fires, to flooding - we made collective progress on solutions harnessing nature’s carbon sequestration potential and co-benefits to create a more livable planet.
Yet it’s still only the very beginning of a critical decade for reversing climate change.
Looking back at the year, here are our top 10 highlights:
1. Nature is front and center at COP26
Natural climate solutions made headlines at COP26, the largest UN climate change conference since Paris, which was held in Glasgow in November. Among a wide range of forest-related pledges were the Glasgow Leaders’ Declaration on Forests and Land Use (to collectively to halt and reverse forest loss and land degradation by 2030), the Global Forest Finance Pledge (US$12 billion commitment for forest-related climate finance to foreign aid-eligible forest countries), and the Congo Basin Joint Donor Statement (US$1.5 billion pledge to protect and maintain the Congo Basin forests, peatlands and other critical global carbon stores, made by 11 governments plus the Bezos Earth Fund).
2. LEAF Coalition and other major corporate commitments towards natural climate solutions (NCS) grow
Companies revved up their commitments to nature-based solutions, including Netflix’s Nature and Net Zero work, Amazon’s investment in an agroforestry and restoration accelerator in Brazil, and perhaps most notably the formation of the LEAF Coalition. This group of high-profile corporations including McKinsey, Amazon, Delta, Bayer, Salesforce, and Unilever committed to mobilizing $1B in public and private dollars to tropical and subtropical forest countries to end deforestation, with a focus on jurisdictional carbon finance. We’ll be watching for how these companies turn commitments into meaningful action and impact.
3. US government incorporates NCS into meaningful legislation
Corporates weren’t the only sector to mobilize for nature. The US infrastructure bill signed into law on November 15th included $8.6 billion for forests. The bill includes funding for post-wildfire restoration and recovery, dollars to reforest abandoned mineland, investment in urban forests and tree planting, and money for climate adaptation through natural infrastructure.
4. Biodiversity and climate conversations inch closer to alignment
Biodiversity, the other existential crisis, has also had a big year, with clear calls from scientists to tackle the interconnected challenges of climate change and biodiversity loss together. The Dasgupta Review on the economics of biodiversity was followed by a record $5b pledge by foundations, and the first part of the COP15 UN Conference on Biodiversity which will establish new goals for nature through 2030.
5. A banner year for NCS venture investment
Private investment in natural climate solutions is rapidly accelerating, and is estimated to have more than doubled in the last two years. The natural climate solution ecosystem is seeing more rounds, larger rounds, and a growing pipeline of companies graduating from seed to early and late venture. Deal activity is growing in every corner of NCS - sustainable forestry and forest carbon (NCX, Pachama, Earthshot Labs), reforestation (Terraformation, Droneseed), regenerative agriculture and soil health (Pattern Ag, Soil Carbon Co., Planet FWD, Nori), and carbon offset ratings and transparency (Sylvera).
6. Institutional capital is beginning to flow towards NCS
Asset owners and asset managers increasingly recognize NCS as an important asset class, and are establishing dedicated vehicles to tap into the space. Numerous players established NCS-dedicated funds, including HSBC and Pollination’s Climate Asset Management, Apple and Conservation International’s Restore Fund, and dedicated strategies from Mirova and Lombard Odier. Generalist climate tech investors such as Breakthrough and Breakthrough Energy Ventures continue to make bets on NCS, and mainstream investors like USV develop climate strategies.
7. Soaring demand for carbon credits signals only beginning of massive growth in the market
The voluntary carbon market exploded this year, growing to $1B for the first time ever. Momentum towards removals versus avoided emissions also built as companies like Microsoft and standards such as SBTi promoted removals over avoidance. Debate still exists whether a focus on removals is premature given the urgent need to reduce emissions and stop putting carbon into the atmosphere from activities such as deforestation. Supply also grew, reflective of the increasing amount of capital and project developers pouring into the space.
8. Increased scrutiny around quality of offsets
Numerous efforts - most notably the Taskforce for Scaling Voluntary Carbon Markets and the Voluntary Carbon Markets Integrity Initiative - have sprung up to address the issue of quality in voluntary carbon markets, with particular attention towards nature-based solutions as a readily available, scalable, and cost-effective form of carbon sequestration. While nature-based solutions received criticism in 2021 from the likes of Bloomberg, ProPublica, and the Guardian, we also know that nature is a critical part of the climate solution. In 2022, we’re hoping to move beyond the general agreement that quality issues must be addressed, to the “how”: emerging consensus and guidance for what “good” actually looks like in practice, as well as greater transparency around these measures.
9. Momentum behind cutting-edge frameworks like the Taskforce for Nature-related Financial Disclosures
The Taskforce for Nature-related Financial Disclosures began taking shape, and kicked off its five phases of work to develop an integrated disclosure framework to promote global consistency around nature-related reporting among corporations, governments, and financial institutions. The TNFD follows in the footsteps of the TCFD (Taskforce for Climate-Related Financial Disclosures), which has over the last half decade crystallized a reporting framework for climate risk that is beginning to be mandated by the regulators in the UK, the EU and potentially the US.
10. Carbon meets crypto
2021 was the year of Web3, and climate was no exception, as evidenced by a rapidly expanding list of climate x crypto projects. The growing ReFi (regenerative finance) community is seeking to create real impact in the real world, with voluntary carbon markets emerging as one target for disruption. Toucan, a Swiss nonprofit, created the Base Carbon Tonne (BCT) token to bring carbon credits on-chain and into cryptocurrency exchanges. Launched in October, Klima DAO already has more than 14M tonnes of carbon in its treasury and is pushing prices up in voluntary carbon markets. We’re also hyped for a new generation of NFT projects like Regenerative Resources’s 100,000,000 Mangroves.
What would you add to this list, and what are you hoping to see on the Top 10 for 2022? Leave a comment, drop a note at solvingclimatenaturally@gmail.com, or Tweet us at @SCNpod!
Naturally,
Ida, Julia, and Kate