How insurance innovation could unlock billions for nature-based climate solutions

With some 55% of the world’s GDP either moderately or heavily dependent on nature, according to PwC, much more finance needs to flow away from activities that harm nature towards activities that support it.

Indeed, the U.N. Environment Program estimates that annual investments in nature-based solutions (NbS) need to increase from $200 billion to $542 billion by 2030 to tackle the planet’s climate, biodiversity and land degradation crises. One important channel could be voluntary carbon markets, with the World Economic Forum saying it could be worth between $5 billion and $30 billion per year by 2030, with perhaps two thirds of this channelled into nature-based solutions. However, in the last three years, only 1.2% of the annual cost-effective potential of NbS has been unlocked by the voluntary carbon market, the WEF says.

A tree is measured at Mere Plantation’s teak forestry project in Ghana. Mere Plantations/Handout via REUTERS

One sector that could be key for expanding the voluntary carbon market and other forms of nature finance is the insurance industry, according to a recent report from insurer Howden and investment and advisory firm Pollination. ”The industry has a significant opportunity to scale and adapt existing products, as well as deliver new solutions, to drive a step-change in nature finance,” the report points out.