ERM offers new guidelines for investing in Nature Climate Solutions for VCM
The ERM Sustainability Institute launched a new guide to help corporate investors and financial institutions understand how and why to invest in high-integrity Natural Climate Solutions (NCS).
ERM published the guidelines in collaboration with the Natural Climate Solutions Alliance (NCSA), Forest Investor Club (FIC), and the World Business Council for Sustainable Development (WBCSD).
It outlines the business case for investing in NCS and provides a framework for investors to evaluate, integrate, and execute NCS projects.
It aims to enhance the role of nature-based solutions in reducing and removing greenhouse gas emissions, increasing carbon sequestration, and delivering biodiversity and social benefits.
Read more: Investment manager steps into nature-based carbon credit market
The report identifies six key stages of the NCS investment process-
- Build a business case
- Identify the investment type finance structure and map stakeholders
- Conduct due diligence
- Determine a fair revenue share sharing agreement
- Integrate legal considerations
- Implement a system for measuring, reporting, and verifying data
Tom Reichert, CEO of ERM, said, “NCS projects are complex and require highly technical due diligence. But if they are well-designed and managed, NCS can be a very valuable addition to a natural capital investment strategy.”
Read more: Barclays says more money needs to go towards transition finance
The report suggests that investors considering funding carbon-credit-generating NCS projects should strictly select high-integrity projects.
Key insights from the report-
- NCS projects can be complex. Investors must plan accordingly
- Match investment plan with risk profile and preferences
- Conduct thorough and context-specific due diligence
- Recognize and support the rights of Indigenous people and local communities is a must
- Sharing revenue with local communities is vital
- High-quality monitoring is crucial in high-integrity NCS projects
It suggests governments to further contribute towards the growth of NCS by enacting regulations and policies to encourage investments in their jurisdictions.
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