Look differently to find Good Returns from Nature Based Solutions in Southeast Asia

What are Nature Based Solutions for Climate Change

The concept of NbS is straightforward. Nature-based solutions (NbS) are initiatives or actions to protect, sustainably manage and restore natural and modified ecosystems, according to the IUCN.

Those ecosystems have a huge global impact. Nature underpins all economic activity, the World Economic Forum opined, and it’s worth an estimated US$125 trillion per year. The economic value of natural land-based assets in the Americas is more than US$24 trillion per year, for instance, and the Great Barrier Reef alone contributes US$5.7 billion a year in Australia.

Despite the high value, nature is threatened by human actions such as deforestation as well as by climate change that results in fires, floods and droughts. Investments in NbS offer ways to reduce the damage. Indeed, Morgan Stanley said discussions and action are underway for investments that should increase the abundance, diversity and resilience of species, populations and ecosystems.

Investing in NbS Seems Difficult

A key challenge with investments in NbS, the WWF observed, is that conservation projects appear unattractive due to limited availability of large-scale liquid investment opportunities, non-transparent risks, low returns and longer time horizons.

To overcome those hurdles, the WWF suggests a different approach. Instead of looking at all types of NbS, investors can focus on Bankable Nature Solutions (BNS) which create financially viable projects to support the development of more resilient, sustainable landscapes and economies. These investments can reduce pressure on ecosystems, drive resilience and sustainability for people and nature, and generate financial returns.

Investors in NbS also need to look at the returns differently. While many investors focus on carbon credits, Schroders Head of Natural Capital Andrew Dreaneen suggests that alternative revenue streams such as leasing land to renewable energy developers or for ecotourism can enhance returns.

The business case for NBS goes beyond returns, though, as investing in NbS can reduce corporate risk and improve supply chain resilience. Even though Natural Climate Solution (NCS) projects are competitive on cost and return on investment, Ecosperity said benefits such as coastal resilience, biodiversity conservation and flood prevention provide added advantages.

Researchers at the University of Oxford similarly found that businesses such as agriculture and forestry can be easier investment options since they have clear traditional revenue streams such as the sale of timber, crops, bed nights or recreation. Innovative NbS green infrastructure projects such as green buildings, green water management, natural hazard protection through restoration of mangroves and corals are also growing.

Fortunately, investors are beginning to understand. While Nature4Climate found that 80 percent of respondents in their survey are motivated to invest in NbS out of a moral duty to help protect nature, 36 percent said they invest because they obtain good returns and 40 percent want the first mover advantages from these investments.

Emerging Market Leaders and Start-ups have Key Roles to Play

The range of solutions is larger than it might appear at first glance. TraceX said NbS investments range from reforestation and wetland restoration to green infrastructure. Some sequester carbon or reducing the vulnerability of communities to climate-related events, while others support biodiversity by restoring habitats and promoting the recovery of endangered species. NbS can also provide ecosystem services such as water filtration, soil stabilisation or recreational opportunities.

Southeast Asia’s NbS could be worth US$20 billion in annual revenue by 2030, East Ventures estimates. If governments implement carbon taxes and trading, investment opportunities for investors and the startups that offer NbS will expand further. Precision agriculture and farmer service platforms are most attractive, it suggests, due to regulatory support and market adoption readiness. In Southeast Asia, Indvstrvs said, Indonesia has the largest potential for NbS, followed by Malaysia and Myanmar. The main NbS levers in these countries are around avoiding peatland, forest, and coastland conversion.

One example in Indonesia, Terranomics said, is Alam Bukit Tigapuluh. It manages an ecosystem restoration concession in a forest where the endangered Sumatran Tiger, Sumatran Elephant, Tapir and Sumatran Orangutan are found. It generates revenue from sustainable rubber and non-timber forest products such as coffee and honey.

In Malaysia, the Rajang-Belawai-Paloh Delta NbS Project in Sarawak aims to secure the long-term conservation of mangroves and Irrawaddy dolphins by co-designing and implementing sustainable economic activities such as sustainable shrimp production, ecotourism, or sustainable aquaculture.

GelamCure, based in Terengganu state in Malaysia, produces essential oils using leaves from native gelam trees which can be sold as cosmetic and aromatherapeutic products. Its business model highlights the economic benefits of conserving gelam forests while also creating sustainable livelihoods.

Indonesia-based Channa Lestari Senentang produces albumin, a health product from the native Snakehead fish. The business will support the conservation and restoration of five Indigenous and Community Conserved Areas to improve forest and lake ecosystems, which will promote healthy freshwater fish stocks and productivity for local communities.

And going further afield, Mongabay said the Land Restoration Fund in Queensland, Australia provides a return and also takes into account additional ecosystem services such as watershed benefits and koala habitat restoration.

To expand the scope of NbS even further, eight global environmental and conservation non-profit organizations launched the Southeast Asia Climate and Nature-based Solutions Coalition (SCeNe Coalition) during Ecosperity Week in Singapore in 2023. The Coalition aims to support investment in high-quality, triple-benefit NbS across the region and has identified seven pilot projects for support from its NbS Incubator, including projects in the Philippines, Indonesia, and Malaysia.

What’s Next

While NbS is indeed nascent and faces challenges, more start-ups are working on NbS than many investors might imagine. Looking carefully and going beyond obvious areas such carbon credits could deliver environmental sustainability with significant financial benefits.