Nature-based Approaches to Decarbonization

October 13, 2021

In our 2020 report “The Largest Investment Opportunity of Our Era: Decarbonizing the Global Economy,” we made the case that investors who price in climate-related risk will be at an advantage relative to those who are too slow to act. The focus was largely on how the public and private sectors might reallocate capital to transitioning and new industries that will help humanity to bring about a cleaner and more equitable future. That is, however, only one side of the coin.

The earth has been endowed with carbon sinks—natural constructs that remove excess CO2 from the atmosphere. For the better part of the last two millennia,  our seas, forests and grasslands have proved to be a most remarkable climate-stabilizing tool. Now, these systems are being overwhelmed. Biodiversity is falling, the ocean is acidifying, and extreme weather is becoming the norm. The consequences are only getting worse.

Often, however, first-order solutions lead to second-order problems, and in our 2020 report we urged investors to support decarbonization solutions that ensure no one is left behind. Today, we would take that maxim a step further to say we should be cognizant of how our solutions affect people and the planet.

In this paper, we will explore several of Earth’s carbon sinks and how they work together to keep our planet’s natural systems in balance. We will also provide LPs with guidance on how to integrate nature-based sink exposure with their net-zero pledges and impact programs. Furthermore, we will explore how there is an opportunity for every GP to consider relevant sink issues within their ESG processes.

Compound Carbon Interest

Carbon dioxide, methane, fluorocarbons and other greenhouse gases (GHGs) survive in the atmosphere for years. Fluorocarbons, for example, are thousands of times more potent than CO2 and can remain in the atmosphere for up to 60,000 years .

Curiously, CO2, the most well-known GHG, is in some ways the least understood: Scientists are still unsure how long it can remain in the atmosphere. Current estimates suggest that half of every new ton of CO2 will be eliminated from the atmosphere within 30 years, and the next 30% will be removed within a few centuries. The remainder may stay in the atmosphere for thousands of years. In a sense, even if the world were to be net zero tomorrow, we wouldn’t even be close to touching the “carbon principle,” some of which we inherited centuries ago. As a result, the GHG  concentrations have been growing at a compounded rate since the Industrial Revolution.

If we are fortunate, we will be able to slow the pace of emissions growth enough to keep temperatures from rising 2°C. But we are not even close to reducing the concentration of atmospheric CO2 to its pre-2010 level. In our quest to measure emissions, we have gained a good understanding of whence those emissions came. That knowledge has, in turn, led us down our current decarbonization path—to replace those sources with new technologies. We’ve made remarkable progress on that front targeting the heaviest emitting sectors: In 2020, renewables accounted for 29% of all energy generated worldwide, according to the International Energy Agency. But in our zeal, we may have overlooked an equally important part of the equation: carbon sinks.