From Co-Benefits to Core Benefits: Reframing the Real Value of Carbon Farming
By Nerida Bradley, Chief Operating Officer
This week, the UN-backed ‘Race to Zero’ had its first anniversary. In marking it, the campaign estimated that net-zero pledges now cover more than 70% of the world’s economy via commitments of many thousands of businesses as well as national and sub-national governments. On the day, Patricia Espinosa, Executive Secretary of the UNFCCC, pointed to COP26 as requiring the globe to “lay the ground for a decade of transformational climate action.” She said, “What the Race to Zero has shown – in just one year – is that there is unprecedented momentum among non-state actors to achieve that goal and deliver the promise of the Paris Agreement as rapidly as possible.”
The megatrend is palpable with the scale and pace of commitments establishing a new normal for businesses and finance. Markets are growing to meet demand and, as choice of producers grows, buyers are looking beyond credits that deliver ‘just’ 1 tonne of CO2 and seeking out credits that deliver more environmental and social “bang for buck”.
In Australia, the idea that additional benefits are generated by ACCU production has gained currency in the idea of ‘co-benefits.’ This is shorthand for any number of community, economic, cultural or environmental by-products of carbon farming activities and credit generation. It is a loose term that fails to capture the endless possibility and opportunity for producers, communities and the environment. Rapidly escalating buyer sophistication brings real opportunity to reframe “co-benefits” into “core benefits” using metrics and standards to capture and verify value, and drive investment into environmental, community and cultural outcomes.
Net zero commitments are not the only push factor– demand for supply chain transparency and delivery of ESG targets are two other forces at play. Measurement and verification of environmental, community and cultural outcomes are equally relevant to those drivers too. In short, regardless of the drivers, buyers want to be proud of their investment portfolio including the credits they buy. Right now, these are generally limited to carbon, but over time will expand to cover other credits, as shown by the demand for Reef Credits. Regardless of what the market demands, credits need to stand up to scrutiny – scrutiny from informed shareholders and diligent financiers, but also increasing scrutiny from customers and employees who want to be proud of what they buy and who they work for.
The ‘co-benefits’ opportunity is underpinned by urgency, with the World Economic Forum’s 2020 Global Risks Report ranking biodiversity loss and ecosystem collapse in the top 5 risks over the next 10 years. The Report estimates more than 50% of global economic output – ~US$44tn of economic value generation – is moderately or highly dependent on nature. Launched recently, the Taskforce on Nature-related Financial Disclosures has brought together 74 financial institutions, regulators, corporates, and other influential actors with assets totalling more than US$8.5 trillion, to provide a framework for reporting and action on nature-related risks. Building on the work of the TCFDs, the TNFD aims to drive a “shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.” Looking at the ‘co-benefits’ of carbon farming projects through the lens of ‘nature-negative’ or ‘nature-positive’ outcomes makes the evolution into core benefits a no-brainer.
Mobilising large scale private investment into on-ground projects has been a perennial challenge, but now the market is demanding ways to invest. It is the market that wants more information about provenance of credits, more transparency around costs and benefits of production, and increasing metrics, measures and verification of the outcomes against targets.
Internationally momentum can be seen in growing voluntary market demand for high quality credits complemented by inter alia community development and biodiversity, supported by accounting and verification frameworks. Locally, we have seen the development of the Accounting for Nature framework which provides a transparent, verifiable, and certifiable environmental accounting framework, built to inform and enable better investment, policy, and land management decisions. The AfN framework is being used by the Queensland Government to drive investment into its key priority areas in the same way that a private investor can use the framework to inform investment decisions and meet the needs of their shareholders or customers.
What does this all mean on the ground for land managers? Does this actually make a difference to projects and communities on the ground? Perhaps. For now, it is being seen irregularly in Australia where the market has grown up on government demand focused singularly on emissions reduction. But whether land managers are already working on carbon farming or thinking about bringing environmental products into their production model, these new global drivers present the opportunity for every project to differentiate on quality and being able to compete on quality requires strong scientific rigour and verification.
Across the board, our farming and land management partners report improvements in soil health, more wildlife, and better water quality. We know that the projects are beneficial for land regeneration by reducing erosion, building drought resistance and supporting vegetation structure. The projects bring both environmental and financial resilience to participating farms. Increasingly we are looking to maximise the social and cultural benefits of our projects through jobs, training and income to remote and regional communities.
But to truly realise the full potential benefit of each and every carbon farming project and at scale, case by case improvement is not enough. So we are working with our farming partners, verification and standards bodies like Accounting for Nature and Verra, as well as our own in-house team of scientists to build data, metrics and measurements that allow us to report on, account for and ultimately verify the other benefits we know our carbon projects are delivering.
Put simply, now is the time to tap into financial flows and unlock private investment that wants to be part of delivering large scale, measurable improvements in environmental, economic, community and cultural health. Converting this opportunity requires metrics and verification frameworks that give investors the tools they need to comprehensively evaluate and prove-up returns. This is how we reframe co-benefits from the fortunate “bycatch” of ACCU production into the core value driver for of each and every carbon project.