Environmental Finance

World - How can we finance climate adaptation? Nature-based solutions to the Americas' climate change risks

The concepts of 'natural capital' and 'nature-based solutions' are gaining attention in the global capital markets, as public and private sector issuers consider ways to finance projects to enhance their physical asset resiliency to climate change or support reforestation and native species regeneration.

While these forms of sustainable debt are well suited to financing diverse adaptation and resiliency activities, the volume of issuances to date is still low, when considering that just five per cent of the proceeds from green, social or sustainability bond issuances in 2020 went to sustainable land use projects, compared to 85 per cent directed to the categories of energy use/efficiency, green buildings and clean transport1.

Melissa Menzies and the team at Scotiabank's Sustainable Finance group are actively introducing clients across the Americas to the potential of these climate adaptation and nature-based financial instruments, to tackle pressing environmental challenges, from destructive flooding in central Canada to deforestation in Chile and Brazil.

Nature-based solutions are earning profile in the Americas, following early moves by European policy-makers and business leaders, notes Melissa Menzies, Associate Director, Sustainable Finance at Scotiabank: "There is growing recognition by corporations and governments around the role of nature-based solutions in creating climate resilience and sustainable infrastructure, and preserving the planet's biodiversity."

She also points out that, "The market for green financing for resilience and adaptation programs is still maturing, as organizations build an understanding of the opportunities, and begin to align their capital-raising programs with their ESG priorities." Although global green bond issues reached $1 trillion by 2020, just five per cent of all green bonds issued in the past decade were categorized as 'adaptation,' with their proceeds allocated to adaptation and resilience projects2.

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