Why firms most impacted by the climate crisis are looking more strategically at nature-based solutions
When Hurricane Irma ploughed into the Florida Keys in 2017 as a category 4 storm, the southern part of the state’s coastal mangrove forests provided some crucial protection against the worst of the storm surge.
According to one study, mangroves averted as much as $1.5 billion in surge-related damage to properties, offering varying levels of protection to over 626,000 people[i].
For millennia, natural ecosystems - including coastal wetlands and mangroves - have offered protection against extreme weather, absorbed and stored carbon and provided other crucial ecosystem services, including providing nurseries for fish and filtering clean water.
One of the discussion items at COP26 is how we can better protect natural habitats using nature-based solutions (NbS) and mobilise finance into this space. With the impacts of climate change and biodiversity loss already being felt, we need to collaborate to come up with new and effective ways of managing these exposures.
While NbS are front of mind for policymakers, how they fit in to broader corporate ESG frameworks are still a work in progress for organisations in many industry sectors.
Those most impacted by the climate crisis and resource scarcity - including utility and energy companies - are beginning to look more strategically at NbS however and there are some real opportunities.
Working with nature
Beyond reforestation to offset carbon emissions, there are other compelling initiatives underway. These include schemes to protect natural watersheds, to use plants to count air pollution and remove commodity-driven deforestation from the supply chain.
In part, the challenge is to integrate understanding of the power of NbS more effectively at every level, including tertiary education, urban planning and risk engineering.
Insurance companies have a vital role in supporting their clients as they embark on their climate transition journeys and consider ways in which nature-based solutions could mitigate their own risks, while building greater resilience for all stakeholders.
As part of our Ocean Risk Initiative at AXA XL we are developing insurance and finance products that incorporate NbS.
We know, for instance, that mangrove swamps provide $65 billion of flood protection every year[ii], but also that these forests are in decline and that these vital ecosystems have not been valued enough by decision makers. To change this we need to provide a dollar value that can be integrated into broader financial plans and policies.
As such, we’re looking to launch a Coastal Risk Index at COP26 in Glasgow, which will value the benefits that coastal ecosystems provide to communities, particularly focusing on the role that mangroves and coral reefs play in reducing flood hazard in coastal communities.
This will be especially important for insurers to price risk more accurately, investors to map future liabilities and local and regional administrations to integrate coastal ecosystems into risk management planning.
By doing so, it will catalyse the protection and sustainable management of these ecosystems with many long-term benefits for communities, their economies and local biodiversity.
The time to act is now. By 2050, 800 million people will be at risk of storm surge, with growing weather extremes, changing socioeconomics/coastal development and sea level rise driving the growth in exposure. It is not difficult to see how these impacts will affect all of us, causing property damage, business interruption and disruption to global supply chains.
As we look ahead to COP26, the value of nature-based solutions (NbS) is rising up the agenda because, in simple terms, the traditional ways of mitigating and adapting to the impact of climate change are among the most effective.
Preserving and restoring ecosystems and working in tandem with our natural world offers vital protections for society and business, ensuring greater resilience and sustainability as we transition to zero carbon economies.
Chip Cunliffe is biodiversity director at AXA XL.
[ii] Menéndez, P., Losada, I. J., S. Torres-Ortega, S. Narayan, M. W. Beck. 2020. Global flood protection benefits of mangroves. Scientific Reports 10:4404.