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    The top five reasons why we need to invest in our forests now

    rethink sustainability

    The top five reasons why we need to invest in our forests now

    It is easy to lose track of how important the forests around us are to our everyday lives and the economy. In a very minor way, doodling in a notebook or adding an extension on to your home – even drinking a glass of water – all depend on them. In the larger picture, they are vital to combatting climate change and the decreasing wealth of biodiversity around the world.

    But the forests, which make up almost a third of land, are under serious and sustained threat. The Amazon is under increasing pressure as destruction and global heating risk a tipping point after which damage will be unrepairable1. Around the world, the rate of deforestation is continuing at an alarming rate. It is estimated that 420 million hectares have been lost in the last 30 years2, mostly because of agricultural expansion.

    But there is hope. At the COP26 climate summit last November, more than 100 world leaders committed to ending and reversing deforestation by 2030 – pledging $19.2bn of public and private funds to achieve the goal by restoring damaged land, tackling wildfires and helping local communities.3

    …forests, which make up almost a third of land, are under serious and sustained threat…Around the world, the rate of deforestation is continuing at an alarming rate

    Now, as we celebrate International Day of Forests, it is time to look at the reasons why we must invest in our forests – now.

     

    1. They are natural carbon sinks

    The last two decades have highlighted how important forests are in the battle against climate change. In a study between 2001 and 20194 it was found that forests sequestered twice as much carbon dioxide as they emitted. In effect, forests act as a two-way road for carbon, absorbing it when growing or standing and then releasing it when cleared. In total, 23% of global GHG emissions come from human use of land.

    As natural carbon sinks, they are reservoirs that accumulate carbon and thus lower the concentration from the atmosphere. As a result, they act as a vital part in the carbon balancing process and one which is either unknown or taken for granted by many. Its conservation and restoration could provide 16-23% of the climate mitigation needed to limit global warming to 1.5 to 2 degrees.

    Read also: Trigger warning: five ways to buy time for net zero and prepare for net negative

    Forest ecosystems harbour some 80% of land-based biodiversity, from plants to bacteria, which all depend on one another for life

    2. They keep biodiversity safe

    Forests are critical components in maintaining the world's biodiversity but the ongoing threat of degradation and deforestation contributes to the continued loss of this vital natural resource, typically down to large-scale commercial agriculture. All of us benefit from the biodiversity in the forests – from those who live in close proximity and rely on it for their jobs (such as tourism) or the majority who benefit from the effects on the carbon, water and nutrient cycles.

    Forest ecosystems harbour some 80% of land-based biodiversity, from plants to bacteria, which all depend on one another for life.5

    The loss of forests creates a long line of after-effects which are severely detrimental to the planet – amongst them, the disappearance of species which would create a natural imbalance that affects the ecosystem. When the level of forest cover changes, from either reforestation or deforestation, surface temperature changes.

    Companies also face risks due to the predicted physical effects of climate change, including more extreme droughts, flooding and fires that may decrease yields and affect input costs and volumes. Deforestation exacerbates the physical risk from climate change by changing local precipitation patterns in ways that make agricultural production less resilient to these predicted changes, as we're already seeing in Brazil. In some parts of the Amazon,6 rainy seasons are being delayed two weeks due to deforestation.

    Beyond the clear environmental argument for the protection of forests is the economic one – more than 50% of global GDP depends on nature

    A number of methods have been used in the past in order to conserve biodiversity, the most often adopted being to create protected areas. Some 18% of the world's forests fall under legally protected areas such as national parks and game reserves. Beyond the clear environmental argument for the protection of forests is the economic one – more than 50% of global GDP depends on nature.

    Read also: Ants: the hidden multi-trillion-member workforce that support multi-trillion dollar industries

     

    3. Forests keep water pure

    A healthy forest leads to a clean water supply and can save us money.7 This first happens by forests acting as an effective filter to keep pollution from the water, preventing sediment from flowing into the streams. They also regulate precipitation and evaporation and control rainfall.

    In total, it is estimated that 75% of the fresh water available for human use comes from the forest.8

    The effectiveness of forests in treating water saves on the costs of expensive filtration systems – best illustrated by a project in New York City where $1.5bn was spent to protect one million acres of forest, thus saving on the construction of a plant which would have cost up to $8bn.9

    …it is estimated that 75% of the fresh water available for human use comes from the forest

    4. Vast amounts of economic and health benefits emerge from them

    On a simple, personal level, a walk through a forest is enough to restore a sense of calm. But on a much broader scale, the vast wooded areas provide vital economic, food and medical resources. It was estimated in a 2007 report that nature-based tourism makes up 7%10 of the total international market with conservation and the protection of the natural environment high on the priority list of travellers.

    Many of the medicines that we use to treat illnesses also have their origin in the forests. From rainforest plants alone,11 some 120 prescription medications that are sold today originate there, coming from just a tiny fraction of the plants that are available. However the threat of deforestation threatens this vital resource. Of the 50,000 known medicinal plants,12 which are the basis for 50% of all of medications, one in five are at risk due to deforestation.

    They also have a natural protective function – which saves money. Mangrove forests currently reduce annual expected flood damages from tropical cyclones by $US60 billion and protect 14 million people.

    Read also: Fashion’s future is in the forest

    The ability of trees to help the environment around them is in direct contrast to the intensive farming which results from deforestation, which is harmful to the soil and helps in its degradation

    5. They act as a natural fertilizer for the environment around them

    Trees are used as effectively a natural fertilizer in order to improve the condition of soils which are used for farming.13 After capturing nitrogen from the air they transfer it to the soil through their roots and by dropping leaves while they can also bring up nutrients from deep in the soil for crops. An African tree, the Faidherbia albida, has been credited with improving the crops planted under it by dropping its leaves in the rainy season, when the crops start to grow. The ability of trees to help the environment around them is in direct contrast to the intensive farming which results from deforestation, which is harmful to the soil and helps in its degradation.

    Read also: Reforesting the planet using seed-spitting drones from the air

    Reforestation, land and soil management, biodiversity restoration and the right bioenergy systems all help to reduce CO2 emissions and sequester CO2 from the atmosphere.

     

    Investor considerations

    Our potential scope for progress depends on Nature's resources – geology, soil, air and water. In forests, we have the ecosystems which harbour all four. As a central part of our natural capital, it is more important than ever for our economy and society that these are allowed to prosper.

    Reforestation, land and soil management, biodiversity restoration and the right bioenergy systems all help to reduce CO2 emissions and sequester CO2 from the atmosphere.

    At Lombard Odier we aim to help our clients invest in our Natural Capital because, as we transition to a CLIC™ economy underpinned by our Natural Capital, the evidence base points to these investments representing some of the greatest opportunities of our time.

     

    1 https://www.theguardian.com/environment/2022/mar/07/climate-crisis-amazon-rainforest-tipping-point?CMP=Share_iOSApp_Other
    2 https://www.fao.org/state-of-forests/en/
    3 https://www.bbc.co.uk/news/science-environment-59088498
    4 https://www.nature.com/articles/s41558-020-00976-6
    5 https://www.reforestaction.com/sites/default/files/en_brochure_sensibilisation_reforestaction.pdf
    6 https://www.ceres.org/resources/reports/investor-guide-deforestation-and-climate-change)
    7 https://www.wri.org/insights/3-surprising-ways-water-depends-healthy-forests
    8 https://www.reforestaction.com/sites/default/files/en_brochure_sensibilisation_reforestaction.pdf
    9 https://wriorg.s3.amazonaws.com/s3fs-public/wri13_report_4c_naturalinfrastructure_v2.pdf
    10 https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwi4_uWRsrv2AhXITsAKHcWoDhQQFnoECAUQAQ&url=https://www.iufro.org/download/file/27078/6521/anniversary-congress-spotlight48-sustainable-tourism-d6_pdf/&usg=AOvVaw0ApYpiBTdqV8zULbBxeH1h
    11 https://www.thoughtco.com/tropical-rainforests-natures-medicine-cabinet-1204030
    12 https://www.worldbank.org/en/news/feature/2015/01/13/la-deforestacion-un-dolor-de-cabeza-para-la-medicina-natural
    13 https://en.wikipedia.org/wiki/Fertilizer_tree

    Important information

    This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

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