NCS for the Voluntary Carbon Market - An Investor Guide for Companies and Financial Institutions

Nature conservation and nature-based solutions are set to play a central role in the fight against climate change. However, a significant nature financing gap exists, particularly from private funding. Natural climate solutions (NCS), a subset of nature-based solutions, can help bridge this gap by providing investors with attractive returns and benefits while delivering positive climate, environmental, and social impacts.

Produced by ERM and its Sustainability Institute alongside WBCSD’s Natural Climate Solutions Alliance (NCSA) and Forest Investor Club (FIC), this guide provides insights to investors on how to identify and invest in high-integrity NCS projects – all for the ultimate purpose of increasing the flow of financial capital into these promising and high impact solutions.

The guide is intended both for financial institutions, such as impact investors or investment funds, and for companies, who are increasingly looking for ways to directly secure a supply of high-quality carbon credits. It highlights the questions that investors should ask, common challenges they may face, and examples of best practice across several stages of the NCS investment process including:

Building the business case for investment
Identifying investment types, structures, and associated stakeholders
Conducting effective due diligence
Determining a fair and equitable revenue sharing agreement
Integrating legal considerations
Implementing systems for measuring, reporting, and verifying data

This guidance comes at a pivotal time for NCS and the voluntary carbon market (VCM) on which carbon credits are sold. The VCM grew rapidly over the past few years until facing a market correction in 2023 as renewed scrutiny highlighted the challenges of carbon projects and their credits. However, improved market infrastructure and more rigorous carbon crediting standards are helping to bolster confidence in the VCM, opening the door for investors to participate in strengthening NCS as an asset class.

Actions to conserve and restore nature are essential to mitigating the impacts of climate change, biodiversity loss, and social inequalities. NCS projects can have real and measurable impact on these challenges, but they must be deployed globally at scale if they are to realize their full potential. New investments in high-integrity NCS projects will be critical to accelerate this growth and fill the nature financing gap.

To learn how your organization can invest in natural climate solutions, download the full NCS Investor Guide.

Looking for more support? ERM helps its clients to navigate the global carbon markets, develop long term mitigation strategies and access high-quality carbon credits that support their decarbonization and sustainability goals. Discover ERM’s Carbon Markets complete solutions at https://www.erm.com/service/carbon-markets/

This guide was developed as part of the NCS Alliance and FIC goal to catalyze more demand and mobilize more capital for NCS Carbon credits. Find out more:

NCS Alliance https://www.wbcsd.org/actions/the-natural-climate-solutions-alliance/

Forest Investor Club https://www.wbcsd.org/actions/forest-investor-club/

Authors:

The ERM Sustainability Institute
ERM
Natural Climate Solutions Alliance
Forest Investor Club