A new report by due diligence startup Xilva looked into the uncertainties that stand in the way of active investment into forest and nature-based carbon removal solutions.
The report, called “Navigating Risks & Realizing Opportunities in Forest & Nature-Based Investments,” draws on 288 project assessments conducted across countries like Brazil, India, Kenya, and the United States.
According to this work, the primary carbon credits focus placed on nature-based solutions undermines the true potential and possible returns from forest investments, which dictates the need for a broader risk assessment in this area.
Faced with this challenge, the team behind the report tried to identify the key obstacles to nature-based CDR investments, attempting to provide a more structured coping approach with Xilva’s proprietary GRADE framework.
Tailor-made to match the due diligence needs of forest and nature-based solutions, this framework differentiates three categories of threats: mitigatable risks, potential red flags, and critical no-go factors.
From the data gathered in the report, Xilva noted that almost 90% of forest projects lack essential documentation, creating risks that can endanger the project’s success.
According to Xilva, the GRADE framework showed that with early action and intervention, 50% of these risks could be neutralized, which would grant more confidence for stakeholders that decide to invest in nature-based solutions.
The framework also outlined five key areas for improvement, including carbon modeling, land rights, community engagement, financial planning, and governance.
These areas surfaced as critical since risks associated with them were found in over 70% of the projects assessed during the research.
By developing the GRADE framework, Xilva wants to offer both project developers and investors an advanced process for identifying these risks, suggesting potential solutions that would turn the threats into workable resolutions.
Sarah Scott, Founder and Executive Director of The Kilimanjaro Project (Kijani Pamoja), a grassroots restoration initiative, commented that the report summarizes recurring challenges and provides a roadmap for project developers.
This, in turn, can help build more trust between investors and project developers, allowing for a more robust pipeline of high-quality nature-based projects and investment opportunities.
Read more: Google Invests In Its First Forestry-Based Carbon Removal Credits
