UBS asset management and Planet Tracker Release Report on Integrating Nature into Energy Transition Solutions
In a new report titled “Climate Meets Nature,” UBS Asset Management and Planet Tracker offer a practical guide for industry professionals on incorporating nature into global energy transition solutions to meet climate goals. The guidance targets both public and private markets, aiding investors and companies in enhancing due diligence and metrics for transition-related investments.
Navigating the Climate-Nature Nexus
The report addresses the complex relationship between climate change and nature, emphasizing the trade-offs involved. It highlights three key technologies in the energy transition: solar, wind, and bioenergy. Investors are encouraged to weigh the benefits of these energy sources against their potential negative impacts on nature. Managing the reciprocal risks to nature and investment portfolios is crucial for delivering value.
Ignoring natural capital in energy transition strategies can pose investment risks. The report states that the impacts on nature are “complex, location-specific, and not easily substituted.” Despite recognizing the threat of natural capital degradation, investors lack a systematic approach to incorporating these risks into their decisions. The report provides pragmatic strategies for managing the upstream impacts of transition technologies and conducting lifecycle analyses to mitigate these risks.
Lucy Thomas, Head of Sustainable Investing at UBS Asset Management, noted, “Climate change, nature, and biodiversity loss are inextricably linked. Investors need to understand these risks to manage natural capital properly and determine the risk premium and impact on cash flows.”
John Willis, Head of Research at Planet Tracker, added, “This report serves as a practitioner’s guide for engagement and investment decisions in both public and private markets. We hope it helps build metrics to measure nature impacts from renewables.”
Balancing Energy Transition and Natural Capital
The report emphasizes that while fossil fuels have a greater overall environmental impact, no energy transition technology is without consequences. Poorly managed transitions can harm natural capital and climate efforts.
Three Main Impacts on Nature:
1. Land Use and Site Management: Replacing fossil fuels with new energy technologies requires significantly more land, affecting local nature through solar, wind farms, and biofuel feedstock cultivation.
2. Habitat Loss and Raw Material Extraction: The energy transition will demand substantial raw materials, necessitating sustainable mining practices.
3. Waste Management: New energy technologies offer opportunities to use waste as feedstock, but challenges in carbon accounting and waste disposal, such as decommissioning wind turbine blades, pose climate and biodiversity risks.
Collaborative Effort Needed
Asset managers should promote the understanding and measurement of natural capital within investee companies. Achieving this requires collaboration from all market participants to integrate natural capital into energy transition solutions at every stage of planning, financing, and implementation.
