Interview with Nigel Topping: High Level Climate Action Champion
Q. Nature has climbed up the agenda alongside net zero in the past 12 months. Why is it important for the private sector to focus on nature in the context of climate action?
Firstly, everybody understands that we have to get to net zero and beyond as quickly as possible, because we're seeing the economic and human costs of climate change all the time. We know that there is no Paris Agreement without protecting nature. In broad terms, nature is about a quarter of the problem and around a third of the solution. But there's also a macro reason – particularly for companies in the food, land and agriculture system. Research by the Race to Zero shows that if the biggest food and agriculture companies don’t take a nature-positive approach, there’s up to 26% of value at risk by 2030. However, when there’s big risk, there are big opportunities for those who get ahead of the risks – and that's a $4.5 trillion opportunity. By now, we're all used to the fact that we have to make an equitable, managed and financed energy transition. We're also going to have to make a massive transition in food, land use and agriculture as well.
Global food supply firms face $150 billion in losses
Deforestation threatens to be the ‘new coal’ in investors’ portfolios
Firms at the centre of the global food supply system could lose up to 26% of their value by 2030 – equivalent to $150 billion in losses – if investors and companies do not act now to protect value
A net-zero, nature-positive, resilient food system could generate up to $4.5 trillion of new business opportunities annually by 2030Source: Race to Zero
Major forest, land and agriculture companies that have committed to net-zero could be at risk of missing their climate commitments due to a lack of action on deforestation. Source
There is an increasing amount of data and methodologies emerging around protecting nature – from organizations such as the Science Based Targets Network and the Task Force on Nature-Related Financial Disclosures – to help companies and financial institutions better understand the risks and opportunities and to set robust targets. But if the target is not ambitious enough, then the action definitely won’t be. It’s clear that we need urgent, ambitious, impactful and transformative climate action to halve emissions by 2030. In particular, we need to cut out all practices which are driving deforestation in order to produce commodities like soy, palm, cattle and timber, and we must provide the necessary support for the transition of the agricultural sector.
To keep 1.5 alive, most deforestation must end by 2025
Agriculture, forestry and other land use contributes 22% to global emissions – half of that (11%) is from deforestation and land conversion
To keep the chance of 1.5°C alive, the majority of commodity-driven deforestation and land clearance must end by 2025
93% of major forest, land and agriculture companies that have committed to net zero could miss their commitments due to a lack of action on deforestationSource: Race to Zero
Q. At COP26, 13 of the world’s largest agri-food businesses announced they would accelerate action to reduce emissions from land use change in line with a 1.5°C pathway and produce a roadmap by COP27. Are these commitments deep and broad enough?
Companies at the lynchpin of the global food trading system must be aligned with science-based targets. The world has missed many 2020 deforestation targets. We have to stop seeing revised roadmaps and turn pledges into actual implementation at COP27. We also need to see a critical mass of banks aligning their trade finance practices with zero deforestation – as well as investors and food manufacturing and distribution companies – so that the whole system gets aligned. Everybody needs to accelerate, because this is the decade where we either tackle deforestation, invest in nature, or lose grip on the possibility of a zero-carbon world in time.
Everybody needs to accelerate, because this is the decade where we either tackle deforestation or lose grip on the possibility of a zero-carbon world in time.”
Nigel Topping, UN Climate Change High-Level Champion at COP26
Q. With partners, Race to Zero is calling on companies and financial institutions to sign a commitment letter to eliminate deforestation in supply chains by 2025. What else do they need to do?
Firstly, it isn’t just about forests: we need to focus on halting the conversion of other important ecosystems. The IPCC says that to reach our 1.5°C goals, emissions from the entire land sector need to reach net zero by 2030 or before. That includes wetlands, peatlands, savannas and natural grasslands. Secondly, just eliminating the negative is part of the solution, but we also need to start seeing investment in the alternatives. For example, Nestle is investing 1.2 billion Swiss francs into regenerative agriculture, supporting 500,000 farmers and 150,000 thousand suppliers. That's the sort of thing we need from major players in the global food system. There’s some encouraging progress. For example, there are more than 700 million hectares of degraded agricultural land in Africa alone. At COP26, 32 African countries committed to restoring over 100 million hectares and called for $2 billion in investment.
It’s called AFR100 – the African Forest Landscape Restoration Initiative. Several funds have already started to invest. Regeneration is important because it immediately improves farmer livelihoods because it goes straight to productivity improvement. The underlying story here is all about the development of jobs, income, economic growth. For some communities, emissions reductions are the third or fourth down the list of priorities.
Regenerating degraded agricultural land immediately improves farmer livelihoods. That’s the underlying story – this is all about jobs, income, economic growth.”
Q. What's the big picture on the mobilisation of finance for the nature positive agenda – and who’s going to have to come up with it?
Mobilising finance means investing for higher productivity and job growth. The crucial question is who will unlock and channel the finance necessary for nature-positive investments that provide returns? Around $2 trillion a year more is needed for the global just energy transition, including in emerging and developing economies and excluding China. About 70% of that needs to come from the private sector. In Africa, where a large majority of people are working in agriculture, there’s a huge need for investment
As well as investing in companies that provide services to the market, we need to provide loans to SMEs that are the backbone of the food system in emerging markets.”
in smallholder farmers, but also in small- and medium-size enterprises. For example, a really exciting start-up in Nigeria is making solar-powered cool boxes that massively reduce food waste while moving vegetables around in a hot, humid country. As well as investing in companies that provide services to the market, we need to provide loans to SMEs that are the backbone of the food system in emerging markets. There'll be a lot of focus on that at COP27 in Sharm el-Sheikh.
Essentially, we must see blended climate finance from the private and public sector, but also crucially from participants in the value chain and local companies.
GFANZ on deforestation
The Glasgow Financial Alliance for Net Zero (GFANZ) is the world’s largest coalition of financial institutions committed to achieving net-zero greenhouse gas emissions by 2050. Its 500+ members from more than 45 countries represent over $130 trillion of capital
On 23 September 2022, GFANZ issued a statement urging its members to start identifying and curtailing financing of deforestation
“In our view, transition plans that lack objectives and clear targets to eliminate and reverse deforestation are incomplete”Source: GFANZ
Q. How committed are investors to the nature-positive agenda? What's their role and do we need a kind of GFANZ for nature?
Financial institutions must be committed to being both net-zero and nature positive – you can't have one without the other. Mark Carney has been very outspoken on this and GFANZ has published some guidance recently. At Race to Zero, we're working with partners to get more of the finance sector to sign our commitment letter on ending commodity-driven deforestation. Investors should assess their exposure to deforestation risks and ensure that they are supporting the transition to more sustainably produced commodities, and are driving out the practices that cause further deforestation. And these actions are increasingly aligned with the law, such as Europe’s new regulation banning the sale of products that are causing further deforestation. So what we are seeing quite quickly is investors making their expectations clear. Those companies who've set targets but aren’t implementing them are going to come under more and more pressure from their owners, as well as from regulators, to do so.
Q. Many of the pressures on companies to change are market-based – but how important is regulation?
There’s definitely a role for regulation. Race to Zero recently published The Pivot Point, a report that calls for an urgent transition from voluntary leadership to globally consistent standards to deliver a net-zero world. We cannot expect systemic shifts to be based on voluntary initiatives alone, because some people will always hide. So this has to be regulated. Regulators put an infinite price on certain activities, by making them illegal. But systems are complicated. It's very difficult to get the perfect regulation in a short period of time. So during this transition, the ratcheting of pressure from investors makes it easier for regulators to be bolder. And vice versa. It’s what we call the “ambition loop”. This needs everybody to move as fast as they can, and be vocal about it, because that involves others. There's also a huge role for local regulations. Of course you had a complete failure of enforcement in Brazil in the last four years. So you need supply side and demand side regulations, but they've all got to be implemented.
Q. You've written, “the only currency that matters now is the quality and pace of delivery”. A year on from Glasgow, has there been sufficient or encouraging progress, particularly on the nature positive agenda?
We’re seeing insufficient yet encouraging commitments being made and we’re starting to see money flow into them. We’re seeing good progress on AFR100 to restore degraded land in Africa. Many of those investments rely on carbon credits, where there's been a maturing of the conversation from a sort of frothy enthusiasm, to markets with very weak standards, to a kind of Puritanism that says nothing will work and everything must be banned. Now we're starting to see a real focus on quality of standards on the supply and demand side.
We’re also starting to see follow-through on the AIM4C [Agricultural Innovation Mission for Climate] agenda initiated by the United Arab Emirates and the USA. Meanwhile, Egypt has launched its FAST [Food and Agriculture for Sustainable Transformation] initiative. And now we have regenerative agriculture incorporated into the Breakthrough Agenda, launched at COP26 in Glasgow to promote clean technologies to help keep 1.5°C in reach.
There’s a growing number of countries committed to investing in the technologies needed to make the low- or zero-carbon option the most competitive by 2030. So we are seeing momentum among governments, as well as more private sector interest. We’re hoping to see a lot more evidence in Sharm el-Sheikh, and then we’ll try and ratchet it up to go faster.
Q. But one issue in Brazil is that millions of hectares of land can still be legally deforested. How can we incentivize people not to clear land that they're allowed to deforest?
There is a balance to be struck between the pressures for production and protection on the same landscape, and you won’t find a solution unless you put the people who live in these places at the centre of that decision. We must create incentives that work for the producers to do the right thing: there are examples, such as a payment for environmental services scheme in Brazil that do exactly that. And in other regions, for example, the reason that money is starting to flow into some of the African regeneration is that the economic model has been unlocked to find a way to finance that work and this quite quickly leads to productivity improvements. That becomes a self-reinforcing cycle. We also see examples like Costa Rica, where there’ve been payments for standing forests for a long time. We need to make sure we're not just lecturing people to not take an income from their available commodity, but we’re actually incentivizing them not to do so.
Q. One last question. The High-Level Champions have put a lot of energy into this agenda. What's next for your work?
We’re trying to significantly increase the number of financial institutions signing the commitment letter to eliminate commodity-driven deforestation, because we know there's a direct line from clear public commitments to actions. Just as with the net-zero commitment – we’ve seen a lot more stringency on eliminating the financing of coal, for example, that comes directly as a result of making a public commitment to net zero.
In particular we’re working with the largest companies all along the value chain in the race to zero, to ensure they’re not just reporting on their achievements but also making commitments to invest in the capabilities of smallholder farmers and SMEs to bring about regenerative agriculture and restore deforested land.
