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

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. Many small things, such as doodling in a notebook, adding an extension to your home, or even drinking a glass of water, depend on them. In the bigger picture, forests are vital to combatting climate change and global biodiversity loss.

But our forests, which cover 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, beyond which damage will be irreparable1. Around the world, deforestation is continuing at an alarming rate – it is estimated that 420 million hectares have been lost in the last 30 years2, mostly as a result of agricultural expansion.

But there is hope. At the COP26 climate summit in November 2021, more than 140 world leaders committed to ending and reversing deforestation by 2030 – pledging USD 19.2 billion of public and private funds to achieve the goal by restoring damaged land, tackling wildfires and helping local communities3.

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

Now is the time to invest in our forests – discover five top reasons below:

 

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, forests are reservoirs that accumulate carbon and thus lower the atmospheric carbon concentration. As a result, they play a vital part in the carbon balancing process, one that is either unknown or taken for granted by many. Forest conservation and restoration could provide 16-23% of the climate mitigation needed to limit global warming to between 1.5 and 2 degrees Celsius.

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 ongoing degradation and deforestation is contributing to the continued loss of this vital natural resource, typically due to large-scale commercial agriculture. We all benefit from the biodiversity that forests support – from those who live in close proximity to forests, and rely on them for employment (for instance in the tourism industry), or the majority who benefit from the role forests play in maintaining carbon, nutrient and water cycles.

Forest ecosystems harbour some 80% of land-based biodiversity, from plants to bacteria, which all depend on one another for life5.

The loss of forests creates a long series of knock-on effects that are severely detrimental to the planet – among them the disappearance of entire species, which can create an imbalance that affects the wider ecosystem. When the level of forest cover changes, from either reforestation or deforestation, surface temperatures change.

Healthy forests act as water filters, removing pollution and preventing sediment from flowing into streams – it is estimated that 75% of the fresh water available for human use comes from forests, with more than 1/3 of the world’s cities reliant on forested areas for their drinking water. Forests are also essential in regulating precipitation and evaporation, and create rainfall well beyond their borders. Deforestation exacerbates the physical risk from climate change by interrupting this process, raising the risk of wildfires and increasing the likelihood of floods and extreme droughts. As is already being seen in Brazil, this is threatening yields and making agricultural production less resilient. In some parts of the Amazon, deforestation is causing the rainy seasons to be delayed by up two weeks6, threatening both agriculture and the wealth of plant and animal life that depends on reliable water cycles.

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. They provide livelihoods and homes

It is estimated that nearly 300 million people live in or very near to forests and depend on them for subsistence – more than half are indigenous communities who have maintained the forest for hundreds or even thousands of years. Across the world more than 1 billion people rely on forests for employment or the products they provide7.

For rural communities in developing countries forests are the second biggest contributor to livelihoods, with half of the income they provide coming as a non-cash “hidden harvest” in the form of food, animal feed, fuel for cooking and construction materials that are gathered or foraged. For those living in extreme poverty forests can offer a vital safety net, providing subsistence in the face of poor crop seasons, adverse weather events, or market-based shocks such as sudden changes in global commodity prices which often affect the poorest the most.

Research shows that one way to invest in forests is to invest in the communities that rely on them most. Numerous studies have found that forests that sit within the territories of indigenous peoples and local communities are better managed than forests in other areas – in the Amazon, for instance, forests within indigenous territories see deforestation at just one-fifth the rate seen elsewhere8, absorb and store more carbon, and are managed more cost-effectively than centralised forest management schemes. As such, these communities are increasingly being recognised as essential to global forest preservation, providing ecosystems services that bestow a benefit far beyond their borders.

It is estimated that nearly 300 million people live in or very near to forests and depend on them for subsistence – more than half are indigenous communities who have maintained the forest for hundreds or even thousands of years

4. They offer vast economic and health benefits

On a simple, personal level, a walk through a forest is enough to restore a sense of calm. But on a much broader scale, these vast wooded areas provide vital economic, food and medical resources. It was estimated in a 2007 report that nature-based tourism makes up 7%9 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 have their origin in forests. Some 120 prescription medications that are sold today originate from rainforest plants10, coming from just a tiny fraction of the plants that inhabit these biodiverse environments. However, deforestation is threatening this vital resource. Of the 50,000 known medicinal plants11, which are the basis for 50% of all medication, 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 USD 60 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 that often follows deforestation, which degrades soil and upsets the natural nutrient cycle

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

Trees provide natural fertilisation, improving the condition of soil used for farming by capturing nitrogen from the air and transferring it to the soil through their roots and by dropping leaves12. They also draw up nutrients from deep in the soil, which can then be used by crops. An African tree, the Faidherbia albida, has been credited with improving the yield of 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 that often follows deforestation, which degrades soil and upsets the natural nutrient cycle.

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 scope for progress as a species depends on Natures resources – geology, soil, air and water. In forests, we have an ecosystem that harbours all four. As a central part of our natural capital, it is more important than ever for our economy and society that forests are allowed to prosper.

At Lombard Odier we aim to help our clients invest in our Natural Capital – 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.

 

Climate crisis: Amazon rainforest tipping point is looming, data shows | Amazon rainforest | The Guardian
State of the World’s Forests 2020 (fao.org)
COP26: World leaders promise to end deforestation by 2030 - BBC News
Global maps of twenty-first century forest carbon fluxes | Nature Climate Change
English (United Kingdom)_Brochure-sensibilisation-OK.indd (reforestaction.com)
Effects of Deforestation on the Onset of the Rainy Season and the Duration of Dry Spells in Southern Amazonia - Leite‐Filho - 2019 - Journal of Geophysical Research: Atmospheres - Wiley Online Library
Enhance Livelihoods of Forest Communities (worldbank.org)
8 Walker, et al 2019. “The role of forest conversion, degradation, and disturbance in the carbon dynamics of Amazon indigenous territories and protected areas.”
9 ttps://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
10 Tropical Rainforests Are Nature's Medicine Cabinet (thoughtco.com)
11 Deforestation, a headache for natural medicine (worldbank.org)
12 Fertilizer tree - Wikipedia

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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