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As part of the new interview series, Conversations about Carbon, Aysen Naylor, our Senior Research Consultant – APAC, will be speaking with experts to share knowledge surrounding the nature-based solutions (NbS) sector. This provides the opportunity to increase awareness, explore trends and unpack challenges, misinformation and potential backlash that may arise when trying to protect biodiversity.
In this second instalment of the NbS series, Aysen speaks to Radha Kuppalli who has more than 20 years of experience in commercial solutions to address climate change and nature restoration.
For 17 years, Radha worked at New Forests, the global investment manager of nature-based real assets and natural capital strategies. Radha’s prominent roles at New Forests comprised Business Development Manager, Director and Managing Director, during which time she focused on building the world’s leading asset manager in sustainable forestry. She is also actively involved in advisory roles and holds non-exec positions including one with environmental enterprise, Greening Australia.
Watch the interview:
Where do you see the opportunities in Asia, specifically around carbon offsetting?
Asia is a huge part of where climate change needs to be addressed. What we're now seeing is some of the major economies in Asia starting to think about their own decarbonization pathways and carbon markets.
I recently started working with Vietnamese asset management firm Vina Capital that is launching their own climate mitigation platform called Vina Carbon to invest in carbon credit projects in Vietnam.
We're looking at projects like biochar and sustainable forestry, plastics reduction and cookstoves. I think those opportunities will grow because we know that other countries in the region, for example China, India and Indonesia, are also assessing how they're going to integrate carbon pricing into their domestic economies.
What are investors looking for to invest in for the future. And where do you see the market growing?
Institutional investors are the largest investors in the world who are thinking about aligning with decarbonization and climate trends.
In agriculture, investors look at more regenerative, sustainable models. Forestry has evolved from timberland asset class to a natural capital asset class because forests also account for improved carbon sequestration for more climate positive investments and it de-risks investments.
The sustainable fiber from sustainably-managed forests can be used to substitute fossil fuel-based materials.
The new areas around biochar, blue carbon and wetland restoration are only now starting to scale up as we get more methodologies and investors, with companies looking more broadly at all the mechanisms to remove carbon from the atmosphere.
How did New Forests design carbon market investment strategies?
When the firm was founded in 2005, the idea was to create a business that not only invested in sustainable timber production but also new value and investment models around carbon, biodiversity and water ecosystem services.
In 2007, I raised $100 million Eco Products Fund via major investors, including big university endowments. And this was one of the world's first funds investing in a portfolio of regulated wetland and stream mitigation banks in the US.
We invested in a bio bank in Sabah, Malaysia, but we went into a global financial crisis and the Kyoto Protocol fell away. At the time, that was quite ahead of its time and unfortunately did not work out, I think now it would be different.
As an asset manager, we had to do two things. First, we had to generate returns, and manage our risk, but secondly, look at where new value was going to be created.
Covid hit, and the conversation started to take off around climate, nature-based solutions and net zero, our whole strategy in Asia started to align with climate impact, carbon credits and impact. I think investors need to continue to innovate, build skills and think about where these markets are going.
How do you achieve high integrity credits in a market that is still fairly immature?
I don't think these markets are immature. Experimentation with carbon markets started almost 40 years ago and some of the avoided deforestation projects were started in the late 80s/early 90s as part of overall corporate social responsibility.
The urgency of the situation has changed in terms of the climate crisis, which naturally led to real concern that we need to try everything to get capital flowing and things moving whether it is perfect or not, as well as ensuring we have the accounting right and making sure companies are doing what they say.
There are two types of integrity: the supply side and the demand side. On the supply side of the equation, a lot of the focus has been on projects such as avoiding deforestation and tropical forest conservation which, despite criticisms, we need financing mechanisms for. Civil society’s response has been to devise architecture around the carbon standards and have a meta standard.
On the demand side, the science-based targets initiative (SBTi) is trying to set a framework for what good looks like, not only the targets set by companies but how they can use carbon credits.
What are your thoughts on SBTi’s plans to allow businesses to use carbon offsetting to abate scope three emissions?
I think what SBTi was really trying to do was to create more certainty for companies. My personal view is that companies should be able to use carbon credits for their scope three emissions, because we are in this transition phase, and we know that there are hard-to-abate sectors that will need to support climate mitigation outside of their own value chain while they're in the process of trying to transition operations.
My hope is that all the energy spent trying to find the perfect answer, when there is no perfect answer, gets transferred to compromising and finding good solutions.
Governments haven't done their jobs the way that they're supposed to and left it to civil society to figure things out, so we continue to put more energy into finding scalable solutions.
How can the industry account for removal credits?
Removal credits can be looked at in a couple of different ways. For the traditional, more nature-based removals, this might be afforestation or reforestation, with plantation forestry or with native species.
I am on the board of Greening Australia, one of Australia's most respected nature/land restoration organizations. We know a huge number of cost-effective removals will come from restoration, the challenge is the idea of permanence, so we have to contend with forest fires and other physical risks in biological ecosystems.
But when are we really thinking about getting to net zero by 2050? What are the right solutions to transition us there? It’s one of the reasons I started working with Re-Vi, looking at biochar and durable carbon removals across Australia.
We have what might be one of the world's largest biochar projects in South Australia and we're looking at projects in other parts of the world. But it's really that intersection of nature and technology where we can look at waste biomass, heat it and make pure carbon that's stored for hundreds, if not thousands of years.
And it can be done really cost effectively so I think there's a lot of interest from investors in biochar as removal technologies.
What are you most proud of?
Oh, gosh. I am proud of a couple of things. First has been my personal contribution, but also through the organizations I've worked with to help change the narrative around addressing climate change to be not just about the energy and clean energy transition, but also the sustainable land use transition.
Nature is a critical part of the sustainable future that we want to see and that's an important part of my career legacy so far. The second is inspiring others and connecting different people and organizations to create solutions.
The world we live in is incredibly complex and the problems we face are challenging and daunting, but the world we live in is worth fighting for.
I just tried to bring enthusiasm and optimism to all the conversations, organizations I'm working with and the people that I meet.
