Natural capital will be a growth area for investment

Significance Investors are increasingly interested in the financial value of the natural world and how to fit it into their investment strategies. As well as decreasing carbon emissions, the focus is shifting to how to protect nature overall through methods such as reforestation, sustainable agriculture, ocean conservation and increasing biodiversity. Impacts Asset managers are likely to launch an array of innovative nature-linked products. Carbon-offset projects will dominate asset inflows for now, but their attractions are limited and eventually they will be superseded. More banks are likely to introduce nature-based goals within their sustainability-linked loans. The pressure for greater transparency, accountability and measurable metrics will grow in the natural capital asset class.

Evaluating Myopic Loss Aversion of Forestland Owners

Attracting forestland owners to participate in carbon markets can be challenging for several reasons including offset price volatility, legislative uncertainties, high costs of offset project development, long contract lengths, and landowners’ risk preferences. In this article, we elicit risk preferences and investigate Myopic Loss Aversion (MLA) of forestland owners using an economic experiment. The economic experiment is a betting game and we find that forestland owners exhibit MLA because they bet higher when returns from their investments are evaluated less frequently. Our results provide valuable information for developing carbon market protocols, especially in setting optimal evaluation periods of forest carbon offset projects.

Stakeholders of Voluntary Forest Carbon Offset Projects in China: An Empirical Analysis

Climate change is one of the defining challenges facing the planet. Voluntary forest carbon offset project which has the potential to boost forest carbon storage and mitigate global warming has aroused the global concern. The objective of this paper is to model the game situation and analyze the game behaviors of stakeholders of voluntary forest carbon offset projects in China. A stakeholder model and a Power-Benefit Matrix are constructed to analyze the roles, behaviors, and conflicts of stakeholders including farmers, planting entities, communities, government, and China Green Carbon Foundation. The empirical analysis results show that although the stakeholders have diverse interests and different goals, a win-win solution is still possible through their joint participation and compromise in the voluntary forest carbon offset project. A wide governance structure laying emphasis on benefit balance, equality, and information exchanges and being regulated by all stakeholders has been constructed. It facilitates the agreement among the stakeholders with conflicting or different interests. The joint participation of stakeholders in voluntary forest carbon offset projects might change the government-dominated afforestation/reforestation into a market, where all participators including government are encouraged to cooperate with each other to improve the condition of fund shortage and low efficiency.