A third of India's economy relies on nature: here’s why corporates need to invest more in natural climate solutions

India’s economy is highly dependent on nature and extremely vulnerable to climate risks. A third of its GDP comes from sectors greatly reliant on nature. Research has found that the climate crisis could cost the country from 6.4% to more than 10% of its national income by 2100, taking 50 million more people back into poverty.

Against this background, a new survey of India’s largest companies by the World Economic Forum shows that they have made strong commitments to sustainability and natural climate solutions (NCS), which aim to protect, conserve, restore and sustainably manage terrestrial, freshwater, coastal and marine ecosystems.

However, Unlocking Private Sector Investment into Natural Climate Solutions in India – written jointly by the Forum, the Confederation of Indian Industry and IORA Ecological Solutions – also points out that their investments are comparatively small in scale.

India’s economy is one of the most nature-dependent in the world. Some 33% of its GDP is generated in sectors classed as highly dependent on nature. These include forestry; agriculture; fisheries and aquaculture; food, beverages and tobacco; energy and water utilities and construction.

Many of these are threatened directly by the impacts of climate change, including rising sea levels, receding glaciers and unpredictable monsoon patterns. Agricultural output alone is predicted to drop by 16%, equivalent to a 2.8% GDP loss by 2030.

Yet, the same sectors are also the largest contributors to greenhouse gas emissions. The energy sector accounts for just below 70%, followed by agriculture, forestry and other land-use, which adds nearly 6%, the Forum’s white paper highlights.

India has set itself ambitious national abatement goals for 2030, including emission reductions of 45% from 2005 levels, generating 50% of power capacity from non-fossil fuels and increasing its carbon sink by a fifth through additional tree cover. However, as of December 2023, Climate Action Tracker rated India’s efforts towards achieving these targets as “highly insufficient”.

The Forum has now looked at the role that the private sector can play in advancing emission reductions in India through NCS. It quotes research that, for example, 94% of investments made in forest restoration efforts in India between 2011 and 2017 were the result of government interventions. This underlines that there are vast opportunities for the private sector to work together with government and other stakeholders to deploy natural climate solutions.

Based on a sample of India’s largest companies, the Forum finds that private sector organizations are strongly committed to reaching these goals. Almost 9 in 10 companies (89%) have dedicated sustainability strategies and nearly half have set themselves net-zero emission goals. Around 70% have included NCS into their commitments, with investments in afforestation, reforestation, the restoration of grassland, wetlands and mangroves, and agricultural land management to improve soil structure.

While more than 8 in 10 of the companies (86%) surveyed highlighted the business case for NCS and over a third stated that mitigating emissions was an investment driver (39%), the Forum found that most investments are comparatively small in scale.

More than half of the respondents said their organization’s NCS investments were less than $1 million (57%). A further 23% stated that they had put between $1 million and $5 million into NCS projects.

The white paper quotes estimates that India needs to spend more than $9 billion per year until 2030 to satisfy its climate abatement targets in the forestry sector alone. With public spending on forests averaging $1.75 billion annually (2012-17), it’s clear that a greater contribution from the private sector and other stakeholders will be needed to hit India’s climate goals.

Asked about the main barriers to increasing their investments in NCS, the most cited ones were a lack of a clear regulatory framework, a dearth of high-quality NCS projects, uncertain returns on investment and limited access to funding or financial incentives.

To address these roadblocks, respondents highlighted the factors that would lead them to increase investments in NCS included clearer guidelines for the Indian government’s green credit programme and its policy on carbon credits. Other factors that would influence corporates’ commitment were collaboration with state governments for restoring degraded land and clarity on investment modalities. Added to this were considerations such as projects aligning with long-term sustainability goals as well as opportunities to partner with local communities and demonstrate positive impact of such initiatives.

The white paper concludes that India’s stakes in mitigating the climate crisis and nature loss are high and calls on the public and private sectors to work together to ease the path to higher investments in natural climate solutions in the country.

Seema Arora, Deputy Director General of the Confederation of Indian Industry, commented:.

“As businesses in India prepare to confront the multi-faceted challenges arising from biodiversity loss, ecosystem collapse and natural resource shortages, it becomes crucial to address the emerging risks by enhancing investments in Natural Climate Solutions.

“The benefits of investing in NCS go beyond environmental motives as NCS also helps address climate risk, build resilience, embed sustainability in corporate strategies and support human well-being.

“The time to act is now, and this white paper offers a comprehensive framework for companies to move forward.”