Mitigating Investment Risks in Nature-Based Solutions: A Strategic Approach Towards Sustainable Project Implementation

Abstract

Reforestation plays a crucial role in combating global warming while promoting biodiversity conservation and restoring ecosystems. However, poorly planned reforestation efforts can lead to increased emissions and long-term damage to landscapes, biodiversity, and livelihoods. In addition, low carbon prices in the voluntary market further hinder reforestation project viability. Therefore, a comprehensive understanding of the scientific and economic aspects of reforestation is essential to ensure effective and sustainable implementation, especially considering the increasing number of institutions and companies that rely on reforestation to achieve ambitious environmental goals.

This thesis focuses on the strategic challenge of developing large-scale investments in reforestation, considering both scientific and economic perspectives. It first applies analytical workflows to explore the relationship between changes in soil carbon and above-ground biomass following plantation by utilizing a diverse set of measurements across multiple interrelated sites. The resulting estimates provide insights and decision-making tools to guide investment choices concerning reforestation location, species selection, and project types from the scientific perspective. The second strategy showcases the application of engineering design flexibility through a case study on an existing reforestation project, demonstrating the benefits of adopting a progressive investment approach with scale optionality.This approach proves advantageous, particularly when dealing with policy and commercial uncertainties that influence reforestation development. Monte Carlo simulation and multi-dimensional project evaluations were implemented to investigate a range of potential scenarios and assess their implications. By integrating these scientific findings, this research contributes to an enhanced understanding of optimizing reforestation investments in a manner that aligns with scientific principles and economic considerations. This holistic approach, incorporating engineering design flexibility and robust evaluations of project dynamics, offers insights and practical guidance for stakeholders to make informed decisions and achieve optimal project outcomes.