Building a circular bioeconomy to address the growing risk of wildfires – Sustainable Views

Marc Palahí is chief nature officer at Lombard Odier Investment Managers

Climate change and landscape management are accelerating wildfire risks

Since the evening of January 7, ferocious wildfires have raged across Los Angeles. Well over 100,000 people have been subject to mandatory evacuation orders, while early estimates have put the likely insured losses at over $20bn and the potential overall economic loss as high as $57bn. To quantify the human suffering and emotional loss is impossible.

While the cause of the fires is yet to be established, it is likely that last year’s heavy rains from the El Niño weather system fuelled vegetation growth, which has since dried during a recent prolonged dry spell.

Combined with strong winds, this has created the ideal conditions for wildfires to spread. The broader science is clear — climate change and today’s methods of landscape management are accelerating the wildfire risk globally.

In today’s era of climate change, we must take our lead from nature and build resilience from the ground up

A key challenge in California is the rural-urban interface where the town meets the countryside, with a disproportionate number of residences located in high wildfire-risk areas.

As residential areas expand deeper into the wilderness, the risk to homes and businesses rises. It is estimated that, globally, insurance claims due to wildfires have risen to $10bn annually, a figure that now looks set to be dwarfed in 2025. Indeed, many homeowners caught up in the LA fires are without home insurance, after insurers had hiked costs or simply cancelled provision altogether due to the escalating wildfire risk.

In addition to urban spread, climate change and the way we plan and manage our landscapes are thought to be key factors. As temperatures rise, and droughts become more frequent, the tinderbox conditions that spark and spread wildfires are increasingly common.

Across the world, this new generation of wildfires is exceeding our capacity to suppress them. As we face mounting environmental, economic and social threats we must move from tactical suppression to holistic mitigation-adaptation strategies, to minimise the risk of extreme fires breaking out, and create resilient landscapes that are capable of recovering quickly should a fire occur.

Recent years have seen substantial scientific and technical advances in how land-management practices can integrate prevention preparedness, detection response and restoration adaptation.

Climate-smart forestry, for instance, which puts resilience and climate benefits at the forefront of forest management, is emerging as an effective tool for creating landscapes that are resilient to wildfires and other extreme weather events such droughts and floods.

But how do we finance such strategies?

Key to achieving this goal is the growth of the circular bioeconomy. By replacing today’s extractive, fossil-based economy with an economy based on nature’s regenerative power, we can cut the emissions that lead to global heating and reduce the risk of extreme weather events while attracting the necessary investments to transform landscapes and businesses in an integrated manner.

At the local level, the bioeconomy flourishes where nature thrives, meaning economic growth goes hand-in-hand with the creation of healthy, biodiverse, climate and fire-resilient landscapes.

Regenerative forest management

Forests and agroforestry, with their multifunctional role and wide range of ecosystem services, offer great opportunities to build this economic model.

New technologies are creating unprecedented opportunities to transform plant-based compounds into many of the fossil-based materials we use today, including construction materials, textiles, plastics and chemicals.

Managing forests in order to produce these resources regeneratively also enhances the ecosystems services forests provide, improving carbon sequestration, soil health and water retention, and reducing a forest’s susceptibility to fire.

The same can be said for agroforestry and regenerative farming, which provide us with food while enhancing ecosystem services. This is not the case in conventional agriculture, which provides food while generating environmental externalities.

As the bioeconomy grows, so does the economic opportunity. In the Amazon alone, the bioeconomy could be worth up to $4tn, while globally the bioeconomy is expected to be valued at $7.7tn by 2030.

For investors, the growth of the circular bioeconomy is creating an opportunity for private finance and public-private partnerships to target returns while creating fire-resistant and resilient landscapes.

However, to bring these and other mechanisms to scale, innovative financial tools are needed.

From real asset strategies that deploy capital to transform degraded or non-adapted land assets to resilient and regenerative assets, to schemes such as the Australian Emission Reduction Fund, and the USA’s Forest Resilience Bond — which allows private capital to play a role in public land management — must become the norm rather than the exception.

To do that, the finance industry needs to build a better understanding of the role of nature as the true engine of our economy. Bringing scientific experts to investment and the finance industry as a whole needs to become the norm.

In a world where losses from environmental disasters are growing — in total, climate disasters cost the global economy $320bn in 2024 — urgent action is needed, and investors have an essential role to play.

As we search for new ways to finance the fight against wildfires we must take a multi-faceted approach, integrating science, finance and policy to build a circular bioeconomy that addresses the root causes of extreme events.

In today’s era of climate change, we must take our lead from nature and build resilience from the ground up.

SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The issues highlighted in the article are connected to the following SDGs:

• SDG 13: Climate Action
• SDG 11: Sustainable Cities and Communities
• SDG 8: Decent Work and Economic Growth
• SDG 15: Life on Land

2. What specific targets under those SDGs can be identified based on the article’s content?

Based on the article’s content, the following specific targets can be identified:

• Target 13.1: Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters
• Target 11.4: Strengthen efforts to protect and safeguard the world’s cultural and natural heritage
• Target 8.4: Improve progressively, through 2030, global resource efficiency in consumption and production and endeavor to decouple economic growth from environmental degradation
• Target 15.2: Promote the implementation of sustainable management of all types of forests, halt deforestation, restore degraded forests, and substantially increase afforestation and reforestation globally

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

No, the article does not mention or imply any specific indicators that can be used to measure progress towards the identified targets.

SDGs, Targets, and Indicators

Source: sustainableviews.com