How can we use nature to combat water risk?

Authored by Ellen Shaddock, Sustainability Project Manager, AXA XL

Work around water resilience has long been a part of AXA XL’s sustainability efforts and valuing nature is at the heart of our sustainability strategy. Ellen Shaddock reflects on a recent webinar during which the winner of the AXA XL Climate Water Nexus Award 2023, jointly launched with the AXA Research Fund, gave some fascinating insights into how nature-based solutions can form part of the response to the effects of climate change on extreme climate events like droughts.

Increasing demand, poor management of supply and a changing climate are all driving water scarcity, representing a huge challenge to communities and businesses across the world. Putting in place nature-based solutions, such as restoring natural habitats, is one way in which policymakers and other stakeholders are trying to tackle this risk. Gaining a greater understanding of how these solutions work, and what other adaptations are appropriate and necessary alongside them, will be key to building our resilience to water-related risks.

AXA XL recently hosted an all-colleague webinar on the topic of using nature-based solutions to reduce the impacts of climate change on droughts and other extreme events. The webinar featured a presentation from Dr Petra Holden, an inter-and transdisciplinary conservation scientist from the African Climate and Development Initiative at the University of Cape Town, and recent winner of the AXA XL Climate Water Nexus Award, jointly launched with the AXA Research Fund.

Dr Holden explained that nature-based solutions are broadly actions and interventions related to the restoration, protection, sustainable management and design of a wide range of ecosystems and land and waterscapes. Nature-based solutions aimed at reducing the risks associated with climate change might include, for example, planting vegetation in urban areas, restoring vegetation along rivers or mountains to reduce the impacts of droughts or floods, restoring coastal wetlands to protect against sea-level rise, or using agri-ecological principles to buffer crops from the extremes of changing weather patterns.

Nature-based solutions typically take a blended approach to address multiple challenges including adaptation to climate change, food or water security risks and disaster risk reduction.

Since the early 2000s, Dr Holden explained, there have been numerous scientific studies that have shown how nature-based solutions can help to reduce the effects of weather-related events. But to date, she noted, there has been far less study of the joint influence of climate and land-based variables and nature-based solutions.

For one research project, Dr Holden and a team of colleagues set about developing a joint attribution framework to explore the combined impacts of climate change on both physical and land-based variables on an extreme event to enable researchers to calculate the extent to which nature-based solutions can offset the impact of climate change on extreme weather events and quantify the extent to which climate change made an event more likely, more severe or longer-lasting.

The scientists examined a severe drought in South Africa to assess the extent to which the efficacy of a nature-based solution to reduce the effect of a disaster event was affected by the influence of climate change.

The Day Zero Drought

For two years from 2015, Cape Town suffered a severe and prolonged drought, dubbed the Day Zero Drought, during which the city’s 4 million inhabitants came perilously close to being left with no water supply by 2018.

In response, The Nature Conservancy – a nonprofit has been focused on combatting the dual threats of climate change and biodiversity loss – and has been leading an effort to put in place a nature-based solution to try to lessen the impact of any similar future drought event. Although it may sound counterintuitive for some, that effort entailed removing thousands of non-indigenous trees in mountain catchments important for water supply as they were using gallons of water that historically would have been absorbed into the watershed. These non-indigenous trees also threaten biodiversity in these shrubland covered mountains.

Dr Holden and her team modelled the Day Zero drought and simulated river flows under four different scenarios; no impact from climate change; climate change impacts added; nature-based solutions – the removal of non-indigenous trees; a situation whereby the non-indigenous trees had been allowed to proliferate.

They found that climate change made the drought more severe with 22% less water in the rivers. The work showed that removing non-indigenous trees reduced the impacts of climate change and resulted in 9% more water in the rivers. Leaving the trees to continue to proliferate would have significantly worsened the effects of the drought.

It was clear from the study, however, that even restoring the environment with the removal of the non-indigenous trees was not enough to reverse the full effects of climate change on the outcome of the drought, she explained.

Nature-based solutions, therefore, are critical and can help to reduce the impact of a weather-related disaster – particularly one made worse by climate change, but are not the whole solution; this emphasises the need to combine nature-based solutions with other climate change adaptations, such as water demand management, in regions facing water shortages. Reducing emissions is also critical to ensure nature-based solutions can be effective in future.

Nature-based solutions can help – hugely – to reduce the impacts of extreme climate events, but they have hard limits and cannot, in isolation, offset the effects of climate change. The application of an attribution framework can help communities and policymakers to understand where those location-specific hard limits lie and what combination of actions is most appropriate to build an equitable, effective and sustainable response.

The webinar also touched upon the topic of the role of gender inclusivity, and of intersectionality more generally, in the development and deployment of nature-based solutions to tackle the effects of climate change.

Here again, noted Dr Holden, an understanding of the specific context and of who is vulnerable to the effects of climate-related disasters and why, is vital to ensuring that interventions are inclusive and equitable. For example, women are frequently most vulnerable to some of the socio-economic risks associated with climate-related events that might be exacerbated by climate change. An awareness of the local context is needed to help ensure that equitable, effective and sustainable nature-based solutions are implemented, alongside other appropriate climate-change adaptation techniques. You can read more about Dr Holden’s work in this area here and here.

The investment case

As well as their role in reducing the severe impacts of climate-related events, nature-based solutions bring with them numerous other socio-economic and environmental benefits, noted Dr Holden.

Along with a team of fellow researchers, she also examined the investment case for nature-based solutions – particularly in Southern Africa – and found that there were many potential social and environmental benefits, like improved water security and assurance of water supply – and sometimes even a return on investment in the form of increased supply; an improved sense of community security; a reduction in the risk of other disaster scenarios like wildfires; employment opportunities for unskilled workers to help deliver the nature-based solution; improved biodiversity and reduced health risks because of better water quality.

These solutions can also help to reduce the supply chain risks to retailers that rely on water supply – a risk that AXA XL found to be underappreciated in our 2023 Water Risks Insights Report.

For investors there are several opportunities to benefit from nature-based solutions, both directly and indirectly, explained Dr Holden, including returns from resilience bonds or other financial mechanisms, risk reductions to core business, fewer business interruption events caused by the impact of severe weather and extreme climate-events, and Corporate Social Responsibility and reputational benefits.

At AXA XL, we recognise the role that insurers can play – as investors, underwriters, corporate citizens and thought leaders – in helping to develop understanding and design of solutions and adaptations that can help to reduce the impacts of climate change, including nature-based solutions.

In our sustainability strategy, and with our work with the AXA Research Fund and other partners, we aim to continually explore and understand the nature of water-related risks, their impact and potential solutions.

Dr Petra Holden is a transdisciplinary conservation scientist at the African Climate & Development Initiative (ACDI), University of Cape Town (UCT). She specialises in research on nature-based solutions for equitable, biodiverse, water secure, and a sustainable climate future. Petra currently leads a research team at ACDI, undertaking research to provide evidence on nature-based solutions accounting for social equity processes and sustainability of ecosystem services given climate changes. For more information on Petra’s research see Google Scholar, TES NbS, ACDI.