While there is increasing focus on cutting fossil fuels to reduce environmental impact, the transition to new energy sources will also have an effect. This will include greater land use, habitat damage, waste challenges and more, according to a report by UBS Asset Management. 

Deploying clean energy technologies has helped the world avoid billions of tons of emissions annually. But the path towards new energy sources is not without its own risks. According to a report entitled «Climate meets nature» by UBS Asset Management and non-profit organization Planet Tracker, there are also negative effects caused by the transition. 

«The nexus between climate and nature is complex and a nuanced topic with trade-offs,» said the report, which focuses on solar, wind and bioenergy. «Investors should consider the opportunity costs and trade-offs between the energy transition benefits and negative impacts on nature from these energy sources. Understanding the two-way risks on nature and portfolios and managing them will be key to delivering value.»

Impact on Nature

The report highlights three main impacts on nature. Firstly, the transition is expected to require significantly more land. Secondly, the extraction and usage of raw materials could cause habitat loss and damage. Thirdly, there are also challenges in managing the input and output of waste which could result in climate and biodiversity risks.

The impacts and dependencies linked to nature are «complex, location-specific, and are not easily substituted, even within the same company».

Collaborative Approach

The report calls for a collaborative approach to minimize such negative effects. From asset managers, it suggests raising awareness within investee companies and asset operators on the importance of understanding and measuring natural capital assets. 

«This cannot be achieved in isolation and all market participants need to assess how they make it relevant for their own spheres of influence,» the report added. «Integrating natural capital into energy transition solutions will only be possible with the support of all key decision makers at every stage of planning, financing and implementation.»