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As droughts fueled by human destruction of the environment are projected to affect 3 in 4 people by 2050, investing in sustainable land and water management is essential to reduce their costs, which already exceed $307 billion per year globally, according to a new report launched at the of the United Nations Convention to Combat Desertification (UNCCD) earlier today.

Drawing on a wealth of evidence and case studies from countries all around the world—like Chile, India, Jordan, Kenya, Spain, and Tunisia—the makes the economic and business case for nature-based solutions (NbS) to drought. That is, for practices that restore ecosystem functions and soil health to enhance water flow, storage, and supply in support of human well-being—for example, reforestation, grazing management, and the restoration and conservation of watersheds.

The report, "Economics of drought: Investing in nature-based solutions for drought resilience—proaction pays," is co-authored by the United Nations University Institute for Water, Environment and Health (UNU-INWEH), the Economics of Land Degradation Initiative (ELD), and UNCCD, with the financial support of the German Federal Ministry for Economic Cooperation and Development, the International Drought Resilience Alliance (IDRA), and the European Union,

"Managing our land and water sustainably is essential to unlock economic growth and build resilience for communities that are becoming locked into cycles of drought around the world," said UNCCD Deputy Executive Secretary Andrea Meza.

"As talks for a landmark COP decision on drought are underway, the report calls on world leaders to recognize the outsized, and preventable, costs of drought, and to leverage proactive and nature-based solutions to secure human development within planetary boundaries."

Urbanization, deforestation, surface water and groundwater overdraft, and climate change are altering land cover and depleting freshwater reserves, meaning that drought is not only caused by the lack of rain but also by the way we treat our land and water resources. Thus, the risk of water shortages, as well as cyclical droughts and floods can be managed through adequate policies, incentives, and investments in our natural capital.

The publication underscores that the long-term economic costs associated with droughts and related disasters are greatly underestimated. Especially, because costs typically escalate within and across borders due to the knock-on effects of drought on sectors like energy and health, as well as the wider economy.

The estimated costs of implementing measures as set out by countries in their national drought and related plans amount to a fraction of the costs of drought every year.

The triple dividend of natural-based solutions

An economy that respects natural systems instead of undermining them could generate up to US$10.1 trillion annually in business value and create up to 395 million jobs by 2030. Tripling investment in Nature-based Solutions up to 2030 could generate 20 million additional jobs.

"Proactive drought management is an ecological and societal imperative. It is also a significant economic opportunity," said German Parliamentary Secretary for the Ministry for Economic Cooperation and Development (BMZ), Niels Annen.

"Every dollar invested in nature-based solutions not only reduces drought impacts, but can generate benefits of up to US$27—including higher farmer incomes, value chain resilience, and reduced long-term economic costs. We must urgently act to rethink how we value land and relearn how to manage land sustainably."

Nature-based solutions to drought yield a triple dividend: they reduce loss and damage from drought; increase the income of land and water users, and generate co-benefits for climate, nature and sustainable development more broadly. Most of these dividends –including food and water security—can be enjoyed regardless of the occurrence of drought, making nature-based solutions a no-regret option.

Recommendations

The report offers a series of recommendations to realize the potential of sustainable land and water management at landscape scales. For example, it points out the need to embed nature-based solutions in national drought management plans; ensure land tenure and water rights; and strengthen local governance, which is essential to implement changes on the ground.

"The economic cost of drought extends beyond immediate agricultural losses. It affects entire supply chains, reduces GDP, impacts livelihoods, and leads to hunger, unemployment, migration, and long-term human security challenges; effective management and investment in nature are crucial to mitigate these effects," said the Director of UNU-INWEH and one of the lead authors of the report Professor Kaveh Madani.

"The report provides invaluable insights into an opportunity sector that has been generally overlooked by public and private investors. Investment in natural capital is one of the most effective strategies for creating sustainable livelihoods and economic prosperity in harmony with nature while mitigating the impacts of droughts and climate change, especially in the developing economies of the Global South," noted Professor Madani.

In terms of finance, the report highlights the potential of public-private partnerships; the need to repurpose harmful subsidies; as well as the role of impact data collection and monitoring in attracting investments from the private sector.

Finally, it calls for a whole-of-society approach to proactive drought management, whereby authorities work hand-in-hand with farmers, landowners, businesses, civil society, and academia, to build the resilience of communities, economies and ecosystems to drought.

"Unsustainable land and water management practices and other human actions that increase the frequency and intensity of droughts must be replaced by pre-emptive, anticipatory action in favor of our survival. Well-planned, timely investments in such actions are imperative," says the report.