Savills plc
Savills plc
05/06/2021 | Press release | Distributed by Public on 05/06/2021 01:52
Is natural capital income finally becoming a tangible reality?
Natural capital has become a buzzword within rural land management, emerging as a concept that has an impact on how we view and value rural land. It refers to the elements of nature and their ecosystem services that directly or indirectly produce value to society. Examples of these services include the carbon sequestration of photosynthesising biomass, the health benefits of access to green space, the flood prevention provided by floodplains, and the wildlife conservation of habitats with high levels of biodiversity.
Natural capital thinking allows rural land managers to demonstrate that many of the solutions to the challenges society is facing - climate change, the health crises, nature's destruction - lie in the implicit yet currently undeveloped value of these ecosystem services. The key question is, if these services are of increasing value to society, how are land managers rewarded for providing them and maintaining their natural capital?
Recently, in England, we have seen significant policy announcements and funding schemes set up with the intention of increasing investment in natural capital. Examples include the Woodland Carbon Guarantee, the introduction of the Nature Recovery Network, the Environmental Land Management pilots and several location and species-specific protection schemes, such as the RSPB and Defra's turtle dove habitat auction.
These schemes represent the first steps in converting natural capital from a theoretical concept into a tangible reality. A key question is whether policy and regulation will dictate how ecosystem services become monetised or whether it will be left to entrepreneurship in the market to drive new income streams.
An interesting indicator in relation to this query is the announcement of the Natural Environment Investment Readiness Fund (NEIRF), which opened for its first round of applications earlier this year. The NEIRF is a competitive scheme which aims to stimulate private investment and market based mechanisms that improve and protect England's natural environment. Grants of between £10,000 and £100,000 are intended to help applicants develop projects, build the capability to attract financial investment, and develop a market for their ecosystem services. This recent initiative from Defra demonstrates a political economy intent on kick starting private natural capital investment alongside public support.
That's not to say that the private market for ecosystem services isn't already developing. It is - and rapidly. We are increasingly seeing private corporates purchasing offsets and partnering with land managers to mitigate their environmental risk. News ricocheted through the rural sector that Microsoft has developed a partnership with an Australian cattle company in order to offset its carbon emissions through the farm's soil organic matter uplift. The agricultural bank Oxbury has just launched the UK's first personal savings account that directs savers' annual interest to tree-planting projects, to fund carbon sequestration and biodiversity uplift. There is no doubt that the private market for natural capital is starting to emerge from its shell.
These funding opportunities indicate a positive direction for natural capital market creation, however land managers must be aware that ecosystem-based income streams will not simply appear - suppliers will have to collaborate and actively seek out opportunities for investment. A collaborative approach can benefit from the economies of scale and offers a competitive advantage for tapping into funding.
There is concern that investment might not trickle down to land managers but rather get lost in authority and bureaucracy so to avoid this, rural businesses must make sure they understand the developing market, be prepared to collaborate and innovate to secure the opportunities for their land and businesses within it.
Further information
Contact Molly Biddell or Jon Dearsley