Navigating natural capital: Next steps beyond biodiversity net gain

5 Jul 2024 | 7 min read

Navigating natural capital: Next steps beyond biodiversity net gain

The UK is seeing a voluntary movement toward natural capital approaches that step beyond the mandatory 10% biodiversity net gain (BNG) for new projects.

It’s a movement that will help ready developers for expected mandatory requirements.

Already, frameworks like the international Task Force on Nature-related Financial Disclosures (TNFD) and de-facto standards like the UK’s Natural Capital Register and Accounting Tool (NCRAT), suggests that what is voluntary today may soon be required.

To consider this increasing focus on natural capital, Sustainability Superheroes Host and AiDash Director of Innovation Stephen Marland sat down with Jonathan Nichols, Associate – Natural Capital Environment Practice at AtkinsRéalis, to talk about navigating natural capital and consider the next steps beyond biodiversity net gain.

Catch the full live event recap here or read on for 3 key takeaways.

Takeaway 1. There’s a difference between natural capital assets and a natural capital approach.

AtkinsRéalis’ Jonathan Nichols explained that natural capital assets are stocks of renewable and nonrenewable assets that combine to yield a view of benefits to people. We often think of these as habitats, such as woodlands, wetlands, farmland, beaches and urban parks, for example.

“They are assets because they deliver benefits that support people’s wellbeing, underpin the economy, and directly contribute to infra developers’ objectives,” he said. “For example, water companies rely on abundant supplies of high-quality freshwater, and railways operators or house builders depend on functioning woodlands and peatlands to slow flows of water to protect their assets from flooding.”

The natural capital approach involves integrating natural capital into decision-making. “So, we seek to bring an appreciation for ecosystems services into our assessment of environmental impacts, and as far as possible quantify losses and gains in benefits,” Jonathan said.

He provided three common examples of a natural capital approach:

  • Assessing a project. How will the project impact on natural assets? How can we vary designs to test optimal scenarios that influence the business case and include wider benefits? If a project needs to deliver BNG, in the long term it might be possible to deliver more ecosystem services value associated with habitat creation and enhancements, like increased carbon sequestration and better flood resilience.
  • Natural capital account. Track changes in the natural assets your organisation impacts and depends upon, the ecosystem services they provide, and the resources needed to manage them over time. Such accounts are often reported with an annual reporting cycle to show the benefits and impacts the company contributes to stakeholders alongside core business activities (sales/costs).
  • Corporate risk management and reporting. The natural assets organisations make use of, or depend upon, through their activities or their supply chain may include long-term risks. Such risks and how the business is approaching mitigation is of value to investors, whether they be public funders or private investors.

“Some of the clients I work with in water have major shareholders which are asset management firms, interested in climate risks and nature risks,” Jonathan said. “[They’re] putting pressure on their investee companies and bringing this to the attention of CFOs, so it’s not only the environmental staff who are getting interested in this now.”

Takeaway 2. Natural capital frameworks and measurement tools exist and are continually evolving; however, emerging UK standards promote a common and consistent approach.

On the national and international level, various frameworks are available to guide natural capital approaches, including natural capital assessment. Jonathan recommended that organizations seeking to work with natural capital look into:

Natural Capital Protocol, created by the global Capitals Coalition, which has “all kinds of useful [widely recognized international] guidance on how your organization can take a natural capital approach.”

But he cautioned that there are both advantages and disadvantages of natural capital assessment, which should be considered.

  • Advantages: The tools can quantify, consider benefits of restoration, protection, enhancement, and provide a robust and established approach that’s government-endorsed and grounded in academic literature (evidence based).
  • Disadvantages: Some tools can give a misleading impression and may include less robust ecosystem service models. Sometimes the science for some ecosystem services remains in a developing status. Care should be taken, and the user should be reviewing the confidence in the underlying data – or use those models provided on ENCA.

Takeaway 3. Getting started and going beyond BNG.

The main benefit of using a natural capital approach is connecting the objectives of infrastructure organizations and developers to functioning natural capital assets, according to Jonathan. Other benefits include cost savings, social value, informing regulatory response and ESG (Environmental, Social, and Governance) reporting, public perception, learning, and reduced risks.

He recommended that organizations start small and pilot their natural capital approach.

“Proof of concept makes it much easier to make the case, and get others on board,” he explained. “It can be very rewarding when that ‘lightbulb moment’ happens and a CFO says something like ‘Wow I can really see now why nature is important to the business and it’s not only our financial and built assets we need to be thinking about.’”

Contact us here, for more information about how AiDash and Atkins can help your national capital approach. Or, learn how our Biodiversity Net Gain Management System can speed your BNG application process.

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