You asked, we answered: 8 questions about navigating natural capital

5 Jul 2024 | 14 min read

You asked, we answered: 8 questions about navigating natural capital

Time ran short when Sustainability Superheroes Host and AiDash Director of Innovation Stephen Marland sat down with Jonathan Nichols, Associate – Natural Capital at AtkinsRéalis for episode 12 of our Sustainability Superheroes live event.

Read a recap blog with key takeaways from the event here or watch a recording of the event here.

Or, read on to see what your peers were asking before and after the discussion about navigating natural capital and considering the next steps beyond biodiversity net gain (BNG).

"AtkinsRealis natural capital interview"

1. How has natural capital influenced decision-making in real life for an infrastructure client you’ve worked with? What was the result/outcome?

Jonathan shared some examples from his work on the benefits that natural capital assessments have created for his clients:

  • Transport project environmental mitigation and business case: Undertaking a natural capital assessment for a transport business case enabled the socioeconomic benefits of habitat creation and enhancements to be captured, such as considering environmental mitigating elements to deliver BNG and create sustainable drainage systems (SuDS). In this example, the value of the increase in ecosystem services was in the same order of magnitude as the “traditional” benefits considered in the transport business case, with the potential to improve the benefit:cost ratio (BCR).
  • Optioneering and nature-based solutions: Jonathan also worked with a water company to evaluate the benefits the investments it had made in nature-based solutions to meet a regulatory requirement in the Water Industry Natural Environment Programme (WINEP). The work demonstrated that nature-based solutions (NbS) can have a wider range of social and environmental benefits beyond “grey” treatment solutions. The evaluation also provided “lessons learned” on how NbS can be designed better to deliver more and bigger ecosystem services benefits in future.

2. Is this about putting a price on nature, and is that a good thing?

No, it’s not about putting a price on nature, but, increasingly, natural capital approaches are being used to explore how ecosystem services provided by natural assets can be marketed as tradable credits.

There’s a difference between “price” and “value,” and the natural capital approach is about representing the value our natural assets provide to society and the economy. Until now, our society has taken this value for granted, and effectively assumed the value of nature to be zero, which is one of the reasons we’re in a global biodiversity crisis.

We seek to quantify, and where possible, place an economic value on the ecosystem services that natural assets provide to translate that value into a common denominator that can be used to compare benefits. It’s used to appreciate the value of the assets we do have, the costs of losing them, and the benefits of restoring and enhancing them. At the heart of the natural capital approach is understanding that the economy is embedded within the biosphere, and that it underpins all our economic activity.

That said, sometimes we talk about national capital and ecosystem services as being provided for free by nature. But that’s not true. As we would do for any asset, we need to invest in the protection, maintenance, and enhancement of natural capital to generate those benefits.

The question then is not about whether there is a price, but rather who is paying. Many businesses are starting to pay the price of unreliable supply chains that depend on healthy ecosystems. Markets are starting to emerge for ecosystem services, such as the voluntary carbon market for woodland creation and peatland restoration, biodiversity credits for new development in England, and nutrients and flood protection. Increasingly, we are seeing that infrastructure organisations, especially those that own large estates, are interested in the potential financial value of their assets in generating credits that they could sell or use their own land assets to compensate for capital projects elsewhere.

3. What input data do you need and is it easy to access?

UK is fortunate that many datasets and tools are available for free, although not all of them are necessarily easy to use. The UK Government’s Enabling a Natural Capital Approach (ENCA) resources, provided by Defra, is a great place to start for exploring the underlying reference data and models.

As a bare minimum, you will also need some input data on the natural assets themselves, such as habitat and landcover mapping.

The resolution of mapping can be very important, depending upon the size, scale, and use case. Determine your purpose for your project. For very large-scale projects where you’re trying to get a quick regional picture, opensource applications like Coordination of Information on the Environment (CORINE), the Habitat Map of Scotland (HabMoS) or Living England could work well. For a more granular picture of either an individual site, project, or estate with multiple sites, a remote sensing approach like those undertaken by AtkinsRéalis and AiDash is recommended and can be fully aligned with the Defra Statutory Biodiversity Metric classification used for BNG.

Ideally, you will also need some input information about the ecosystem services being provided in your area of interest. This data can range from very generic and national standardised information to something very site specific.

The more site specific you can be the more accurately you can express the value of your natural capital assets. For example, you might use visitor numbers, educational visits, volunteer efforts, land management activities like stocking rates, fertiliser applications, mowing regimes, beneficiaries and other users of the site, rights of way, or specific activities like canoe events. Some of this may be available through your corporate social responsibility (CSR) teams, land management teams or already used in reporting, and some of it may require additional survey and analysis, depending on what you want to achieve.

Best practice: Understand your purpose and objectives for undertaking the natural capital assessment and start small and simple with a pilot. Build your efforts over time, drawing in a wider range of data to produce something relatively simple and quick. You can then target your data-gathering exercise based on what is important for your needs.

4. Are cultural ecosystems services really a thing? Aren’t all ecosystem services culture-bound — whether growing wheat or going for a walk in a national park?

Natural capital is an anthropocentric concept, so thinking in terms of ecosystem services has a cultural reference. They emerge from the flows of material and information mediated by natural assets than create benefits and value for people and society, which in turn underpin the economy and business activity.

Frameworks such as the Common International Classification of Ecosystem Services (CICES) and Defra’s Enabling a Natural Capital Approach (ENCA) offer useful ways of grouping ecosystem services (ES). We often classify ecosystem services in provisioning, regulating, and cultural categories — so yes, according to international and UK natural capital frameworks, cultural ecosystem services are a thing. This category of services includes things like tourism, recreation, aesthetic value, sense of space, and spiritual value. This is a large range of tangible and relatively easy to quantify services, and those that are very difficult to put numbers on.

5. Is mandatory biodiversity net gain really going to make a difference in natural capital restoration nationally? Is the number of offsite hectares really a game changer? Or should we think of it more as locally important?

Biodiversity loss is a major challenge to humanity, BNG is a positive approach and a key part of the nature restoration challenge in England.

As a common approach enshrined in the Environment Act for projects that meet the relevant criteria, BNG drives a consistent approach to creating net-positive outcomes for nature in relation to new development. Guidance for BNG starts with acting on site, avoiding impacts, mitigating and restoring on site when possible, and then seeking off-site measures.

Offsets are likely to be more expensive the farther they are located from the impacted area. That said, it is of course very early days. A lot of factors will determine whether it is a success in practice, such as the capacity of local planning authorities to have the appropriate governance in place to ensure high integrity credits are being delivered.

BNG should also be seen as part of a bigger picture of nature action, rather than the “silver bullet,” considering, for example, the role of Local Nature Recovery Strategies.

6. How could Wales, Northern Ireland, and Scotland improve on English BNG, if they wanted to choose their own distinctive approach? Or is UK consistency best for the business that wants to do the right thing for nature?

Each nation is customizing their own approach to biodiversity. For example, the Scottish Government and NatureScot are exploring the possibility of developing a Scotland-specific metric.

What we’re seeing with clients in the other UK nations is that they are using the Natural England metric in lieu of something more locally specific to provide an indicator on the biodiversity value of their projects. They’re doing that because planning requirements in some nations, like Scotland, mandate positive effects for biodiversity, and the metric provides the best available approach to demonstrate projects have delivered biodiversity improvements in terms of habitat creation and enhancement.

We see the advantages of having common metrics for ecosystem services, such as in the UK Defra Enabling a Natural Capital Approach (ENCA) guidance. The approaches work well when we have tools that are applicable across the UK, but difficulties arise when they are not.

Ideally, a national capital approach would extend throughout Europe or even to the global level. The Taskforce on Nature-related Financial Disclosures (TNFD) metrics were created to provide consistency for business globally but are obviously operating at much higher level of abstraction, and lower level of resolution.

7. How do we calculate loss and gain after implementation of a natural capital project?

Evaluating existing projects is a fantastic way for developers and infrastructure organisations to not only demonstrate the benefits that their investments have had, but also learn how their projects can be designed better in the future and start building internal capacity on natural capital approaches.

AtkinsRéalis has used a natural capital assessment to calculate losses and gains in biodiversity, natural capital and ecosystem services on road schemes, natural flood management projects, catchment management schemes, river restoration projects, and urban parks.

We do this by considering the “before” and “after” scenarios. The more data available on both of those scenarios, the better — for example, prior land management and habitat types, and project design data. Essentially, we’d follow the same process as we would with a natural capital assessment for a proposed scheme but would use actual data on the project that was implemented in reality.

8. Please explain the relationship between carbon capture and natural capital (if not already covered!).

Natural capital refers to stocks of natural assets, which include geology, soil, air, water and all living things. Ecosystem services are the flows of material and information that create benefits that are valuable to people and the economy.

One of the ecosystem services provided by natural capital assets is climate regulation, and one of the ways natural assets do this is through regulating the flows of emissions of greenhouse gases like carbon dioxide and removal of those emissions from the atmosphere. Some ecosystem services can store carbon in a stable form for very long periods of time.

Natural assets remove carbon from the atmosphere as CO2 during photosynthesis to build organic matter. Some of this carbon is retained in the soil as dead organic matter and as decomposition occurs to form humus. This is quite a complex process, so natural capital assessments typically use a generic habitat-based value for carbon sequestration (balance of the flow of carbon into or out of the habitat) and the carbon stored in that habitat. The level of granularity depends on the method used and intended purpose, from a very broad average value per unit area of land to detailed modelling studies and field-based monitoring. There are also tools available for specific habitats like woodland and peatland, which quantify the benefits of habitat restoration and enhancement according to relevant carbon offsetting protocols.

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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