Business
The cost of failing to protect natural capital
‘We have some major environmental challenges coming our way, and our economy needs to be future-proofed.’
5 October 2017
Natural capital should be formally recognised as critical national infrastructure to strengthen the UK’s economic resilience, drive sustainable growth and meet its environmental goals, according to a new policy paper by The Institute of Sustainability and Environmental Professionals (ISEP).
The new report, ‘Natural capital is critical infrastructure: Putting natural capital at the heart of UK growth and resilience’, brings together insight from industry experts across infrastructure, energy, water, highways, rail and finance.
It demonstrates that the loss or degradation of natural capital could significantly impact essential services, economic stability and national security.
Natural capital refers to the world’s stocks of natural assets – including forests, fisheries, rivers, biodiversity, land and minerals, both the living and non-living.
These assets provide essential ecosystem services – the benefits humans derive from nature – such as food, water and climate regulation, which are crucial for the economy and human wellbeing.
Natural capital loss impacts economic resilience, operational costs and critical resources; the
Office for National Statistics values UK ecosystem services at £1.8trillion, or 72% of GDP.
The Green Finance Institute estimates environmental deterioration could lead to a 6-12% GDP loss by the 2030s. For context, the 2008 financial crisis reduced GDP by 5%, while Covid-19 cost 11% GDP in 2020.
Natural England’s State of Natural Capital Report says environmental degradation threatens industrial productivity and resilience to climate change and economic shocks.
Investing in nature-based solutions can drive economic growth, create jobs and generate significant social welfare benefits (for example, £3 of welfare from every £1 invested in nature).
‘There is a crucial relationship between the UK’s economic growth agenda and natural capital. Despite growing evidence demonstrating that nature and biodiversity loss pose significant risks to society and the economy, and that investment in nature restoration can generate jobs and economic output, there remains a shortfall in policy integration.
‘There are 13 sectors that currently fall under the category of critical national infrastructure, such as food, water, energy, health, transport, and communications, and while not a sector in its own right, natural capital directly underpins the functioning and resilience of each of these existing sectors.
‘To futureproof the economy and provide resilience against the increasing impacts of climate change, natural capital should be recognised as critical infrastructure and integrated more effectively into the UK economy and fiscal policies. This will align with the scientific advice, with current forecasts predicting that nature-related risks – unless addressed and properly integrated into decision-making – will negate any of the potential gains in economic growth that the government is striving to deliver.’SARAH MUKHERJEE MBE
ISEP CEO
While UK policy has evolved from site-specific conservation to strategic nature restoration, and natural capital is recognised as an asset in some policy frameworks such as the UK’s 25 Year Environment Plan (25YEP) and the HM Treasury Green Book, it largely remains voluntary and inconsistently applied across sectors.
To address these challenges and harness nature’s economic potential, the report proposes six priority policy actions within national infrastructure and economic planning.
Relevant government bodies should formally recognise natural capital as a critical national infrastructure alongside its essential role in supporting the Critical National Infrastructure (CNI) sectors and the UK government’s growth agenda.
A Strategic Nature Network (SNN) should be created and designated a Government Major and Nationally Significant Infrastructure Project, creating opportunities for economic growth and targeted investment in nature recovery.
The SNN should be recognised in National Policy Statements and Spatial Development Strategies, and the uptake of natural capital approaches should be promoted to deliver a consistent reporting requirement.
The economic importance of natural capital should be explicitly recognised for its role in delivering the Environmental Improvement Plan and environmental net gain should be embedded in decision making. Nature-related financial disclosures should be mandated for CNI sectors and public bodies, for example. This will help the UK government to deliver its nature restoration targets.
A dedicated Natural Infrastructure Investment Fund should be established for nature restoration projects that connect the SNN. This would create early-stage investment that provides private-sector confidence and targets nature recovery in the most nationally critical locations.
Guidance and training should be developed on natural capital and asset management approaches for public bodies and companies across all CNI sectors, to enable decision-makers to reach balanced and sustainable investment decisions.
This paper makes practical proposals that natural capital built on structures already in place is critical for economic growth, vital to ensuring resilience to climate change and economic shocks and added value to the current nature conservation and restoration system.
Jacobs led the research for the paper and facilitated workshops with key business representatives across critical national infrastructure sectors.
‘The economy is embedded in and dependent on nature. Whether for materials, or ecosystem services such as flood management, carbon storage, air to breathe or food to eat, the health of the natural environment is the critical foundation on which a prosperous society is built. A strategic, resilient national nature network is critical national infrastructure.
‘I welcome the ISEPs recommendations for a Strategic Nature Network and encourage all to join Rebuilding Nature in its construction.
‘The SNN can help us make sense of all the initiatives and projects that are dispersed across the UK. It helps us communicate and inspire, with a vision for a better future. It shows that access to nature will be coming to your community with all the benefits for health and wellbeing that brings.
‘It gives us confidence that we have a coherent plan and that delivering and maintaining it will ensure that the natural environment is sufficiently muscular and resilient, safeguarding the ecosystem services it provides. It can help us prioritise our spend and provides the strategic context within which to make the business case for individual interventions.’
STEPHEN ELDERKIN
Director of Environmental Sustainability, National Highways
‘We have some major environmental challenges coming our way, and our economy needs to be future-proofed.’
Research team develops an equation to calculate the value of natural capital.
EIB report investigates the barriers and opportunities for scaling of green actions that protect ecosystems and mitigate threats to society.
