Environmental Markets – opportunities for business to protect and value nature

Prof David Hill CBEChairman, Environment Bank

English biodiversity loss

• 500 English species extinct in the last 200 years• Of 3000 species with data, 2000 declining!• Many farmland birds have declined by up to 90% in 50

years!• Average English county loses 2 plants per year• Loss is ‘mainly’ outside SSSIs and Natura 2000

sites, and ‘unprotected’ species• Much the same story across western Europe

Priority species

Based on 213 species

Landscape amnesia

Creeping normalcy

Jared Diamond ‘Collapse’

What have we lost?

Rodger McPhail

Land use change - UKArea (ha) From To

100,000 Conifer forest 50,000ha replanted conifers; 50,000ha ’other’

3,000 Conifer forest Industrial development

7,000 Forest Artificial surfaces

14,000 Agricultural land Artificial surfaces

3,000 Arable land Mineral extraction sites

2,000 Pasture Mineral extraction sites

1,000 Pasture Arable land

1,000 Wetlands Artificial surfaces

2006-2012 Europe-wide CORINE land cover map – 225,200ha showed change in land cover – Leicester University

Traditional funding

Aggregate membership 17 conservation bodies

6.7 million

NGO income £854m Latest reports

NGO spending on biodiversity in England

£213m 2012/13

Govt. spending on biodiversity in England

£384m 2013/14

Biodiversity 2020 Indicators summary Dec 2014, Defra

Secretary of State comment at Wildlife & Countryside Link Sept

2015

Countries that are successful in the future are going to be those with thriving

environments where people want to live and work and be close to nature

The race for initiatives - UK

• The Economics of Ecosystems and Biodiversity – TEEB - 2010

• Natural Environment White Paper 2011• Natural Capital Committee 2015• Natural capital accounting – National Audit

Office, Office for National Statistics - ongoing

TEEB

• “The global economic benefit of biological diversity, the costs of the loss of biodiversity and the failure to take protective measures versus the costs of effective conservation.“

• Answer : $14 trillion; 7% global GDP by 2050

Natural Capital Committee

“Successive natural capital deficits have built up large natural capital debt and this is proving costly to our well-being and economy. If economic growth

is to be sustained, natural capital has to be safeguarded”

But we need restoration first – we are ‘massively overdrawn at the Bank of Nature’

• About 40% of global GDP intrinsically relies on natural capital - yet we don’t value it and we treat the environment as a charitable exercise

OECD Report 2012 - Outlook to 2050Per capita GDP NOT accounting

for loss of natural capital

Per capita GDP accounting for loss of natural

capital

Brazil 34% 3%

India

UK?

120%

2% ?

9%

-20%?

We need a paradigm shift1. Intrinsic value alone is not enough2. Make nature economically visible - proper

accounting of the value of our natural environment in decisions and policies across all sectors

3. Need for a new economy to enable investment into biodiversity, natural capital and ecosystem services - understanding massive supply chain risk

Environmental markets

• Internationally there is mounting interest in environmental markets from credit buyers, regulators, investors, environmental community

• Emerging recognition of natural resource stewardship and restoration as a dynamic area for investment – great opportunity for SME’s

• Transforming biodiversity from a risk and liability problem into viable profit-generating business opportunity

• Environmental Finance; Ecosystem Marketplace

Value = $5 - 10bn p.a

Natural Capital Accounting

• Gov’t should lead the development and coordination of long-term investment in natural capital

• Burdening future generations because we think protection of and investment in natural capital is too expensive today, is not a viable model

• Corporate natural capital accounting should be required on basis of benefits derived from non-renewables to increase stock of renewables

• Credit based – create a market – SME involvement

• The economic rents from depleting non-renewables should be saved and invested for future generations – compensate by increasing renewable natural capital assets.

• Using natural capital accounting – create natural capital investment funds from the depletion of non-renewables via a proper compensation regime. Dieter Helm 2015.

• Role for development of environmental markets to establish around natural capital assets and asset classes - SMEs

Natural Capital Investment Opportunities

• Woodland planting – 250k ha. Net benefits £500m p.a• Peatland restoration – 140k ha uplands. Net benefits

£570m over 40 years• Wetland creation/ES – 100k ha. Benefit-cost ratios 3:1 to

9:1• Restoring commercial fish stocks. Benefit-cost ratios

>6:1• Urban greenspace – health treatment savings £2.1bn p.a• Environmental performance of farming

Government to:• Require natural capital accounting by

corporates• Incentivize corporates – taxation• Implement accreditation – standards• Provide guidance

Corporates purchase ‘natural capital’ credits for assets – woodland, peatland, wetland, grassland and ecosystem services they provide

Market developed. Land brought forward under conservation covenants.Ecological networks-resilienceLong-term management income

• Better corporate reporting• De-risk the business• Better investment value

Ecosystem Markets Taskforce - key recommendations

• Biodiversity offsetting (compensation) - mandatory - securing net gain for nature through planning and development

• Bio-energy and anaerobic digestion on farms• Sustainable local woodfuel• Nature-based certification and labelling• Water-cycle catchment management -

integrating nature into water, waste water and flood management

Biodiversity Compensation

Biodiversity Compensation“..conservation activities designed to deliver biodiversity benefits in compensation for losses, in a measurable way”

Voluntary – UK government trials

• Slow take-up - lack of urgency

• Inconsistency between LPAs• Lack of a market

Mandatory - LPAs mandated to use the metrics

• Rapid market (scale-up) created - supply of compensation sites via landowners, farmers, conservation bodies, providing choice

• Consistency across Local Planning Authorities

• No extra cost - residual land value

• Market = c.£1.2bn p.a• Will stimulate SME’s and will

grow the rural economy• Metrics, trading system, delivery

system - all in place

Compensation through planning• Compensating for impact in one place with gain in another• Compensation ‘metrics’ allow for estimation of both loss and gain• Simply a tool for planners – guarantees no net loss –

accountable, transparent, consistent• Enables development and delivers biodiversity protection i.e.

sustainable development• Observes mitigation hierarchy• Additional & complementary to existing wildlife/landscape

protection• Planning Authorities now being encouraged to roll-out application

of the metric = creating demand for compensation sites

How does it work?• LPA requires application of biodiversity compensation metric• Impact of development assessed• Developer purchases conservation credits from strategically

located ‘habitat bank’ which yields the credits based on a Biodiversity Management Plan

• Environment Bank brokers deal - signs legal agreements to purchase with developer, and to manage with receptor site land manager

• Money transferred, over time, to the land manager against specific conservation management delivery

• Monitoring and reporting systems for LPAs

Warwickshire strategic areas To target restoration and creation of new core areas

Habitat Banking

• Warwickshire• South Humber• HS2

Environment Bank - what we are doing• Operating brokerage model • Setting up Habitat Banks• Building receptor site capacity - Environmental Markets

Exchange• Applying metrics to impact and receptor sites• Asset classes - biodiversity, but also for woodland and

peatland carbon, water, other natural capital assets• Long-term delivery contracts - Conservation Bank

Agreement, Conservation Credit Purchase Agreement; monitoring, compliance

• First conservation credit sales undertaken - housing schemes; with pipeline of projects

Grow emerging markets

• Regulatory framework with metrics• Accreditation of sites eg habitat banks• Tracking of conservation credits and enforcement• Environmentally experienced brokerage system - trading

platform (eg. Environment Bank)• What next ? An EU-wide Ecosystem Markets Taskforce –

assess innovation opportunities across EU – DG Research & Innovation or DG ENV with DG GROW

Summary• Biodiversity, natural capital and ecosystem service loss

continues - will create catastrophic impacts on GDP within 2 generations

• A new economic model is needed to move nature beyond intrinsic value

• A range of opportunities exist for business/SME investment with potentially massive market value: • Biodiversity compensation• Corporate accounting for natural capital – woodland, peatland,

wetland, restoring fish stocks, urban greenspace • Payment for ecosystem services (PES)• Improving the environmental performance of farming

www.environmentbank.comEnvironmental Markets Exchange

https://environmentbank.mmearth.com

We don’t inherit the Earth from our ancestors, we borrow it from our

children

Maybe we should be renting it instead !