This article was originally published at Aldersgate Group.
“As the full extent of the damages from recent natural disasters are calculated across the Caribbean and the Southern United States and Lloyds of London begins paying out $4.5bn of claims, there is a stronger argument than ever to invest in natural capital as a way of improving resilience, Alex White finds.
The term ‘natural capital’ refers to natural resources that provide goods and services of value to people and our economy, including the provision of healthy air, clean water, food, timber and opportunities for recreation as well as the regulation of flood risk, and climate change through carbon sequestration. Investing in natural capital can reduce the amount and cost of conventional ‘grey’ infrastructure needed to manage flood risk. This investment can also provide wider benefits such as enhancing biodiversity and contributing to better health and quality of life. Many of the services delivered are seen primarily as public goods, so funding in the past has principally come from public coffers.
However, the funding needed to meet the UK’s forthcoming 25 Year Plan for the Environment is going to be enormous, and certainly beyond the scope of public finance alone. Private investment will play a crucial role in improving the state of our natural assets. But, given its complexity, even bodies with a clear mandate such as the Green Investment Bank (now Green Investment Group) have struggled to break into this space.
The single greatest barrier to investment in natural capital has been that of generating a reliable and recognised revenue stream. Essentially – show me the money. Beyond that, the market is still relatively immature, and therefore seen as risky. There are problems of scale and often a lack of understanding between those delivering the project and the finance community they seek to woo. Multiple solutions targeting different aspects will have to work in tandem to establish a more mature market…”
Read on at: Aldersgate Group.