‘Natural capital’ and ‘ecosystem services’ – what do they mean?
To understand some of the terminology that surrounds private investment into nature recovery, you first need to think of nature in a way that might seem unusual – with a price tag.
Now this isn’t to say that the entire natural world can be determined by a fixed price, but it is becoming a more common way that economists, land managers and environmental organisations are looking at nature.
It is through such thinking that the term ‘natural capital’ was created, referring to the elements of nature (plants, animals, air, water, soils, minerals etc.) that combine to provide benefits to people.
These benefits, which contribute to making human life both possible and worth living, are referred to as ‘ecosystem services’ and describe a range of ‘products’ such as food, clean water, breathable air and fuel to heat our homes.
To put this into context, consider the following example:
INFOGRAPHIC EXAMPLE
Imagine a tree and its ability to provide clean air as a product that it provides society.
The tree in this scenario is referred to as ‘natural capital’.
The tree’s ability to provide cleaner air its ‘ecosystem service’.
Its value to society? The ability to reduce the impacts of poor air quality on our health, from conditions like cancer and asthma. This value may not seem immediately quantifiable, but if you consider the costs of treating such conditions on our health system it becomes clearer.
Consider another example.
INFOGRAPHIC EXAMPLE
Imagine a bee and its ability to pollinate agricultural crops as a product that it provides society.
The bee in this scenario is referred to as ‘natural capital’.
The bee’s ability to pollinate crops its ‘ecosystem service’.
Its value to society? We consume many food crops that rely on pollinators, such as bees. It is easy to reflect on these costs when we consider the price we pay for such items at the supermarket till.
Why are such terms important?
Concepts such as ‘natural capital’ and ‘ecosystem services’ were created to emphasise the importance of conservation and sustainable management of natural resources in the global economy, not to mention the possible benefits they can provide in terms of promoting social ecosystems and world health.
How does this work in practise?
We were one of 27 organisations in England to secure funding from Defra’s Natural Environment Investment Readiness (NEIR) Fund to explore how private investment could be used to drive nature recovery in the Esk Valley. This is important, as attracting private investment into environmental projects is seen as essential if the UK is to reach its nature recovery ambitions - public finance alone will not be enough.
The idea is that private investment is achieved through the sale of carbon and biodiversity credits, giving companies the opportunity to compensate for their activities through habitat improvements that boost natural capital. This in turn would increase ecosystem services and the subsequent benefits to society.
The NEIR Fund is designed to support these projects until the point they become financially sustainable.
We ran this in collaboration with Palladium through the Revere initiative, alongside farmers, land managers, data modellers Natural Capital Research Ltd and the Environment Agency.