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The Importance of Natural Capital
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Heather Williams
Associate Director
Chris Fawcett
Technical Director

In Wood’s recent blog, we presented on the principle of Biodiversity Net Gain (BNG) as a tool for reversing biodiversity loss through planning and land management. Recognising the value of biodiversity, and what we lose through its decline, we should always consider the many benefits that the natural environment provides to the world’s population. This brings us to the concept of natural capital.

Natural capital is the world’s stock of natural resources that provide a flow of benefits to people (and all living things) in the form of ecosystem services. For example, a woodland is a natural asset that provides a wide range of benefits including regulation of climate, noise, water and air quality, provision of food, timber and other materials, and often recreational and other cultural benefits. The ability of natural capital to provide goods and services depends on how much of “it” (nature) there is, where it is and its condition. These factors are influenced by external pressures such as development and land management.  The increasing demand placed on natural capital, and failure in the past to recognise and integrate its value into government policy, has led to environmental degradation worldwide and highlights the need for decision makers to take a broader view, recognising trade-offs and look to long-term planning of natural resources.

According to the World Bank, reporting on national income provides a misleading picture of the health of an economy as it does not consider the depletion natural capital assets. Measuring national wealth, which does consider a country’s assets, can give a more accurate measure of long-term economic viability.  It’s clear that recognising the value of natural capital can provide important evidence to support and enable sustainable decision-making by land and resource managers, planners and developers. Preservation of natural capital is key for conserving our natural environment.

The UK Government’s 25 Year Environment Plan is increasing the requirements and expectations for businesses to take account of ‘environmental net gain’, measured using natural capital, in their planning.  The UK Government has been developing the evidence base and guidance for policy and decision makers around the value of taking a natural capital approach.  The UK is not alone in recognising the importance of natural capital – guidance has been provided by the European Union and the United Nations for natural capital accounting.

Many of the principles of natural capital are not new, but a natural capital approach draws together existing concepts and practices, to collectively and holistically recognise and value ecosystem services, thereby providing businesses with tools to enable balanced decision making for sustainable development. For example:

  • Sustainable business plans, particularly for large land-holders, should include consideration of other capitals, including natural and social capital, to recognise the true value of their assets and be resilient to future change.
  • Incorporating natural capital strategies from the early stages of planning new developments encourages designs in which space is given to nature in a way that optimises the benefits we can receive from it.
  • Through monetary assessment of natural capital, the benefits of habitat restoration schemes and nature-based solutions can be truly demonstrated, compared to ‘doing nothing’ or alternative hard engineering solutions.

We are seeing these benefits to clients across a range of sectors. In our advice to water companies as part of their water resources planning process, addition of natural capital assessments provides a well-rounded assessment of environmental impacts when appraising additional supply options. This broader appraisal enables environmental benefits and impacts of options to be considered alongside CAPEX and OPEX.

In underpinning growth in natural capital applications, there needs to be a sound understanding of the scientific mechanisms for achieving the benefits. For example, coastal mangrove swamps are widely understood to provide flood protection to coastal communities. As part of a natural capital assessment Wood has been undertaking in the Caribbean, we have incorporated hydraulic modelling of coastal flooding to quantify the impacts in terms of changes in flood level and the associated impact on property flooding. Our work is providing the evidence needed to support national policy development ensuring its importance and that the wider benefits of natural capital are considered in decision-making.

Interest in natural capital strategies will continue to grow as the concepts of environmental net gain and BNG gain traction. These are valuable tools that can enable us and our clients in realising our commitment to sustainable development for the benefit of communities, industry, society and ultimately nature.

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