Capital Connection

Posted by Daniel Allen on 4/06/2019

 

A growing number of British cities are now reevaluating their natural assets. In Greater Manchester a pioneering new plan could leverage such assets to generate returns for both investors and society.

 

Funding shift

By 2050, over two-thirds of the human population will be living in cities. But what will those cities look like? Will they be sterile, concrete jungles blighted by pollution, extreme temperatures and a lack of clean water? Or will they be pleasant urban centres filled with the connected green spaces and thriving wild nature that typically support and improve human existence?

 

Today, a paradigm shift in the way we view so-called "natural assets" is seeing a growing number of cities reevaluate how they value, manage and invest in their natural capital - the elements of the natural world such as soil, trees, water and air - that provide benefits to their residents. This new approach not only promises to make the cities of tomorrow more liveable, but to boost their ability to counter pressing societal challenges such as climate change.

 

Many British cities have long experienced strong investment in communications and built infrastructure. But investment in urban blue-green infrastructure remains minimal. Outside the public sector, money flowing in to natural capital has traditionally been limited to philanthropic sources.

 

"To achieve measurable improvements in the UK's urban natural environment, there is clearly a need to mobilise existing and new sources of funding," says Krista Patrick, Natural Capital Coordinator with the Greater Manchester Combined Authority's GM Environment Team.  

 

Pioneering approach

No city can achieve ambitious goals for protecting and enhancing natural assets without adequate financing. Innovative financing and business models - such as impact investing, green bonds and voluntary private sector investment in ecosystem restoration - can help pave the way towards large-scale implementation of nature-based solutions.

 

With this in mind, Greater Manchester has developed an innovative Natural Capital Investment Plan - the first of its kind for a UK city region. The focus of the plan is to attract investment in the region's natural environment, not only securing the future of its natural assets, but generating healthy financial and social returns as well.

 

Manchester's Natural Capital Investment Plan builds on Greater Manchester's natural capital account, which identified the region's green infrastructure assets, the benefits they provide, and the cost of maintaining them.

 

In undertaking this ambitious plan, Greater Manchester is joining a number of cities and city regions around the globe formulating new ways of financing environmental improvements, including Washington DC and Malmö in Sweden.

 

"Sound financial thinking will help us to determine the monetary as well as the social benefits that our natural environment provides," said Leader of Stockport Council and Green City Region Lead Alex Ganotist at the time of launch. "If we can do this, then we can encourage investment in those assets."

 

Scaling up investment

Manchester's Natural Capital Investment Plan builds on Greater Manchester's natural capital account. Completed in 2018, this identified the region's green infrastructure assets, the benefits they provide, and the cost of maintaining them. According to the account, the region receives around £1billion worth of benefits from its existing natural capital every year, encompassing everything from air quality and noise regulation to carbon sequestration and mental health.

 

The aim of the plan is to  support investors and investments requiring financial returns - this will almost certainly involve some form of blended finance (a combination of funds for risk sharing). Broadening the range of investment sources for natural capital is challenging because many different parts of society receive benefits from natural assets without paying for them.

 

Despite this challenge, the plan identifies a wide range of potential investment opportunities, assessing the "investibility" of each in terms of the size and predictability of revenue streams, and their attractiveness to investors (reflecting risks and returns). This assessment takes account of the value generated for society, but the primary focus is the ability to generate profit.

 

The priority now is to set up a pipeline of investible opportunities. For Greater Manchester these relate to the leasing of blue-green infrastructure (to trusts), habitat and carbon banking, and sustainable drainage systems.

 

"We are now helping a number of organisations develop business plans that demonstrate their investibility," explains Krista Patrick. "Going forwards, I'm optimistic that we can improve Greater Manchester's natural environment, delivering benefits to a whole range of stakeholders in the process."

 

Natural asset thinking from Ecosulis

Today, underpinned by the principles of recoverable Earth, natural asset restoration and rewilding offer rewarding and potentially lucrative opportunies for land management. Capturing the zeitgeist, the Ecosulis Natural Asset Framework offers a new, viable and forward-looking alternative to the status quo.

 

The framework is designed to help land owners, managers and investors derive higher levels of value from the practice of managing and restoring natural areas. Based on innovative natural asset systems thinking, its grounded and systematic approach generates multiple revenue streams by connecting the restored forces of nature with modern societal trends.

 

Want to know more?

 

For a no obligation discussion about how the Natural Asset Framework might add value to your project or business, please contact Dr. Paul Jepson, Ecosulis Nature Recovery Lead (Paul.Jepson@ecosulis.co.uk / 01225 876 974).