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UK must invest more in its natural assets to support long-term economic growth

17th November 2015

A new report from the Aldersgate Group out today, Investing in our natural assets: how government can support business action, argues that it is in the UK’s economic and social interest to increase investment in its ‘natural capital’ and calls on government policy to do more to support businesses investing to improve the state of the UK’s natural assets. 

Featuring case studies from major projects such as Crossrail and the work of Aldersgate Group members including National Grid, the RSPB, Kingfisher, Willmott Dixon and the Woodland Trust, the report explores how businesses are already assessing their reliance on natural capital and investing to protect it.

The UK’s ‘natural capital’ includes the natural resources that provide goods and services essential to the functioning of our society and economy, such as the availability of clean water, food, timber, recreational green spaces and the regulation of flood risk and other climate change impacts.

The report argues that with the state of the UK’s natural environment rapidly declining, the UK urgently needs to prioritise the state of its natural assets in order to support the future resilience and productivity of its economy. The report refers for example to the current degradation of soil, estimated to cost £1.2bn a year in England and Wales alone, which is undermining the vital economic and social functions that soil plays in supporting food production and storing water and carbon. Environmental damage feeds directly into costs for government, business, supply chains and households.

Nick Molho, Executive Director of the Aldersgate Group, said: “Not properly valuing natural capital poses economic risks for the UK but natural capital projects can also provide excellent investment opportunities, by ensuring that the key natural resources our economy and society depend on will remain available in the long term. By putting more focus on improving the state of our natural capital in policy making and investment decisions, government and businesses can manage risks more effectively and will reap the benefits in terms of long-term growth and competitiveness.”

In this report, the Aldersgate Group sets out how action by government can help deliver natural capital improvements through:

Better measurement –improving understanding of our reliance on natural resources will help its value be better reflected in policy and corporate decision making and support economic growth over the long term. The Office of National Statistics should in particular continue its work to incorporate tools to measure the state of the UK’s natural capital into the national accounts.

Improved integration of different policy areas – improving the state of the UK’s natural capital could deliver benefits and cost savings for a range of policy areas beyond just the environment and requires much greater levels of co-operation across several government departments including the Department of Health, the Department for Communities and Local Government and the Department for Environment, Food and Rural Affairs.

Evidence such as the NHS Forest Initiative suggests for example that the availability of green spaces for recreational purposes can improve health, accelerate patient recovery and cut costs for the NHS. The government has also previously estimated that coastal wetlands provide valuable services in the region of £1.5bn a year in terms of helping managing the impacts of storms and floods.

The recent co-operation between the RSPB and Crossrail have provided a valuable example in this area: more than three million tonnes of earth tunnelled from beneath London’s streets has been used to help transform Wallasea Island into a huge wetland, which will provide economic benefits in terms of reduced flood risk and flood defence expenditure, increased tourism and significant carbon storage.

Helping build a supportive structure for investment in natural capital projects – long-term investments in natural capital improvements and new market opportunities can be supported by targeted government action.For instance,the reform of existing subsidy schemes in areas such as agriculture could help channel greater funds towards projects aimed at improving the state of the UK’s natural assets. Helping set up markets for ecosystem services, of which some examples already exist in the water and farming sectors, could also result in greater private sector investment in natural capital improvement projects. 

Ensuring robust institutions can help deliver natural capital improvements over the long term – the work of institutions such as the Natural Capital Committee has been fundamental in driving forward understanding in this area. Confirmation of its future remit and an ambitious 25-year plan for biodiversity will help safeguard the UK’s natural capital strategy and steer policies towards delivering better environmental outcomes in the long term.

The report will be launched at an event in Parliament today, hosted by Peter Aldous MP, member of the Environmental Audit Select Committee.