The concept of Natural Capital is receiving significant press attention and rightly so. Only now, 250 years since the first steam engine spluttered into life, is society contemplating the impact we are having on the natural world. The human race has been delving deep into the collective overdraft and the scientific community is clear … we are going to struggle to pay it off. The concept of Natural Capital may be the repayment plan.
Natural Capital is a term which has historically been overlooked. The reason? Simply put, it is challenging to monetise Natural Capital despite it being estimated to be worth nearly £1 trillion within the UK.
What is Natural Capital?
The meaning on Natural Capital is fairly simply. It is the world’s stock of natural assets including geology, air, soil, water and all living things. This would include all the habitats and ecosystems that provide social, environmental and economic benefits to humans. Scotland has a wide range of these habitats and ecosystems - each of which makes a unique contribution to the wellbeing of those who live and work in Scotland.
NatureScot (previously Scottish Natural Heritage) has attempted to track Natural Capital by creating the Natural Capital Asset Index (NCAI). Historically, Scotland's Natural Capital deteriorated until the 1990s. Evidence from the index suggests that Scotland's Natural Capital has grown slightly over the past 15 years and now is at its highest level since 2000, recovering from a low in 2012. This should be closely monitored over the coming years to assess the impact of policy change in this area.
Harper Macleod has seen an increasing number of clients and public bodies seeking advice on how best to improve their natural capital portfolios. This is challenging without having a working example of the difference between traditional capital and natural capital.
What's it worth?
A United Nations research group in 2018 decided to settle on the comparison between felled timber and a living mangrove forest in Thailand. The example may be thousands of miles away from the shores of Scotland but the comparisons are stark. The value of a felled hectare of mangrove forest was estimated to be $1000 in comparison to $21,000 in value attributed to flood protection, carbon capture and improved ecosystems of the same living forest area. The global value of the timber industry was estimated at $400 billion. The global value of the same amount of forest to be conserved simply for carbon capture was estimated at $3.7 trillion.
Even if we take those comparisons with a pinch, or even a fistful, of salt they remain startling. The question is what policies must be introduced to produce the carrot or indeed the stick, or both.
Taking a new approach to Natural Capital
Following Brexit, Scotland has a unique opportunity to redesign the land management support established via the EU Common Agricultural Policy. Given that more than 70% of land area in Scotland is designated for agricultural use, the farming sector is best placed to help adopt new approaches to Natural Capital. There must be greater focus on land use change in such a way as to benefit ecosystems, the economy and communities with an increased stewardship approach to land management in increasing woodland creation and peatland restoration. It would be encouraging if Scotland follows the proposed English system of public money for public good.
Taking a step away from government support, UK-based enterprises are taking strides to improve their Natural Capital portfolios. An example would be the Brewdog brewery. Brewdog has recently embarked on its Lost Forest project. This project plans to plant over a million broadleaf trees over 1500 acres north of Loch Lomond, including over 500 acres of peatland restoration. The project will contribute to Brewdog declaring itself double carbon negative. Brewdog has received exceptionally positive press coverage for this project and has undoubtedly helped sales and its wider green credentials. On a slightly smaller scale, a number of garden centres are now striving to declare themselves as suppliers of peat free soils. This may seem a marketing gimmick but the abstraction and drying of peat has been established to be a major contributor to atmospheric carbon.
The future is now. In order to achieve net zero by 2045 we must take challenging strides and potentially reassess priorities. We must look to solutions, often supported by government grant schemes, in order to meet our repayment plan to the world we live in. We have dined out for far too long on that overdraft.