Natural England defines natural capital as the parts of nature that provide benefits to people through ecosystem services. A list of assets that are considered to constitute natural capital are included within the report. These range from enclosed farmland to mountains, moors and heaths. The report states that any asset, if degraded, will not function well – in order to maintain a sustainable future supply of ecosystem services, we need to ensure that our natural capital is in good working order.

The report highlights key areas: economic resilience, net zero, climate adaptation, food security, health & wellbeing and water security. These provide a framework against which landowners and managers can explore opportunities to make improvements to and potentially receive payments from, the natural capital that is owned and managed.

Decision-making

A recurring theme of the report is centralising natural capital decision-making. This could be a nod towards a future of integrated policy for natural capital and its presence within the eagerly awaited Land Use Framework. By incorporating actions aimed at improving natural capital across all policy-making areas, in theory, more joined-up progress is made towards enhancing the overall state of natural capital in England. However, for an integrated approach to be successful, co-ordination from multiple areas of government is needed – a task that is easier said than done.

A place of choice

It is important to remember that natural capital encompasses more than just carbon sequestration and biodiversity net gain, which are often the buzzwords in this sector. While natural capital remains a viable investment opportunity, the report does not suggest that natural capital investments and improvements will become mandatory. The market continues to be a “place of choice”, presenting opportunities to enhance natural capital and explore investment possibilities. The report speaks of natural capital as an asset – appreciating its value to the country and the importance of safeguarding its future with a focus on the quantity, quality and location of natural capital.

Financing ecosystem needs

Aside from the integration of natural capital in policy making, the report speaks of the value of nature-related financial disclosures (a practice that is already in place) and promoting private and public investment in ecosystem creation and restoration. These investments must be the right kind of investment: the report notes the importance of avoiding financial support that drives risk to ecosystem needs – seemingly an effort to minimise the risk of greenwashing. Although greenwashing has declined for the first time in six years (according to RepRisk), it remains an area of concern for policy makers, in a time when transparency is so vital.  

What is clear is that private investment into natural capital remains critical to support Defra’s Environment Land Management Scheme (ELMS) budget and to meet the targets set in the Environment Act 2021.

Conclusion

Concluding that both society and the economy will face significant risks as a result of England’s degraded natural capital, Natural England makes it clear that we cannot take our natural capital for granted – and we must value it.  

There is a strong argument that land with greater natural capital assets, especially if they are in good condition, should have a higher capital value. The mathematics of this are simple; higher levels of natural capital, means more ecosystem services, which in turn yields a higher income. Higher income producing land, especially if stacked with multiple and diverse income streams should have a higher capital value.

The report considers introducing a measure of natural wealth similar to gross domestic product, which begs the question, could the value of England's environmental wealth become another national performance indicator in the near future?

A suggested review and repetition of the evidence every 5-6 years, means that those who do make the choice to invest in securing their natural capital assets will be tackling the risks to society and the economy head-on, and will be helping to secure policy goals both now and into the future.

Further information

Contact Katie Stein or Jon Dearsley