Natural capital refers to the planet’s stock of trees, waterways, soil, biodiversity and other resources. According to the Australian Bureau of Statistics, Australia’s natural capital is worth $6.5trillion.
Landscapes can be future-proofed from disastrous impacts of natural disasters through investment in natural capital, which involves land management to achieve certain goals. For fires and floods, this involves managing fuel loads and water systems. Biodiversity also leads to healthy landscapes.
Assessing the financial viability of investing in natural assets is a challenge. It can be expensive to measure vast distances in great detail using technology on the ground and man power. A combination of technologies is needed to take the cost out of remote measurement.
Reliable, credible and accessible data is fundamental to assessing the value and benefits of land management practices, which determine return on investment.
The limitations of government funding also present a natural capital investment gap. Land owners and managers are forced into trade-offs between financial returns and ecological conservation. There is potential for this investment gap to be filled by private capital through environmental impact funds and resilience bonds, potentially creating whole new economic models.
HSBC and the Queensland government have purchased “reef credits” to pay farmers to change their farming practices to reduce the amount of nitrogen and sediment that runs into the ocean and damages the Great Barrier Reef. By changing the water quality, investors can help sustain the reef.
The Forest Resilience Bond (FRB) produced by Blue Forest was piloted through The Yuba Project in the Californian Tahoe National Forest, in 2018. Through four private investors the FRB provided $4 million to finance restoration treatments across 15,000 acres of forest. This provided the upfront funding needed to carry out much needed work that otherwise would have been delayed until other funding became available. The investors are repaid through the bond by the State of California and the Yuba Water Agency at a rate predetermined and based on success of the project. This work has created further opportunities and interest in natural capital investment resulting in additional projects and established partnerships in the region.
We need to measure nature at a much higher resolution. This requires access to different layers of data from ground and LiDAR (light detection and ranging) to aerial and satellite.
New regulatory and policy models encourage the development of economically viable and accessible resilience-based land management practices. This will enable both private and public sectors to adopt these practices and encourage more investment as well as new economic models for natural capital in Australia.
Minderoo Foundation’s Data Collective is working towards providing a framework for data sharing across private and public sectors. This data can inform investment models that will identify and determine the suitability of regions that require investment in land management to reduce the risk of hazards.