UK firms ignoring £7bn of natural capital benefits

Businesses and landowners could be missing out on a £7bn windfall by ignoring the natural capital potential of their land, according to new analysis by infrastructure services firm Aecom.

The findings are the result of a project with National Grid, which hired Aecom to identify ways to optimise the productivity of its sprawling estate which feautured up to 2,000 acres of ‘wasteland’.

Aecom analysis highlighted a number of natural capital initiatives that could deliver benefit, including restoring wetland habitats to improve water quality and reduce flood risk, creating woodlands to improve air quality and provide recreation opportunities, and managing grassland habitats so that grazing regimes benefit both farmers and biodiversity.

When piloted on two sites in South Yorkshire and Derbyshire, the projects delivered approximately £9,000 of benefit per hectare. When scaled up across the National Grid estate, that equates to £18m of additional value from company land that is currently underutilised. When scaled up across the two million acres of ‘wasteland’ in the UK as a whole, natural capital improvements could be worth £7bn.

Natural capital refers to the elements of the natural environment that provide valuable goods and functions such as clean air, clean water, food and recreation. 

From liability to asset

AECOM senior environmental economist Chris White explained: “Businesses that own a substantial amount of land typically have areas that they can’t use productively if, for example, they can’t get planning permission for developing it.

“This land then essentially becomes a liability in terms of ongoing maintenance and security costs. The tool we’ve developed for National Grid enables organisations for the first time to easily assess and build a business case for managing this land differently. They’re able to turn pieces of land from liabilities into assets by investing in ecosystem services enhancements.

“There has been a lot of enthusiasm within the private sector for the idea of natural capital, but very little has been available until now in the way of practical tools that fit into existing decision processes.

“National Grid was very proactive in wanting to assess its natural capital, and we believe the tool and approach we’ve created can be replicated for other large landowners, helping them to achieve a broad range of potential benefits that can be passed on to multiple stakeholders.” 

The economic benefit from natural capital upgrades can be both direct – a stock of trees being sold for timber for example – or indirect, such as reducing healthcare costs thanks to improved air quality.

Other potential benefits include reduced insurance costs thanks to lower flood risk, the ability to sell carbon offsets thanks to forestry, or marketable opportunities such as recreational mountain biking.

Eye opener

National Grid’s environmental sustainability manager Ian Glover said: “We wanted to identify specific sites that weren’t being used, which we could transform into quality habitats that enable biodiversity to thrive and provide valuable, accessible green spaces in the communities in which we operate.

“The pilots have been a real eye-opener and has changed the way we look at our land assets. Land that was previously undermanaged or potentially earmarked for sale is now being reviewed to see if it can create additional value for National Grid, our stakeholders and for local communities.”

A report earlier this year from the University of Cambridge, sponsored by Mars, Nestle and Asda, found that there was a clear business case for pro-actively addressing natural capital issues in a business’ operations.

Brad Allen

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie