Green Commerce and Green Finance – the Basics

Nature includes the land we live on, the air we breathe and the waters and seas that support life, as well as all the plants and animals that live here. This can be thought of as natural capital. This idea treats nature as a stock of assets that provide benefits to people. 

There are many different ways that nature benefits people. Some of these are obvious, including food, fibres and timber. Other benefits include access to nature, which can improve health and wellbeing. Being able to go into the hills or a woodland or a park can encourage physical activity. Connection with nature can also improve mental health. Nature also provides benefits which historically have gone unnoticed. An example would be wetlands which store water. This reduces flow of water during rainy periods and storms and prevents flooding. Certain wetland plants also help filter water, removing any pollutants. Without these hidden benefits, many of the conditions we rely on to build our lives can be threatened. 

The benefits nature provides to people offers value. However, unless this can be measured, it is difficult for this value to be considered against other considerations. Some of nature’s benefits (such as food or timber) can be sold and are already valued in a monetary way. But many other benefits are not currently valued in this way. Because of this, it is difficult to invest in these parts of nature. It is important to find ways of measuring or valuing all the benefits of nature to make a strong case for why they should be protected. Another kind of value - intrinsic value - describes the value of nature in itself, without reference to its impact on people. This is an important and valid type of value, but in the past it has not always connected to financial support. Focussing on value in relations to the benefits nature provides people, or instrumental value, can help bridge this gap. 

Ecosystem services refers to the benefits that the natural capital assets provide. They can be grouped into the following categories: y Provisioning services: which provide tangible goods that can be harvested e.g. crops y Regulating services: which includes benefits from natural processes and cycles that sustain ecosystems. y Cultural services: which includes recreation, education and other health and wellbeing benefits. y Supporting services: which keep ecosystems functioning and allows other services to be delivered. Ecosystems services themselves are difficult to measure. Natural capital is often used as a proxy for estimating the ecosystem services delivered. 

Nature-based solutions is an approach to natural capital where the conditions of ecosystems are enhanced to increase the value of the natural capital and the ecosystem services it provides. Nature-based solutions highlight that restoring nature can be part of the solution to addressing wider social, economic and environmental challenges that we face. This includes challenges related to climate change, inequality, low growth and the health crisis.

Green Finance refers to investment in environmental projects that require a financial return on the investment or loan for those providing the investment funds.

Green Commerce is a new approach and starts by understanding what people and businesses need from the landscape and then designing investable, collaborative solutions to meet those needs. It is also referred to as Landscape Transformation Business Planning (LTBP).

Conventional conservation approaches are failing to halt the decline of habitats and species in the UK. Combined with growing disruption from a changing climate, this means landscapes are less able to provide the stable, productive environment on which society, nature and the economy depend.

The approach outlined in Natural England's Green Commerce Manual aims to harness the wider economy and landscape, to address underlying causes and drivers of environmental underperformance. 

Natural England's Green Commerce Manual identifies a range of funding options and levers and how these may be combined and coordinated. The manual also provides an illustrative example of how combining these different levers could look at the landscape scale. There are many ways in which Green Commerce opportunities might happen, some of these include: 

• Creating new markets
• Connecting businesses exposed to environmental risks with direct mitigation
• Using environmental interventions to reduce other forms of business risk, improving resilience
• Changing regulations or the way in which existing regulations are applied to benefit both businesses and the environment
• Developing new governance structures/ways of coordinating businesses and other organisations, which may allow them to share resources to mitigate risks more effectively together  

Natural England's Green Finance Toolkit provides a number of case studies and examples of different delivery options and funding sources, including compliance payments to ecosystem services. This is where land owners are paid to undertake actions that provide a specific ecosystem service, which the buyer is required to purchase to achieve policy compliance.

Mechanisms include:  

• Developers provide biodiversity uplift (on or off-site) as part of development as part of mandatory Biodiversity Net Gain (BNG).  
• Developers fund Suitable Alternative Natural Greenspace (SANG) and access management and monitoring to reduce pressure on the protected site.  
• Development must demonstrate that it achieves nutrient neutrality by supporting mitigation measures to reduce impacts on the protected site 
   

A blended funding approach includes private and public funding to deliver a PSS. Blended funding may be particularly important in the early stages of funding a PSS, to provide initial investment to explore options for building private markets.  

Payments for delivering a range of ecosystem services on the same parcel of land can be ‘stacked’ together. The government has set rules on what payments can be stacked. For example, a land manager could sell both carbon and water quality units from the same woodland.

Sometimes a single environmental credit can be sold, which represents multiple different ecosystem services. This is known as bundling. Bundles can be explicit (where each different ecosystem service is quantified) or implicit (where only one is quantified but others are assumed to be sold alongside it).