funding the natural environment

OxCam LNCP

The challenge

In this section we look at some of the reasons why funding and investment in the world of environmental management and projects can be challenging
We really want to encourage businesses, investors and funders to help resource projects that help halt the deterioration of nature across the Arc and beyond and bring about improvement that benefit people and more. However, there are some difficulties in translating traditional investment and funding routes into environmental management.
The main difficulties in applying a traditional investment/funding framework to the environment are:
  • Environmental projects are often small scale
  • Environmental projects often take longer to reach maturity
  • Environmental projects may have no clear beneficiary
  • Environmental Benefits are not easily monetised
  • Environment Management has often been left to charities and the public sector to mitigate private actions

Environmental projects – the long game

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Environmental projects are often small scale

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Valuing nature is difficult

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Benefits and beneficiaries

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Environmental projects – The long game

The challenge

Environmental projects often take longer to reach maturity – planting trees, for instance, requires at least 20 years before the trees are mature enough to provide the maximum benefits of carbon sequestration, air quality improvements, recreation, biodiversity and water management. As the old saying goes, the best time to plant a tree was 50 years ago. The second best time is now. If a funder/investor is used to 2-5 year long investments, then environmental solutions can be a very different world.

The good news

Environmental projects that are a mixture of actions have the advantage of providing different benefits and different timescales. For example, compared to a scheme that is simply “planting trees” as cheaply as possible, a scheme that mixes tree planting with other land use management (encouraging scrubland, meadows, perhaps community orchards) can provide short terms benefits to communities and wildlife as well as long term. This may be more expensive but with a range of partners, these benefits can be maximised to meet different partner organisation aims.
Download Welcome to the Natural Capital Trust

Engagement and co-creation

We exist in an interconnected world and our natural environment is no different. As you develop your business case and project you will need to consider what benefits can be achieved by taking a partnership approach. As so many of our pressing problems are complex and have impacts across physical and administrative boundaries; and as so many of our solutions can help address a multitude of issues, looking for ways in which you can build partnerships to address these and deliver multiple benefits is the best way forwards.
Building a partnerships or collaboration can take longer than doing things alone, particularly if this is how you have traditionally operated, and it may mean compromising on your outcomes. But it opens up many more sources of funding, resources and ideas and can help manage risks by diversifying the range of outcomes and lessening the impact any one single shock can have. It also means that by delivering multiple benefits for both the environment and society you will have a wider field of stakeholder from which to appeal for support from, as you are meeting a greater number of needs, which will make your case even stronger.
As the image shows, the project process should always begin with building partnerships and should have engagement and co-creation as constants throughout your work.
  • Partnership building: a broad term for the process by which one organisation or individual can work more closely with others to see more shared benefits, to share risks and help with risk management, and to share learning and other opportunities
  • Engagement: opening up to stakeholders, partners and other related groups about what you are doing and why; communicating about the benefits, costs and other outcomes you hope to achieve and what your project means for them. Ideally, a two-way process by which you learn from your stakeholders as well as you teaching them. Also, not a one off event but a process throughout the life of your project
  • Co-creation: allowing your project to be built and designed in full collaboration with partners and stakeholders so that it helps meet their needs as well as yours.
Download Participatory Mapping Guidance Document Final 200520CaBa Catchment Partnerships

Environmental projects are often small scale

The challenge

Most environmental projects are relatively small in scope, with budgets of less than £1m and often with local impacts. For example, natural flood management schemes, payments for ecosystem services, even sites of global significance such as SSSIs do not have a large operating  budget. This contrasts with the size of projects that many investors will be looking at which are often multiple millions of pounds.

The good news

Whilst individual schemes may be small, if schemes can be joined up strategically then they could become more compatible with larger financial investments. This also helps join up the overall impact of the schemes and helps ensure they are part of wider strategic schemes. Organisations exist to help compile funding or investment at a large scale and allocate this to schemes across an area to achieve joined up output for example, Trust for Oxfordshire’s Environment, Natural Capital Trust.
Opportunity mapping and strategic visions for the natural environment can also help you to develop your project in a way  that could improve both its impacts and funding opportunities.
Landscape innovation – 3KeelWelcome to Natural Capital TrustTrust for Oxfordshire's EnvironmentBuilding our evidence base

Valuing nature is difficult

The challenge

Environmental Benefits are not easily monetised – the main reason why markets do not already do a thorough job of funding and protecting nature. There are many reasons for this. One of the main ones is that many of the benefits of nature are not directly linked from each individual to every part of the environment (see the point about clear beneficiaries) – the benefits are diffused amongst the local, national and global populations.  Another key reason is that many of the things we get from nature cannot be bought and sold, so are not included in market decisions. For instance, whilst we can buy tickets to some parts of the countryside (golf courses, stately homes) or buy access (car park tickets), most of the countryside is accessible for no charge. Similarly the carbon sequestration benefits of habitats and soils; nutrient cycling, pollination from insects and so on.

The good news

The more we understand about the complexities in nature, the more we appreciate that we have to ensure that we don’t lose benefits just because we don’t understand them or can’t market them. Natural capital approaches actively encourage these perspectives and challenge “business as usual” accounting. Insurance markets, water companies, large food producers and the public sector are starting to look into how natural solutions can mitigate complex risks such as soil loss, climate change and flood risk management.
Natural Capital Story interactive pdfManchester PioneerVNN-Demystifying Economic Valuation-PaperBuilding our evidence base

Benefits and beneficeries

The challenge

Environmental projects may have no clear beneficiary – In the world  of economics, we often talk about how the benefits of an improvement (or the losses from a deterioration) are externalities as they are not internalised in any actors’ decision making processes. For example, if a small community at risks of localised flooding would benefit from tree planting or wetland restoration upstream, then there is no real existing market for them to pay landowners. Public policy can try to support these market failures but these policy instruments may not allow or encourage investment or funding to help step in. The beneficiaries could be communities, but they could also be businesses such as farmers needing pollination, food processing businesses needing agricultural produce, and local councils needing better air quality or recreational spaces.

The good news

The good news: There is considerable interest in encouraging policy or other drivers to bridge these gaps. One important process is Payment for Ecosystem Services (PES) whereby schemes and structures are created so that the beneficiaries can pay environmental managers for best practice for specific outcomes. The LENS approach seeks to join business beneficiaries as well as community and environmental groups. Other drivers that are providing a way to incentivise land management decisions would be Environmental Management Schemes (ELMS), carbon policies and commitments, and Biodiversity Net Gain. ELMS is likely to enforce some form of “public money for public goods” so land managers will have to demonstrate that they are providing services that benefit the wider public. Carbon commitments and BNG encourage or require organisations to measure their environmental impact and mitigate this.
Payments for Ecosystem Services (PES): best practice guide - GOV.UKLandscape innovation – 3KeelNatureBidCarbon Plan - gov.uk
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