Biodiversity Net Gain and Corporate Natural Capital Accounting

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1 BBOP 13: Explore the link between NNL/NG and Natural Capital Accounting: Develop a better framework for accounting for biodiversity and ecosystem services within natural capital accounts. Draw on the methods developed and discussed within BBOP for establishing baselines, exchange rules and metrics for NNL/NG accounting. Work at project level but also look at SEEA and national accounting methods. Biodiversity Net Gain and Corporate Natural Capital Accounting

2 Natural Capital Accounting: National level eftec Economics for the Environment Consultancy Natural capital is misrepresented in GDP: Invisible (e.g. declining assets through exploitation not seen in GDP) Limited (e.g. only part of natural capital s contribution is represented in GDP) World Bank: Natural capital is a critical asset, especially for developing countries where it makes up a significant share (36%) of total wealth. WAVES Coalition - help countries adopt and implement accounts; develop approaches to ecosystem accounting methodology; build international consensus around natural capital accounting System for Environmental And Economic Accounts (SEEA) - UN Statistical Commission (adopted, 2012 Framework revised, 2014): method to account for material natural resources.

3 UK example importance of private NCA eftec Economics for the Environment Consultancy The private sector owns and controls much of England s natural capital.

4 Corporate Natural Capital Level Accounting Improvements needed on biodiversity eftec Economics for the Environment Consultancy Acknowledged need for CNCA: Companies increasingly aware of their high dependence and impacts on natural systems. Natural Capital Protocol: We are drawing down our natural capital 50 percent faster per year than the earth can replenish it. Leading businesses, supported by the Natural Capital Coalition and others, are seeking to address this and improve decision-making. Corporate Natural Capital Accounting is one tool at their disposal. Recent reviews show some weaknesses of NCA: Focus on carbon emissions and water usage, overlooking biodiversity and ecosystem services (BES). BES not covered properly, so undervalued. Components that are not substitutable are traded off against each other. Accounts haven t covered the period over which losses and gains of biodiversity really accrue. Accounts haven t always look broadly at the landscape for full range of impacts, including indirect and cumulative impacts.

5 Accounting for Biodiversity Net Gain eftec Progress measuring and planning for Biodiversity Net Gain (and No Net Loss ): National policies in this broad area in some 100 countries loan conditions specifically for NNL/NG by 90 major financial institutions, and a proliferation of corporate commitments to No Net Loss, Net Positive Impact or Zero Net Deforestation. We re smarter at measuring losses and gains of biodiversity and ecosystem services. Companies have struggled to scale up, and to show the full value of investing in Net Gain of biodiversity. Commonalities: Challenging making business case for BNG without showing costs and multiple benefits from biodiversity net gain (related to carbon, water, recreation, health and wellbeing). So we need: A way to measure biodiversity and ecosystem services more accurately within organisations NC Accounts. A way to value all the benefits that arise from planning for NG of biodiversity Can we bring Net Gain planning together with CNCA? FT and eftec have prepared this methodology for discussion today and at BBOP14. Economics for the Environment Consultancy

6 CONTEXT: NATURAL CAPITAL ACCOUNTING AND BIODIVERSITY Ian Dickie 11 th October 2017 eftec Economics for the Environment Consultancy

7 Context: Natural Capital Accounting and Biodiversity Biodiversity and NNL/NG Natural Capital Accounting Biodiversity in a CNCA eftec 7

8 Context: Natural Capital Accounting and Biodiversity BIODIVERSITY - THE MITIGATION HIERARCHY eftec 8

9 Context: Natural Capital Accounting and Biodiversity THE MITIGATION HIERARCHY eftec 9

10 Context: Natural Capital Accounting and Biodiversity NATURAL CAPITAL ACCOUNTING eftec 10

11 Context: Natural Capital Accounting and Biodiversity NATURAL CAPITAL ACCOUNTING APPROACHES Raw Materials Manufacture Operations Distribution Use End of Life GHG, Air pollution, Water pollution & use, Land Use Impacts via ecosystem services Waste Impacts via other processes EP&L Stocks of natural assets CNCA Lots of overlaps in scope boundaries flexible Different perspectives - NC assets/ value chain boundary eftec 11

12 Context: Natural Capital Accounting and Biodiversity NATURAL CAPITAL ACCOUNTING APPROACHES Raw Materials Manufacture Operations Distribution Use End of Life GHG, Air pollution, Water pollution & use, Impacts via ecosystem services Land Use BIODIVERSITY? Waste Impacts via other processes EP&L Stocks of natural assets CNCA Both face a challenge on biodiversity eftec 12

13 Context: Natural Capital Accounting and Biodiversity CORPORATE NATURAL CAPITAL ACCOUNTING (CNCA) 1. What do we have? STOCKS OF NATURAL ASSETS 2. What does it produce? FLOWS OF SERVICES 3. What is that worth? NATURAL CAPITAL BENEFITS 4. What does it cost to maintain these benefits? NATURAL CAPITAL MAINTENANCE Values assets based on future benefits they produce Compares this to maintenance costs to give balance sheet eftec 13

14 Context: Natural Capital Accounting and Biodiversity CNCA LOOKS LIKE THIS At 31 st March 2016 Private External Total Financial Assets m m m m Baseline Gain/Loss Addition/Disposal Revaluation Gross Asset Value Liabilities Legal Other Total Maintenance Total Net Natural Capital Assets eftec 14

15 eftec 15 Context: Natural Capital Accounting and Biodiversity

16 Context: Natural Capital Accounting and Biodiversity NATURAL CAPITAL & BIODIVERSITY At 31 st March 2017 Private External Total Assets m Biodiv. m Biodiv. m Biodiv. Baseline Gain/Loss Addition/Disposal Revaluation Gross Asset Value Liabilities Legal Other Total Maintenance Total Net Natural Capital Assets eftec 16

17 Context: Natural Capital Accounting and Biodiversity ALTERNATIVE BIODIVERSITY METRIC PRESENTATION At 31 st March 2016 Private External Total Biodiversity Assets m m m Units Baseline Gain/Loss Addition/Disposal Revaluation Gross Asset Value Liabilities Legal Other Total Maintenance Total Net Natural Capital Assets eftec 17

18 Context: Natural Capital Accounting and Biodiversity PROJECT BASELINE At 31 st March 2017 Private External Total Assets m Biodiv. m Biodiv. m Biodiv. Baseline Gain/Loss Addition/Disposal Revaluation Gross Asset Value Liabilities Legal Other Total Maintenance Total Net Natural Capital Assets eftec 18

19 Context: Natural Capital Accounting and Biodiversity PROJECT IMPACTS At 31 st March 2017 Private External Total Assets m Biodiv. m Biodiv. m Biodiv. Baseline Gain/Loss Addition/Disposal Revaluation Gross Asset Value Liabilities Legal Other Total Maintenance Total Net Natural Capital Assets eftec 19

20 Context: Natural Capital Accounting and Biodiversity OFFSET At 31 st March 2017 Private External Total Assets m Biodiv. m Biodiv. m Biodiv. Baseline Gain/Loss Addition/Disposal Revaluation Gross Asset Value Liabilities Legal Other Total Maintenance Total Net Natural Capital Assets eftec 20

21 CONTACT Ian Dickie TEL: eftec Economics for the Environment Consultancy

22 Context: Natural Capital Accounting and Biodiversity FURTHER QUESTIONS 1. Progress for biodiversity in natural capital accounting? 2. Consistent approaches on biodiversity to use in different NC accounting frameworks? 3. Helpful to link methods like NNL/NG to NC accounts? eftec 22

23 Natural Capital benefits from Biodiversity Net Gain Julia Baker

24 483bn investment Great Western Northern Hub Ebbsfleet Garden City Humber Gateway

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26 Partnership

27 Case Study Voluntary commitment to Biodiversity Net Gain Operational & safety constraints Partnered with local groups for biodiversity offsets Adopted UK govt biodiversity metric

28 CASE STUDY: APPLYING THE JOINT NNL-CNCA FRAMEWORK Adams Koshy 11 th October 2017 eftec Economics for the Environment Consultancy

29 Case Study: Applying the Joint NNL-CNCA framework Biodiversity Accounting Natural Capital Accounting Joint NNL-CNCA Framework eftec 29

30 Case Study: Applying the Joint NNL-CNCA framework TIMELINE PROJECT SITES Offset outcome Impact Baseline Beyond 2022 Baseline Offset activities OFFSET SITES Offset implementation eftec 30

31 Offset sites TRANSFER Case Study: Applying the Joint NNL-CNCA framework Project site BIODIVERSITY OFFSET ACCOUNTS <1 161 [23] 183 BASELINE Loss in biodiversity IMPACT of project Regrowth and wildflower seeding Impact of factor IMPACT of project + RESTORATION activities Offsets OFFSET OUTCOME [23] 21 Outcome from offset activities Impact of time to target Offsets BASELINE OFFSET ACTIVITIES BASELINE OFFSET IMPLEMENTATION eftec 31

32 Case Study: Applying the Joint NNL-CNCA framework NATURAL CAPITAL AIR QUALITY CARBON SEQUESTRATION eftec 32

33 Case Study: Applying the Joint NNL-CNCA framework NATURAL CAPITAL BENEFITS PROJECT SITE METHODOLOGY AIR QUALITY BASELINE IMPACT of project IMPACT of project + RESTORATION activities CARBON SEQUESTRATION BASELINE IMPACT of project IMPACT of project + RESTORATION activities eftec 33

34 Case Study: Applying the Joint NNL-CNCA framework NATURAL CAPITAL ASSETS PROJECT SITE Over 50+ years AIR QUALITY BASELINE: FOLLOWING IMPACT of project + RESTORATION activities: 4.6m 3.8m CARBON SEQUESTRATION BASELINE: FOLLOWING IMPACT of project + RESTORATION activities: 1.6m 1.4m eftec 34

35 Case Study: Applying the Joint NNL-CNCA framework NATURAL CAPITAL ASSETS OFFSET SITE Over 50+ years AIR QUALITY BASELINE: FOLLOWING OFFSET activities (total): 0.27m 0.3m ATTRIBUTED TO OFFSET activities: 0.01m CARBON SEQUESTRATION BASELINE: FOLLOWING OFFSET activities (total): ATTRIBUTED TO OFFSET activities: 0.18m 0.2m 0.001m RECREATIONAL BENEFITS BASELINE: FOLLOWING OFFSET activities (total): 6.2m 15.5m ATTRIBUTED TO OFFSET activities: 1.4m TOTAL ATTRIBUTED TO OFFSET activities: 1.4m eftec 35

36 Case Study: Applying the Joint NNL-CNCA framework CNCA BALANCE SHEET III. Offset outcome Baseline year: Reporting year: Time period over which assets and liabilities are estimated: +50 years. Non-Renewables Renewables Private External Private m m m Biodiversity Units m Assets Total Value External Biodiversity Biodiversity 'm units units 1 Baseline value (2016) Cumulative gains/(losses) - (19.7) (1.1) (1.1) (19.7) 3 Additions/(disposals or consumption) Revaluations and adjustments - (0.2) (0.2) Gross asset value Liabilities Private External m m 5 Legal provisions a Offset delivery Other maintenance provisions Total maintenance provisions Total Net Natural Capital eftec 36

37 Case Study: Applying the Joint NNL-CNCA framework CNCA BALANCE SHEET III. Offset outcome Baseline year: Reporting year: Time period over which assets and liabilities are estimated: +50 years. Non-Renewables Renewables Private External Private m m m Biodiversity Units m Assets Total Value External Biodiversity Biodiversity 'm units units 1 Baseline value (2016) Cumulative gains/(losses) - (19.7) (1.1) 0 (1.1) (19.7) 3 Additions/(disposals or consumption) Revaluations and adjustments - (0.2) (0.2) Gross asset value Liabilities Private External m m 5 Legal provisions a Offset delivery Other maintenance provisions Total maintenance provisions Total Net Natural Capital eftec 37

38 CONTACT Adams Koshy TEL: eftec Economics for the Environment Consultancy