What is your definition of natural capital?
The majority of natural capital in the UK and globally is owned or overseen by the land-owning, land-holding, and farming sectors, and it has a range of assets. Some examples of these might be biodiversity, pollinators, landscape habitats, air quality, and water quality. All the things that nature delivers for us are embraced under the umbrella of natural capital.
How is natural capital linked to food, security, and economic growth?
The World Economic Forum has calculated that around 55% of global GDP (gross domestic product), relies on what nature provides.
Effectively, the land and farming sector is sitting on assets that are used within all of our daily lives. So it may be from a whole range of factors like air quality, water quality, and natural resources, but it's all critical to our survival.
Climate change and biodiversity loss are the two main existential threats because natural capital really is vital in so many aspects of our lives.
What is the state of global biodiversity and what impact does this have on food production?
Food production has actually been one of the major drivers of biodiversity loss, globally.
The cause of the decline in biodiversity is 70% down to food production systems. Food production systems at the moment are very extractive and not sustainable. However, we're seeing a very significant change in how food is going to be grown. This might involve much more reliance on regenerative agriculture, building organic material in soils, holding water back by having good soil management, and so on. The only way we'll be able to maintain food production and the security of food production in the future is by harnessing the value of nature rather than extracting it.
How can the farming industry play a pivotal role in helping nature’s recovery and generating natural capital?
The farming sector has a major role to play. In the UK alone, biodiversity has declined by 60% in the last 50 years, demonstrating that in a relatively short time, farming systems have become much more extractive and reliant on large-scale inputs.
By this I mean chemical inputs such as artificial fertilisers, pesticides, insecticides, fungicides and herbicides, all of which have had a major impact. According to DEFRA in 2021, around 52% of all UK farms were failing to recover the costs of inputs and costs of actually producing that food.
Now, farmers and landowners are looking closely at how they spend money on inputs and how they can reduce it as much as possible, and the value of chemicals is diminishing quickly, due to the growing worry of pest resistance.
Therefore, we need to find more innovative ways of growing food, like building nitrogen in soils by the use of legumes again and generally going back to older systems but making them more efficient and effective. These practices have a much more sympathetic rotational deployment, rather than growing monocultures that are only able to be produced with large chemical inputs.
The same can be said on issues such as large-scale agricultural machinery. We might see in the future that machinery sizes diminish, to enable farming and agriculture to reduce compression of soils. I’d also expect there to be robots operating these, so I’d suspect the means of growing our food will be much more remote.
By transitioning back to regenerative and more nature-friendly farming methods, farmers will be increasing natural capital while also looking after their own economic interests.
What are the funding options for farmers?
I think farmers see natural capital as a revenue generator, which is really important.
There is also a huge amount of activity in the corporate sector that wants to become more sustainable and improve how they deal with natural capital, and farmers are sitting on that very land that can allow them to do that.
For farmers, there is definitely the need to look at new income generation opportunities. One of which is obviously Biodiversity Net Gain, or BNG.
Looking at the demand for BNG into the future, the number of acres/ hectares needed is not massive. So not that many farmers will probably benefit from that. But they might benefit from the corporate sector’s interest in seeing landholdings enable them to fulfil a Nature Positive future.
We can provide sites through landowners and farmers that corporates can buy into through our Nature Credit product. This will help to make a real and lasting change to biodiversity through private investment into private landholdings.
We use the term ‘making nature economically visible’ to describe a lot of our work so that the farmer or landowner won't just see nature or natural capital as a ‘nice to have’ but as a mainstream revenue generator.
Farmers can build a holistic business around what the land can provide, and this isn't just about food, but is mutually compatible. As the farming sector adapts and changes in the coming years, a range of diversification strategies are practical to have in mind and in practice.
If we don’t move to a more regenerative way of farming, what will the consequences be?
I’d expect that yields are likely to decline if pests rapidly increase due to chemical resistance.
If you've got pests in mosaic-type environments where there are lots of predatory insects around that can control those pests, which is where the success will lie.
I was in Italy just last summer and I was in a vineyard. The site manager showed me a part of the vineyard which was out in the open and the yields were being reduced by pest infestations. However, another part of the vineyard was close to a forest, which had lots of predatory insects in it. That area had no pest problem at all.
That is a key example of how working with nature rather than against it or trying to control it is going to help maintain yields.
It might be that regenerative agriculture actually generates slightly lower yields, but the input costs will be so much lower that the number of those not recovering their costs will reduce drastically. The bottom line is that not moving to a regenerative farming model might hinder the economic success of farmers.
What is Environment Bank all about?
I founded Environment Bank in 2006 because I'd spent many years designing mitigation schemes for developments to get planning permission, only to realise that they were failing biodiversity.
Environment Bank was set up to lobby the government to change the law on planning so that it would require developers to provide gains for nature, preferably off-site where a real and lasting change could be made. I carried on lobbying and by 2021, Biodiversity Net Gain (BNG) became embedded into law through the Environment Act.
We’ve just raised a fund of around £220million working in partnership with Gresham House. We create large-scale Habitat Banks in partnership with landowners and farmers and we pay for all the costs upfront. We also provide finance for 30 years to actually transition land from being low-grade or low-production sites to havens for biodiversity. We then sell the uplift credits as BNG Units to developers, who require them to comply with the law, or Nature Credits to companies who need a meaningful mechanism to invest in nature.
