Is there an intersection where ecology and economy collide?

According to Real Wild Estates, there certainly is and this ‘natural capital’ startup is catching the eye of investors. With claims of tens of millions of pounds already set aside to acquire land for ecosystem and species restoration, they promise to be the UK’s first business offering sustainable financial returns in this sector.

But what exactly is ‘natural capital’ and why is this so revolutionary? The term itself is not new. It was first used by economist E.F. Schumacher in the 1970s. It refers to goods or services derived from the natural environment. In terms of return on investment for this asset, rewilding has been the starting point for generating a number of innovative income streams. In practice, rewilding is the large-scale restoration of ecosystems that allows nature to take back control of the environment.

One of the main social and economic benefits of this approach lies in the increased resilience to climate change phenomena. Often, rural communities where practices like rewilding are operationalised are also the places worst hit by ecological devastation. From flooding to fires, a damaged ecosystem means an impaired ability to adapt to disaster. It is also these rural communities that are more reliant on natural resources. For example, agricultural industries often have to deal with soil degradation caused by the effects of fertilisers and pastoral practices. We see that when ecosystems are disrupted, there can be an increased number of pests, decreased number of pollinators and poor crop yield.

However, the benefits of rewilding aren’t strictly found in rural economies. With the government planning to increase concessions for biodiversity enrichment and carbon offsetting, more and more industries are looking to natural capital assets. The reason behind this move comes from a few different factors. Since the UK decided to move out of the EU, it has been necessary to adapt its own policy towards environmental management. The Department for Environment, Food and Rural Affairs (DEFRA) created the 25-year plan which was designed to outline post-Brexit goals for the UK. In particular, the Environmental Land Management (ELM) scheme came out of these new policies with promises to incentivise sustainable farming, local nature recovery and landscape recovery.

This is where nature-based economies come into play. Already, Rewild Britain has reported a 54% increase in jobs over the past 10 years in the rewilding sector alone. The UN Climate Change Conference (COP26) has made the call for governments to start looking at ways to transition to greener economies. In 2020, the UK and other global leaders made a commitment to reverse biodiversity loss by 2030. Rewild Britain have theorised that if the UK follows through on this pledge to protect just 30% of the UK’s land and seas, we can make a transformative change to the environment and develop a sustainable economic infrastructure. They suggest that if 30% of the land went towards core rewilding areas (5%) and regenerative areas (25%), we could reap significant economic and ecological benefits. Let’s take a look at what this might look like.

Carbon sequestering is one viable income stream from this endeavour. In essence, it is the long term removal and capture of carbon dioxide from the atmosphere. A scientific study found that:

If a third of the planet’s most degraded areas were restored, and protection was thrown around areas still in good condition, that would store carbon equating to half of all human-caused greenhouse gas emissions since the industrial revolution.

(Nature journal)

In the same study, scientists predicted that we could recover 55% of our unusable farming land through this method and increase agricultural productivity significantly. Other benefits of carbon capture include power generating, fuel production and it can even be used in manufacturing. Some of the largest industries in the world are already investing in carbon capture technology. As governments are being increasingly pressured to increase taxation of the worst carbon emitters, rewilding offers a unique and potentially profitable natural solution.

As you may have guessed, however, such plans are by their nature long term. Although we are seeing more investment and traction for ideas like carbon sequestration, the technology and funding are still falling behind demand. In fact, a 2018 study (by the journal of applied ecology) found that one of the biggest barriers to rewilding was uncertain outcomes of stakeholders.

Thus, let’s move on to another contender for a nature-based economy: ecotourism. The International Ecotourism Society (TIES) defines ecotourism as:

Responsible travel to natural areas that conserves the environment, sustains the well-being of the local people, and involves interpretation and education.

As you can imagine, with tourism accounting for 1 in 10 jobs worldwide, this industry promises a huge boom for job growth. It is an industry that has grown considerably over the past ten years. Current market growth estimates predict ecotourism becoming a $333 billion US dollar industry by the year 2027 with a survey by finding that 87% of travellers want to travel sustainably.

In the UK and Europe, a number of estate and landowners are converting to rewilding. At present, the European Rewilding Network (ERN) already has 27 participating countries and 75 rewilding initiatives. There is an increase in funding in both the public (ELM) and now the private sector for such initiatives. A number of organisations have already been backed by the Natural Capital Financing Facility (a joint initiative of the European Investment Bank and European Commission) and Triodos Regenerative Money Center, REC who provide low-cost loans of up to €1 million euro to estate owners looking to generate positive rewilding impact.

The potential for a nature-based economy doesn’t stop there. Sustainability is a big part of rewilding. The idea of regrowth is about living within the capacity of nature. Currently, we are expending resources beyond our means. This is what has led to our current climate devastation.

While ‘sustainability’ has become somewhat of a throwaway term over the past few years, there are a number of principles that are still useful. The purpose of a nature-based economy is to provide sustainable economic productivity. Rewilding gives natural capital resources a chance to re-establish themselves. Whether this is in agriculture, forestry, fisheries or aquaculture, we need to design an economic model that accounts for the actual capacity of the resources we have. To this end, we need investment in technologies that supplement these goals and also generate return on investment. In the UK for example, £200 million pounds of funding has been earmarked for “innovative projects such as sustainable drainage systems and nature-based solutions.” Such approaches are not only about mitigating financial risk caused by climate change, but also about investing in new jobs and more sustainable economies.

With all that said, there is still a lot of room for growth in the realms of a nature-based economy. The prospects of natural capital are enticing but limited. One of the biggest areas of contestation is government funding. In the study conducted by the journal of applied ecology, many landowners had reservations towards rewilding. One of their main concerns was the lack of appropriate and flexible funding opportunities. Now, as we discussed, the UK is making a number of policy changes to its environmental stance, but the green finance institute reported that there is a funding gap of £97 billion pounds between the government’s commitments and actual money available. Where is the rest of the money going to come from? The old adage is that it takes money to make money. If we want to see the growth of a nature-based economy, it will be the role of private investors to address this gap. It is likely that big business will rise to meet some of these demands, but the shortfall may be left to the general public to meet.

It all depends on whether we can buy into the prospects of what rewilding, natural capital and a nature-based economy offer. Yes, there are viable economic streams, but many of the ecological benefits are just as far-reaching. We need to account for the well-being, ecological resilience and beautiful wildness that a nature-based economy might bring forth.

Surely, this is an investment opportunity none of us can afford to miss?