Natural Capital Incentives and
Support Mechanisms for Business
& the Financial Sector Workshop
Defra, TEEB for Business Coalition & Natural
Capital Declaration
Workshop Agenda
Timings Speaker Description
10:00 - 10:10 Oliver Greenfield, Convenor, Green Economy Coalition Introduction to the day: Natural Capital incentives and support mechanisms for business
10:10 - 10:30 Keynote: Ian Cheshire, CEO, Kingfisher Group Natural Capital: the perspective from the Ecosystem Markets Task Force
10:30 - 10:40 Lord De Mauley, Parliamentary Under Secretary of State for natural environment and science, Defra
Natural Capital and Ecosystem Services: The Government perspective
10:40 - 11:15 Dr. Dorothy Maxwell, Director TEEB for Business Coalition Business and Natural Capital - Developing the Natural Capital Protocol
11:15 - 11:35 Tea & Coffee Networking
11:35 - 12:00 Andrew Mitchell and Liesel van Ast, Natural Capital Declaration
The Financial Sector and Natural Capital - The Natural Capital Declaration
12:00 - 12:10 Christian del Valle, Managing Partner, Althelia Investing in Natural Capital – an international perspective
12:10 - 12:30 Zoe Knight, Director Climate Change Strategy, HSBC Bank Natural Capital – implications for economies and investors
12:30 - 12:40 Nick Barter, Head of the Natural Capital Committee Secretariat, Defra
Introduction to the Natural Capital Committees work to integrate natural capital into decision making
12:40 - 12:55 Helen Dunn, Senior Economic Advisor, Defra / secondee to TEEB for Business Coalition
Developing the UK roadmap for business accounting for nature – linking Natural Capital Protocol, NCD and Defra activities
13:00 - 13:45 Lunch (buffet lunch provided), tea and coffee Networking
13:45 - 13:55 Oliver Greenfield Introduction to 2nd half of the day.
13:55 - 14:25 Roundtable 1: Establishing the end point. Develop a vision for the end point of the roadmap.
14:25 - 14:40 Feedback from Roundtable 1
14:40 - 15:05 Roundtable 2: Where are we now & what actions are needed to support business integration of natural capital?
15:05 - 15:20 Feedback from Roundtable 2
15:20 – 15:30 Break Networking
15:30 - 16:05 Roundtable 3: Developing and delivering the roadmap
16:05 - 16:20 Feedback from Roundtable 3
16:20 - 16:30 Conclusions and wrap up The next steps and closing remarks from the hosts.
Ian Cheshire
Why business needs to change
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Net Positive
7
Changes and developments witnessed
Puma’s Triple bottom line
Closing the loop Nike’s re-used trainer M&S coat Neonicotinoids Businesses adopting precautionary principle Government’s Green Paper on Biodiversity offsetting BIS CR consultation Net Positive movement
Lord de Mauley
Parliamentary Under Secretary of State for natural
environment and science
NATURAL CAPITAL IN BUSINESS
Natural Capital Incentives and Supports, 10 Dec 2013, London
Dr. Dorothy Maxwell Executive Director
TEEB for Business Coalition
dorothy.maxwell@teebforbusiness.org www.teebforbusiness.org
BUSINESS POLICY & INTERNATIONAL
SCOPE: NATURAL CAPITAL
Source: Natural Capital at Risk – Top 100 Externalities of Business , Trucost for TEEB for Business Coalition, 15 April 2013, www.teebforbusiness.org Biodiversity & Ecosystem Services
Environmental Impacts VALUE
• Financial
• Non Financial
Externalities
• Positive & Negative
MAINSTREAMING
NATURAL CAPITAL PROTOCOL
AIMS & DELIVERABLES
• Valuing & Accounting for Natural Capital
– Why & How
– Business applications
• Two sector guides
• Road test
PROJECT TASKS
Consultation workshops & webinars (throughout process) Publish framework, sector guides with case examples
Revise & peer review Road test Case examples Peer Review & update
Independent Peer Review panel
Draft framework & 2 sector guides
Independent Technical Author Stakeholder Consultation
Mapping the Existing Natural Capital Initiatives
GOVERNANCE & CONSULTATION
INVITATION TO PARTICIPATE IN KIND
VISIBLE PROMOTION OF PARTICIPATION – website & publications ROAD TESTING
MAPPING EXISTING NATURAL CAPITAL
INITIATIVES IN BUSINESS
AIM
Mapping the initiatives
Valuation – methodologies, tools etc.. Applications in business and investors Links with policy initiatives
Inform Draft Straw man
Value add, fill gaps Users
Feedback Today
Mapping NC Initiatives in Business
Policy Business Engagement Business Applications Data NC Impacts & Dependencies Valuation
Mapping - Existing Status
Finance
VALUATION
Methodologies, guides & tools
for business
Developing methodologies,
guides, tools
Policy initiatives
Data/Databases
Existing e.g.
• Ecosystem Service Valuation Database (TEEB)
• Environmental Valuation Reference Inventory
Business Applications
• Filling data gaps, access & quality norms
• Technology Innovations
BUSINESS APPLICATIONS FOR
NATURAL CAPITAL
Strategy
• Value Creation, Net Positive • Integrated Thinking/Reporting
• 6 types of Capital – how natural integrates • Business Models
Sustainability Management
• Organisation
• Product / Supply Chain
Toolkit – well established, standards & tools
Biodiversity & Ecosystem Services are gap Standards /Guides: Measuring and Managing Environmental Impacts in Business
ISO 14040/44 Life cycle Assessment (all environmental impacts) ISO 14067 Carbon footprint (GHG emissions only)
ISO14064 Water Footprint (draft) (water)
EU Product Environmental Footprint (PEF) Guide (all environmental impacts )
EU Organisational Environmental Footprint (OEF) Guide (all environmental impacts of an organization) WRI/ WBCSD GHG product supply chain standard (GHG emissions)
Product/Supply Chain
• Bridge gaps
– Indicators
– Classification
Environmental Impact Categories (LCA)
Global Warming Potential (GWP) (IPCC 2007) Water eutrophication (ReCIPe 2008/CML 2002) Marine eutrophication (ReCIPe 2008)
Acidification (ReCIPe 2008)
Operational and embodied water use (water footprint) Waste
Non renewable resources depletion (EDIP 97(2004) Aquatic toxicity (Usetox)
Example - LCA impact indicators for
Ecosystem Services ?
Corporate Reporting & Disclosure
Natural Capital in
reporting
Financial
Accounts/Reporting/Disclosure
• GAAP & IFRS
• Full Cost Accounting & Life Cycle Costing
• Materiality
STRAWMAN
Feedback : Natural Capital Protocol
Aim: Why, What & How
Business language & consistency
Applications Focus
Scope : Natural, Social & Human Capital links
Format: More than one deliverable
• C-Level Guide – Why and How (high level)
• Protocol for practitioners – business, policy, consulting,
research
C-level guide – Straw man (business)
Business Case
• Why & what is the business value add • Risks & Opportunities
• Users –CFO, CEO, Sustainability, Operations, Procurement, etc...
Big Picture
• Business Models – Natural Capital links with 5 other types of Capital
Applying Valuing Nat Capital in Business
• Route map
• Using key questions/uses business are likely to have in practice • Examples to illustrate applications
Protocol – Straw man
Definitions & Scope
Measuring Natural Capital Impacts & Dependencies
• Classifications (e.g. FEGCS, Industry and trade consistency)
• Links to national environmental accounting metrics (UNSEEA) as suitable • Natural Capital Impacts and Dependencies- Indicators
• Bridging Biodiversity & Ecosystem Services indicator gaps in Life Cycle Assessment • Determining materiality per sector (sector guide)
Valuing Natural Capital - Business Applications How To
• Which technique & tool(s) for which application & how – fitness for purpose • Clarity on inputs required and outputs expected
• Clarity on benefits, limitations , trade offs
• Clarity on uncertainty of valuations – relative vs. absolute • Illustrate with examples (anonymized or real)
Valuing Natural Capital - Financial Institution Applications How To (linking with NCD project) Incentives required
• e.g. Payments for Ecosystem Services, Water Funds
Tools and Databases
• Filling gaps and access
• Criteria and quality norms required for consistency • Standalone/ adding to LCA databases and tools e • Using technology innovations in monitoring
NEXT STEPS
Feedback today
“Mapping” & “Straw man” Consultation draft –
early 2014
Participate in Natural Capital Protocol
http://www.teebforbusiness.org/how/natural-capital-protocol.html
Tea & Coffee Break 11:15- 11:35
The Natural
Capital
Declaration
and Roadmap
Andrew Mitchell, Founder & Executive
Director, Global Canopy Programme
Liesel van Ast, Programme Manager,
Natural Capital Declaration
– About the NCD and Roadmap
– Why is natural capital relevant?
– Work plans for Working Groups
– Proposed pilot projects
– Signatories and supporters
Links between natural capital and finance
Financial capital
Insurance Investment Banking
S ou rc e: P RI/UNE P F I, Uni v ers al O w ne rs hi p
The business case for financial
institutions to consider natural capital
• Over-exploitation of natural capital will cause price
volatility and business constraints across the economy. • Growing need to address exposure to indirect risks from
natural resource constraints and pollution issues embedded in loans, investments and insurance.
• Position portfolios for adjustments in price signals that aim to address depletion linked to market failure.
Engaging financial institutions 2010-2013
• Finance-led, CEO-endorsed initiative to mainstream natural capital in loans, bonds, equities and insurance, as well as accounting & reporting.
• Focus on the global financial sector: banks,
institutional investors, fund managers, insurance firms. • The NCD is building capacity for financial institutions to
develop structured approaches to address challenges. • Signatory financial institutions working with supporter
organisations to strengthen management of risks and opportunities to increase resilience and protect returns. • Project jointly managed by UNEP FI and Global
Canopy Programme.
• FMO (Dutch development bank) • First Green Bank (U.S.)
• Yes Bank (India) • Abrapp
• TEEB for Business Coalition
• Convention on Biological Diversity (CBD)
• Association for Sustainable & Responsible Investment in Asia (ASrIA)
• World Business Council for Sustainable Development (WBCSD)
• Climate Disclosure Standards Board (CDSB)
Secretariat UNEF FI, GCP NCD Steering Committee IFC Chair in 2013/14 WG Chairs, Supporters NCD Advisory Network
Academics and industry experts in natural resources, finance, accounting, science WG 1: Understanding Impacts/Dependencies Chair: Rabobank Project Manager KPMG Australia Project Manager CDP WG 2: Embedding NC in financial products Chair: Banorte WG 4: Natural capital disclosure/reporting Chair: Nedbank WG 3: NC accounting
Chair: National Australia
Bank Project Manager NVI/FFI Project Manager GCP
Governance NCD
Multidisciplinaryknowledge and expertise across signatories,
supporters and advisory network.
Objectives for implementation 2014-2016
• Build capabilities for signatory financial institutions to implement NCD commitments to understand, embed, account for and report on natural capital factors.
• Develop practical tools, guidance, methodologies, frameworks and indicators for financial institutions.
• Increase signatories in key areas (e.g. asset owners, fund managers, insurers, development/ banks, innovative and leading FIs) to address NC challenges across asset
classes and financial products.
Working groups for 4 commitments by 2020
Working Group NCD commitment
1. Understand Build understanding of risks and opportunities linked to impacts and dependencies on natural capital through operations, supply chains and portfolios.
2. Embed Support the development of methodologies to
integrate natural capital considerations into financial products and services
3. Account Work towards integration of natural capital into private sector accounting
4. Report Develop guidance for natural capital disclosure
Working Group 1
Chair: Lara Yacob, Rabobank (Netherlands); Project Manager: Global Canopy Programme
1. Map direct and indirect impacts and dependencies through loans and investments
2. Develop capabilities to evaluate natural capital risk. 3. Pilot project(s) to create and test methodology to
understand exposure to financial risk linked to natural capital.
Output: Methodology and guidance
Working Group 2
Chair: Marcos Mancini, Banorte (Mexico); Project Manager, Natural Value Initiative
1. Focus on corporate banking (lending, project
finance) and investment (public and private equities, fixed income).
2. Food & agriculture, energy and electric utilities; forest/timber and mining.
3. 2 work streams: (1) Risk management in existing products and (2) New opportunities, such as impact and thematic investment products.
Working Group 3
Chair: Rosemary Bissett, National Australia Bank Project Manager: KPMG Australia
1. Scoping to identify opportunities and barriers to quantify and account for NC in finance.
2. Work towards developing methodologies to quantify and evaluate materiality of NC across portfolios.
3. Develop and test methods for financial institutions to account for natural capital in financial reports.
Aligned with TEEB4B Protocol for companies.
Draft work plan for 2014-2016
Working Group 4
Chair: Vicky Beukes, Nedbank (South Africa) Project Manager: CDP
• Work stream 1: Disclosure
• R&D to enable disclosure by financial institutions on exposure to NC through financial activities/portfolios. • Develop disclosure programme with questionnaire and
guidance on natural capital reporting.
• Work stream 2: NC in Integrated Reporting by FIs • CDSB to help develop guidance for financial
institutions to include material natural capital
information in primary reports in an integrated way.
To develop and test methodologies under WGs.
NCD Pilot Project 1
• Develop evidence of natural capital as a material risk for financial institutions through portfolios.
• Develop practical ways to integrate material factors for natural capital-adjusted credit risk assessments.
Pipeline of NCD Pilot Projects
Understanding natural capital risks for financial institutions and embedding them in credit risk assessment
Phase 1 (under Working Group 1)
Developing and testing a methodology for mapping of impacts and dependencies across FIs’ portfolios
Phase 2 (under Working Group 2)
Develop methodology/ guidance to embed natural capital considerations into credit risk assessment
Work stream 1: Commercial banks and development finance institutions Work stream 2: Institutional Investors
.
Pipeline of NCD Pilot Projects
Guidance to address deforestation risk in soft commodities policies
Develop guidance to address deforestation and forest
degradation caused by agricultural production (i.e. oil palm, soy, beef) through lending, advisory and investment risk policies.
Partners
UN-REDD Programme UNEP
Figure 2. NCD Work package/Pilot Project 2
NCD Pilot Project 1
• Evaluate lending, advisory and investment risk policies in relation to sustainable production and consumption of soft agricultural forest-risk commodities.
• Identify good practice and opportunities to strengthen policies.
Thank you.
Christian De Valle,
Managing Partner
Althelia Ecosphere
Zoe Knight
Director, Climate Change Strategy
HSBC PLC
Natural Capital Committee
“A new independent Natural Capital Committee, to put the value of England’s natural capital at the heart of our economic thinking” reporting to
the Economics Affairs Committee chaired by the Chancellor.
The chairman of the NCC, Dieter Helm, was appointed in early 2012 with seven members added through 2012.
Natural Capital Committee
Natural Capital Committee
Defra Secretary of State: “What is clear is that we need to avoid growth that erodes our natural capital, and therefore our ability to grow in the future, but encourage growth which conserves or
enhances our natural capital”.
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“I do not, however, just want to
maintain our natural assets; I want to improve them. I want us to derive the greatest possible benefit from them, while ensuring that they are available for generations to come. This is what the NCC’s innovative work is geared towards”.
Natural Capital Committee
1. provide advice on when, where and how natural assets are being used
unsustainably. For example, in a way that takes us beyond some
acceptability limits or non linearity thresholds, or in a way that diminishes some measure of comprehensive wealth;
2. advise the Government on how it should prioritise action to protect and
improve natural capital, so that public and private activity is focused where it will have greatest impact on improving wellbeing in our society.
This will include advising the Government on tools and methodologies to ensure that the value of natural capital is fully taken into account in policy decisions and in economic planning;
3. advise the Government on research priorities to improve future advice
and decisions on protecting and enhancing natural capital. The
Committee’s advice in this area will reflect consultations with the Research Councils and the academic community.
Natural Capital Committee
Focus 1: Producing annual State of Natural Capital reports (first was April 2013). Providing information for Gov’t on whether our natural capital is being used sustainably.
Working with Defra and the Office for National Statistics to ensure the timely development of experimental natural capital national accounts.
Focus 2: Working with a few businesses (including major land owners and managers) to pilot the development of corporate natural capital
accounting.
Working with academics and the Research Councils to identify research priorities that will improve future advice on managing our natural assets. Providing ad-hoc advice to ministers – CAP reform, forestry, offsetting etc.
Natural Capital Committee
SoNC 1: the 2013 report set out a framework for what the NCC
thought was needed. Basically this was: to measure and value our natural capital in order to better manage it.
SoNC 2: the 2014 report will build on this and start to answer the
first of the NCC’s terms of reference – outlining the assets which are at risk – and suggest a generational framework for improving nature in a step towards its second ToR.
SoNC 3: the 2015 report will bring it all together (including its
corporate accounting work) and provide more concrete advice on its second terms of reference – how to prioritise public and private activity to protect and improve natural capital.
Natural Capital Committee
A single overarching 25 year framework (starting in 2015)
that:
• identifies where natural assets are not being used sustainably and/or are at risk;
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• brings together existing policies and strategies for protecting and improving NC and identifies gaps in order to maximise impact and effectiveness;
• ensures existing and future public and private activity is focussed where it will have greatest impact on improving wellbeing in our society.
Natural Capital Committee
The NCC is tasked with providing advice to the
Government that is relevant to public and private activity
(as part of its second ToR).
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This, combined with the fact that businesses own and
impact on much of our natural capital, is why the NCC
also has a corporate focus.
Natural Capital Committee
The NCC is working with its major landowners’ group to pilot experimental natural capital accounts.
The NCC, working with its consultants (eftec, RSPB and PWC), will:
◦ produce a methodology by late January;
◦ work with a small group of land-owning organisations to pilot accounts by summer 2014;
◦ use the lessons learned from the pilots to produce a generic accounting framework with accompanying guidance for other interested businesses to use by late 2014.
It will then report on this work in its third State of Natural Capital report (early 2015) and will consider whether it has a role in a 25 YP.
Natural Capital Committee
It is about working with them to develop and encourage the take up of NC accounts. We hope that it will be in their
interest to account for the natural capital they own. For example:
To obtain a picture of what is happening to their assets over time, documenting changes on which more informed
management decisions can be made;
To help make the case for securing wider revenue streams, from having a better understanding of the non-commercial value of their assets (benefits they provide to society); and
To demonstrate value added to society – CSR type reasons.
Joint Workshop hosted by TEEB for Business
Coalition, Natural Capital Declaration and
Defra
Developing the UK roadmap for business
accounting for nature
Helen Dunn, Senior Economic Adviser, Defra
Introduction
• Background to roadmap initiative - EMTF on business accounting for
nature (recommendation 21)
• Why a roadmap? What could be the potential benefits? • Links to policy initiatives for accounting for natural capital • Scope and timetable for Roadmap
Background to roadmap initiative:
Ecosystem Markets Taskforce Report
• Ecosystem Markets Task Force Report (March 2013) set out
a high level narrative of the importance for business to
• integrate the real value of nature into its thinking. Benefits for
companies include greater resilience and managing risk more effectively.
• EMTF identified need for support including new measures
and standards to support awareness of how businesses
depends and impacts directly or indirectly on natural
ecosystems.
•
• EMTF also recommended that Government review incentive
structures surrounding standards and metrics to see if these create specific barriers to take up
“We need better tools and metrics to
understand the role nature plays in our businesses: tools and metrics that will
integrate financial, environmental, social and governance information in a concise, consistent and comparable format”
Background to roadmap commitment:
EMTF recommendation 21
The commitment to develop a roadmap was set out in the Government’s response to the EMTF
recommendation 21 on business accounting for nature at: http://www.defra.gov.uk/ecosystem-markets/.
In particular:
1. reviewing incentive structures to ensure they
support the uptake of ecosystem standards and metrics by business. As part of this work Defra
will support the TEEB for Business Coalition to lead a workshop focussed on the topic;
2. working with business to produce and publish
a roadmap in Spring 2014 that builds on the
Why a roadmap? What are benefits?
Key part of roadmap work to review incentives and barriers to business uptake of ecosystem standards and metrics – seen as a gap
Opportunity to engage with initiatives encouraging business and finance sector accounting for natural capital including TEEB for Business Coalition and NCD (+ many others)
Roadmap could help to support this agenda towards consistent effort to embed natural capital in business
decision making and develop a longer
term strategy to incentivise uptake.
Policy initiatives - accounting for natural
capital
Tracking natural capital at national level: ONS/Defra ecosystem
accounting roadmap to 2020: to make more visible on the nation’s balance sheet
Policy appraisal ‘micro’ level: High level guidance
on identifying and valuing impacts in policy appraisal
Developing metrics for environmental reporting
and business investment in natural capital
What is in scope for roadmap?
Reviewing the incentives and barriers for uptake
Focus at a national (UK) level, but be developed with strong understanding of the international context and at what level actions need to be driven
Highlighting opportunities for progress over the short, medium and longer term including mapping key ‘points of opportunity’ over time – whether UK based or internationally - to further increase uptake
To be drawn up with key partners TEEB4BC and NCD via consultation with businesses, advisory committees such as the Natural Capital Committee, NGOs and Government.
What business, finance and policy drivers might
accelerate the demand for uptake of standards and
metrics?
Harmonising metrics and tools, filling gaps
Build on existing roadmaps – e.g. NCD roadmap
Developing the business case & case studies Reviewing current barriers to uptake?
- Organisation level (relevance,
measurement, priority, integration)
- Macro (lack of various pressures
including from government, customers and investors)
Indicative timetable and milestones for
roadmap
Summary paper on outputs of Joint TEEB4BC/NCD/Defra Workshop – Jan 2014
Follow on discussions/ working groups held to build on workshop outputs – early 2014
Drafting with key partners TEEB4BC, NCD and stakeholders of
roadmap including incentives review and timeline for action developed – for comment, March 2014
Final version of Roadmap agreed and published – Spring 2014
Thank you
Background to business accounting for nature
roadmap – see Ecosystem markets taskforce
report and government response at:
http://www.defra.gov.uk/ecosystem-markets/
For further information on Roadmap and
interest in becoming involved please contact
Geoff Richards (policy lead) or myself at:
Lunch Break 13:00- 13:45
Part 2: Workshop Sessions
•
Roundtable 1
– Establishing the end point. Developing a vision for the end point of the road map. What will integration of
natural capital look like in an ideal world?
30 mins. discussion
Table facilitators will feed back to the group your top three priorities.
Part 2: Workshop Sessions
•
Roundtable 2
– Where are we now & what actions are needed to support business integration of natural capital?
Based on the straw man presented by TEEB on harmonised Natural Capital Protocol.
30 mins. discussion
Table facilitators will feed back to the group your top three priorities.
Feedback : Natural Capital Protocol
Aim: Why, What & How
Business language & consistency
Applications Focus
Scope : Natural, Social & Human Capital links
Format: More than one deliverable
•
C-Level Guide – Why and How (high level)
•
Protocol for practitioners – business, policy,
consulting, research
C-level guide – Straw man (business)
Business Case
• Why & what is the business value add • Risks & Opportunities
• Users –CFO, CEO, Sustainability, Operations, Procurement, etc...
Big Picture
• Business Models – Natural Capital links with 5 other types of Capital
Applying Valuing Nat Capital in Business
• Route map
• Using key questions/uses business are likely to have in practice • Examples to illustrate applications
Protocol – Straw man
Definitions & Scope
Measuring Natural Capital Impacts & Dependencies
• Classifications (e.g. FEGCS, Industry and trade consistency)
• Links to national environmental accounting metrics (UNSEEA) as suitable • Natural Capital Impacts and Dependencies- Indicators
• Bridging Biodiversity & Ecosystem Services indicator gaps in Life Cycle Assessment • Determining materiality per sector (sector guide)
Valuing Natural Capital - Business Applications How To
• Which technique & tool(s) for which application & how – fitness for purpose • Clarity on inputs required and outputs expected
• Clarity on benefits, limitations , trade offs
• Clarity on uncertainty of valuations – relative vs. absolute • Illustrate with examples (anonymized or real)
Valuing Natural Capital - Financial Institution Applications How To (linking with NCD project) Incentives required
• e.g. Payments for Ecosystem Services, Water Funds
Tools and Databases
• Filling gaps and access
• Criteria and quality norms required for consistency • Standalone/ adding to LCA databases and tools e • Using technology innovations in monitoring
Part 2: Workshop Sessions
•
Roundtable 3
– Developing and delivering the roadmap
Session aims to gain consensus on where the roadmap can add the most value to organisations, how they can contribute to its development, and mapping its key componements. 30 mins. discussion
Table facilitators will feed back to the group your top three priorities.
