In the ever-growing recognition of the pivotal role that Nature-Based Solutions (NBS) can play in addressing environmental challenges, there has been a notable surge in the private sector’s engagement in financing Nature-Based Solutions. This reflects a broader acknowledgment of the intertwined relationship between business interests, environmental stewardship, and the pursuit of resilient and sustainable solutions to the pressing issues facing our planet. Some notable examples include L’Oréal S.A., through its Fund for Nature Regeneration, and Apple Inc., through its Restore Fund and in partnership with Goldman Sachs, Conservation International, and Climate Asset Management.
Despite the growing involvement of the private sector in financing Nature-Based Solutions (NBS), a substantial funding gap persists. According to the State of Finance for Nature report released at COP28 in December 2023 by the UN Environment Programme (UNEP) and partners, only $200 billion was allocated in 2022, a figure notably smaller than the $7 trillion annual global investment in activities that have a direct negative impact on nature. Governments contributed the majority, accounting for 82% (US$165 billion), while private finance made a more modest contribution of US$35 billion (18% of the total amount).
While obtaining financial support from the private sector is essential to bridge the financing gap, certain obstacles may hinder such assistance. As noted by Toxopeus and Polzin (2021), NBS possesses a public infrastructure nature, which may deter involvement from the public sector. Moreover, the absence of established metrics poses a challenge for private sector entities, as they rely on metrics for feasibility analysis.
The European Commission’s 2021 publication, “Evaluating the Impact of Nature-Based Solutions: A Handbook for Practitioners” (referred to as EC 2021 Handbook hereafter), provides valuable resources for measuring the costs and benefits of NBS. It emphasizes the importance of ensuring that evaluations of NBS impacts are relevant and useful for end users. Therefore, impact monitoring and evaluation plans should adhere to key principles, including scientific rigor, practicality and straightforwardness, inclusion of reference conditions and baselines, alignment with policy principles and reporting obligations, and the utilization of a transdisciplinary approach.
The EC 2021 Handbook provides several case studies, one of which focuses on a green barrier aimed at reducing the risk of floods due to snowmelt and extreme rainfall in the Gudbrandsdalen Valley, Norway. The main criteria for assessment include the following:
- Risk reduction
- Technical and feasibility aspects
- Environment and ecosystems
- Society
- Local economy
Each of these aspects requires evaluation using a range of metrics. For instance, the technical and feasibility aspects of the project include:
- Cost-Benefit Analysis of the Intervention
- Application of Suitable Materials and Technologies.
The cost-benefit analysis involves using indicators such as:
- Initial costs
- Maintenance costs
- Replacement costs
- Avoided costs
- Payback Period,
Meanwhile, the application of suitable materials and technologies is assessed based on the coherence of the materials used.
Another straightforward criterion is risk analysis, typically involving the assessment of hazards, exposures, and vulnerabilities. The impact of an NBS solution on risk reduction can be evaluated by considering its effects on:
- enhancing flooding risk resilience, such as by reducing peak flow or flooded area,
- minimizing potential exposure to flood risk for areas, population, buildings, and infrastructure, and
- mitigating vulnerability, including the economic value of productive activities susceptible to risk and potential vulnerable infrastructures (such as buildings, transportation networks, and lifelines).
There are various nuances in evaluating NBS solutions, leading to varying criteria and indicators depending on the specific solutions. However, the framework outlined in the case studies in the EC 2021 Handbook provides a solid foundation to build upon.
To be Continued in Part 3
References:
European Commission, Directorate-General for Research and Innovation, (2021). Evaluating the impact of nature-based solutions : a handbook for practitioners, Publications Office of the European Union. https://data.europa.eu/doi/10.2777/244577
Toxopeus, H., & Polzin, F. (2021). Reviewing financing barriers and strategies for urban nature-based solutions. Journal of Environmental Management, 289, N.PAG. https://doi.org/10.1016/j.jenvman.2021.112371
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