Natural capital – what is it, and how to monetise

April 22, 2020 5:49 pm

What is Natural Capital?

Natural capital comprises Earth’s natural assets (soil, air, water, flora and fauna), and the ecosystem services resulting from them, which make human life possible (UNEP Finance Initiative).

The Australian Environmental-Economic Accounts (Australian Bureau of Statistics 2018) calculated the value of the nation’s natural capital to be over AU$6.4 trillion annually.  Land (soil, water, biodiversity) accounted for 90% of the total value and had increased by 12% in comparison with other environmental assets (minerals, timber and energy).

For accounting purposes in an agricultural setting, natural capital can be developed through a number of management practices that build and conserve carbon, enhance biodiversity and water quality and cycling.  In the current marketplace opportunities are developing in the following areas;

  • Carbon – emissions avoidance, reductions or sequestration via vegetation, soil or herd management to generate Australian Carbon Credit Units (ACCUs)
  • Biodiversity – biodiversity and ecosystem health measured independently with tools and methods of assessment.
  • Water – improved water quality and water use efficiency.
  • Green finance – investment in the agricultural sector that delivers positive climate outcomes, namely resilience and emissions reduction.
  • Renewables – investment in on-farm wind and solar energy infrastructure.
  • Product premiums – receiving better prices for agricultural products such as organic food and grass-fed beef.

Using sustainably managed grazing systems is a way of increasing soil carbon. Impact Ag Partners has assisted a client in establishing such a system in 6 years, building their soil organic carbon from 3.8% to 5.01%.

Building on-farm natural capital gives land managers access to a broad range of other social, environmental and financial benefits including;

  • Increasing soil biology and farm biodiversity
  • Decreasing the use of chemicals and fertilisers
  • Increasing drought and climate change resilience
  • Improving water use efficiency and off-farm runoff
  • Increasing farm productivity
  • Supporting regional economies and small businesses

The main aim for using a framework for natural capital is to open a way for farmers and land managers to appreciate nature and to embrace the imperative to measure, manage and invest in natural systems with the same due diligence we as a society use for other forms of capital.

Regenerative agriculture that builds and preserves natural capital can deliver stable investment returns while improving climate resilience and storing carbon in the landscape

What’s happening on the Australian carbon market?

Despite challenging economic conditions on a global scale, the Australian carbon market experienced substantial growth with a 14% increase in value at the 10th Emission Reduction Fund auction held last month (March 2020).  The volume of abatement also increased with vegetation projects continuing to maintain the greatest number of contracts with soil carbon projects in second place.

News such as this invokes confidence in the marketplace. Coupled with the Australian Government’s AU$2.55 billion commitment to the scheme, we anticipate an increase in demand from a variety of institutional, corporate and green bond investors for the protection and/or procurement of natural capital.

Whether you are starting out or ready to jump into the marketplace, Impact Ag Partners can assist you to navigate the path to carbon credits with their team of Natural Capital specialists and regenerative farming processes to deliver stable investment returns while improving climate resilience and storing carbon in the landscape.

Read more on how Impact Ag Partners assist their clients in generating, measuring and monetising natural capital across their assets.

 

Related articles:

How carbon can not only benefit the environment but also increase your bottom line

What is the price of carbon in Australian Agriculture?

 

 


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