Natural capital: economic benefits assessment

Conclusions

Next steps and recommendations

The estimated £12.5 billion in public and private investment that would help to address the nature finance gap for Scotland and its potential economic impact on outputs and jobs into the Scottish economy presents a significant opportunity to transition towards a green economy. However, these economic benefits can only be achieved through concerted effort, planning and strong partnerships.

Initially the jobs created may be temporary or substituted from other activities, which could dilute the economic benefits. Hence, it is crucial that the additionality impacts of these investments are further explored. In addition, adequate skills and training programmes should support these investments to ensure jobs do not leak out of the region or wages do not rise artificially due to skills shortages.

The workshop discussion also highlighted the "opportunity cost of investment" where delayed investments could mean either risking more environmental decline or experiencing higher costs in the long run (e.g. the cost of mitigating climate change are likely to increase as action is delayed). In which case it would be useful to further explore whether the incentives and market drivers are fit for purpose to scale up responsible private finance. Investment in natural capital interventions can be motivated by institutional investors complying with ESG and SDG principles versus corporates and utility companies looking to reduce costs or generate revenues through nature-based solutions. Hence, it would be helpful to look in more detail at how the market is responding to the needs of private sector investors.

The stakeholder discussions also highlighted that the findings of the economic model should be further complemented by looking at the community impacts of investments in nature-based activities. The social value of these investments can be substantial and recognising these benefits more explicitly could also help to accelerate or scale up these investments.

Moreover, nature-based interventions require strong partnership models, mainly because nature-based solutions can have multiple impacts. For example nature-based flood management can also involve peatland restoration. Impartial intermediaries can help in fostering investment by forming a multi-interest partnership. Intermediaries can have different roles depending on the business model. Different delivery models should be explored further, where intermediaries (local business partnerships, sector-based associations, landscape partnerships) could play a role in pooling finance, providing advice on green interventions, or executing projects.

The results of this study could be expanded to incorporate the marine environment by undertaking research into the relationship between various marine natural capital interventions and economic outputs.

Finally, we recommend that the findings of this study should be considered along with the enabling and delivery frameworks mentioned in Scotland's Biodiversity Strategy to 2045: tackling the nature emergency published in December 2022. The economic model can provide the evidence base for the various investment and delivery plans mentioned in the strategy.