Our Thoughts
Tue, 09/11/2021 - 12:00
· 3 min read

Natural Capital, Natural Value for Real Estate

We depend on natural capital - land, water and air – to live. The planet provides us with food, fuel, materials, and clean air, but that natural capital is depleting.

Valuing nature to ensure we invest resources into reversing that trend was the topic of a panel at BNP Paribas Real Estate UK’s 'Shaping A Better World From the Ground Up' webinar.

The starting point is to measure the value of nature, socially and economically, in the same way as man-made assets to unlock investment. For real estate, some of that value is already evident, such as how proximity to a park adds a premium to homes.

But there are many other benefits such as the impact on health and well-being and climate mitigation – water absorption, for example - which can also be measured.

Quantifying that value will support the case for investment into the natural environment. So far, investment has been primarily driven by regulation – and there are more legislative sticks to come. But being able to measure and demonstrate the economic and social value is the carrot for landowners, developers and investors.

Jason Beedell, Director of Rural Research, BNP Paribas Real Estate UK, said it is now possible to measure the impact of natural capital on landowners profit quantitively and qualitatively.  And that can be a light bulb moment.

“They've never really thought about their assets in that way before,” he said. “You can show the overall environmental position, and we can do it quantitatively pretty accurately. We'll never get everything measured, but it's a much better position than we've ever been in.”

Sustainable accounting is also starting to filter into investment decisions. Caroline McDade, National Head of Planning, BNP Paribas Real Estate, said: “We're seeing clients starting to think about what the outputs and environmental benefits of a development project might be really early on. So, this might be at the feasibility stage, if not at the site purchasing stage.

“They will add that into the cost of purchase and construction to ensure that they're meeting whatever objectives that they want to hit.”

Improving natural capital is harder to do in urban areas where there are huge demands on land. Including space for nature can be tricky but not impossible if designed into developments from the outset.

For example, ensuring the building structure can support a sufficient soil depth to create a green roof. There is a cost attached, but natural capital can provide huge benefits to real estate, such as trees providing shade in hot weather, landscaping that absorbs rainwater and green features to enhance architecture. Such features can also add to the appeal for occupiers.  

There is an opportunity to develop natural capital investment models across city regions and counties. Local authorities are tasked with developing local nature recovery strategies, which means putting together a plan to maintain and improve the natural capital in their areas.

Beedell said: “Because you've got scale, that's going to create investment opportunities. Some of them will be funded through new schemes that are coming through in the environmental land management system (ELM). But there'll be others and lots of private sector opportunities.”

Natural capital is critical in the journey to net-zero and a healthier planet, and measuring its social and economic value is a hugely important step.

To view a recording of 'The Value of Natural Capital' panel session, click here.

Natural Capital, Natural Value for Real Estate