UK launches inquiry into role of private investment in nature

Open for feedback until 22 September 2023

The UK environmental audit committee has launched an inquiry into the role private finance can play in investing in nature.

The inquiry will look at how private investment can help achieve the government’s nature commitments and how the UK might develop markets in natural capital assets while avoiding the greenwashing of investments.

“The financial sector will have a significant role to play in promoting the development and enhancement of the nation’s natural capital – from air to water, soil to forests – as the UK economy begins to embrace the economics of biodiversity,” said committee chair Philip Dunne MP.

“We will look at measures to prevent greenwashing in the natural capital sector so that the investment and policies really do make a material and nature positive difference to environmental recovery and levels of biodiversity across the UK.”

The committee will also look at whether government policies in this area are adequate. These include the piloting of a Natural Capital and Ecosystem Assessment, the introduction of a mandatory biodiversity net gain requirement in the Environment Act (from November 2023) and working with the Taskforce on Nature-related Financial Disclosures to develop metrics for companies and financial institutions to embed into their investment decision making.

Earlier this year in its Nature Markets Framework, the environment secretary stated that measures such as carbon sequestration, clean water, biodiversity and natural flood management remained “systematically undervalued” in the UK economy.

The inquiry is open until 5pm on Friday 22 September 2023 and requires written answers to the following questions:

  1. What potential contribution can private capital investment make to measures to secure nature recovery?
  2. How can investment best be aligned with environmental benefits, so as to achieve or surpass the government’s targets for nature recovery?
  3. What measures are necessary to (a) establish and (b) maintain the high-integrity markets in ecosystem services which are expected to attract private investment? What confidence do investors currently have in the UK’s arrangements for these markets?
  4. What contribution will data from the Natural Capital and Ecosystem Assessment programme make to the objective measurement of changes in environmental outcomes?
  5. How can the proposed UK green taxonomy support high-quality investments which deliver genuine benefits to nature? What financial disclosures should the taxonomy require?
  6. How can the operation of natural capital markets ensure genuine net gains for nature? How do such markets address the risk of greenwashing of investments and the offsetting of natural recovery in the UK against environmental degradation elsewhere?
  7. What role can the UK’s financial markets play in developing the flow of international capital into the development of natural capital in the UK and globally?
  8. What role does the UK have in establishing international standards for natural capital investments, alongside other jurisdictions and financial centres?

Dunne said: “I encourage anyone engaged in the development of natural capital markets to contribute to our inquiry.”