Hutton expert contributes to new guidance for assessment of natural capital risk

"The importance of natural capital should never be underestimated. It is our ‘stock’ of geology, soil, air, water and all living organisms, providing fundamental life-support functions and underpinning the global economy"

Professor Alison Hester, a senior research scientist within our Ecological Sciences group, has contributed to the development of new guidance by the Natural Capital Finance Alliance (NCFA), aimed at helping financial institutions conduct rapid assessments of natural capital risk.

Already piloted by banks in Colombia, South Africa and Peru, the guide promotes the use of the recently launched Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) tool, which enables financial institutions to understand and assess their exposure to natural capital risks.

The guide has two core elements: Rapid Natural Capital Risk Assessment, which allows an institution to quickly identify the areas of highest natural capital risk; and Sector/Asset Analysis, which uses data on drivers of environmental change and the state of natural capital assets, to assess the likelihood of disruption of relevant ecosystem services.

Liliana de Sá Kirchknopf, Head of Private Sector Development Division, State Secretariat for Economic Affairs in Switzerland (SECO), funders of the project, said: “The degradation of natural ecosystems poses a material threat to future economic growth. Until now, the financial community was not able to systematically assess and manage such risks.

“That is changing thanks to our collaboration with the NCFA to create a natural capital framework for financial institutions.  Practical tools like ENCORE define the link between environmental change and economic consequences, so market players are empowered to make sustainable financing decisions.”

Professor Hester, who was a member of the Advisory Panel of the project, commented: “The importance of natural capital should never be underestimated. It is our ‘stock’ of geology, soil, air, water and all living organisms, providing fundamental life-support functions and underpinning the global economy.

“It has been a pleasure working with the authors of the report and the other partners within the Advisory Panel – a really interesting and worthwhile project.”

The project was funded by SECO and the MAVA Foundation, and the guidance is available at www.globalcanopy.org.