Consultation on the Finance Sector Supplement of the Protocol

22nd June 2017

Scotland’s finance & insurance industry is worth over £8bn in GVA and over 155,000 people are employed in the industry and related professional services, but what are the impacts and dependencies on natural capital of the sector? The consultation on the Natural Capital Protocol Finance Sector Supplement aims to help the industry understand. 

The Natural Capital Coalition, in association with Natural Capital Finance Alliance and the Dutch Association of Investors for Sustainable Development, have opened up a public consultation on the Natural Capital Protocol’s draft Finance Sector Supplement.

The draft Finance Sector Supplement is being designed to expand the Natural Capital Protocol's utility for the financial sector, and focuses on three key sub-sectors: banking, investment, and insurance. As we become more aware of the role that the environment plays in the economy and society at large, it is evident that financial institutions need a common framework which can provide a clear introduction to natural capital issues, as well as a structured process to identify, measure, and value their direct and indirect impacts and dependencies on natural capital.

These dependencies are already well documented, for instance the flooding in the winter of 2015/16, cost insurers up to £350million in claims and cost the Scottish economy up to £700million. These risks are only increasing with Climate Change, which has seen annual rainfall in Scotland increase by 27% since the 1960s primarily through more extreme wet weather. Building on flood plains, damage to wetlands, the loss of natural drainage features and other land management changes have all contributed to the increased likelihood and severity of flooding. 

The finance sector also has the opportunity to help build natural capital, for instance through financing nature based solutions. Using wetlands as a solution for managing waste water is an example of a nature based solution which in the case of the butchers Simon Howie more than paid for the investment in the first year and is saving the business £50,000 per year.     

Natural capital issues are an opportunity to manage financial risks and to identify better investment decisions for businesses and the financial organisations which surround them. Knowing how to identify, measure, and value these risks is the first step towards reducing them. Basing decisions upon an awareness of natural capital can save the financial industry billions of pounds per year, and opens up opportunities which can enrich not only our economy, but also our environment.

The role of the finance sector in helping to protect and enhance natural capital, and examples of action, will be among the topics discussed at the World Forum on Natural Capital which will bring together business leaders, government representatives and environmental experts from around the world in Edinburgh this November.  

The consultation runs until 25th August 2017, and is an opportunity for members of the finance sector to inform the development of the Finance Sector Supplement, join a community of natural capital practitioners and position yourself as a leading financial institution when it comes to integrating natural capital risks and opportunities into your business.

Click here to access consultation on the Natural Capital Finance Sector Supplement on the Natural Capital Coalition’s website.

Image: A bridge too far by Ross Strachan, licensed under CC BY 2.0