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Call for Evidence

The role of natural capital in the green economy

The Environmental Audit Committee is undertaking an inquiry into the current and potential future role of natural capital in the green economy, and the Government’s proposals to increase private investment in measures to support nature recovery.

Background to the inquiry

In the February 2021 report of his review of the economics of biodiversity, commissioned by the then Chancellor of the Exchequer in March 2019, Professor Sir Partha Dasgupta defined natural capital as

the stock of renewable and non-renewable natural assets (e.g. ecosystems) that yield a flow of benefits to people    (i.e. ecosystem services). The term ‘natural capital’ is used to emphasise it is a capital asset, like produced capital (roads and buildings) and human capital (knowledge and skills).[1]

In its July 2021 response to the Dasgupta report, the Government committed to “ensuring economic and financial decision-making, and the systems and institutions that underpin it, supports the delivery of [a] nature positive future’.[2]  The headline goal of this ‘nature positive’ future is twofold: to leave the environment ‘in a better state than we found it’, and to reverse biodiversity loss globally by 2030.

The Committee’s June 2021 report on Biodiversity in the UK: bloom or bust? made several recommendations for policy actions with the objective of sustaining and improving levels of UK biodiversity.[3]  In its response to that report the Government indicated a number of steps it was taking to improve the state of nature in England and the related actions being taken by the devolved administrations towards the same overall goal, including:

  • the development of the Outcomes Indicator Framework (OEF) as a means of reporting on progress against the Environment Improvement Plan and its five-yearly updates. The OEF has been developed on a natural capital assessment basis;[4]
  • the piloting of a Natural Capital and Ecosystem Assessment (NCEA) for England, using emerging earth observation technology to provide long term monitoring of the environment and to improve the evidence base for natural capital, habitat and ecosystem policies;[5]
  • provision of further support to the Office for National Statistics to enable it to improve its estimates of national natural capital and make the most of their policy relevance;[6]
  • the introduction of the mandatory biodiversity net gain requirement as a planning condition from November 2023, supported by the Green Infrastructure Framework (February 2023), the Environmental Benefits from Nature Tool (beta version July 2021) and guidance on a natural capital approach to planning;
  • collaboration with the Financing UK Nature Recovery Coalition on recommendations designed to scale up private finance into environmental markets,[7] and
  • working with the Taskforce on Nature-related Financial Disclosures (TNFD) on the framework of metrics it is developing to enable companies and financial institutions to integrate nature into their decision making.[8]

Policy context

In the 2021 Spending Review the Government set a goal to “grow annual private investment flows to nature” in England to at least £500 million every year by 2027 and to more than £1 billion by 2030.[9] 

An essential element of the Government’s strategy to enable firms to mobilise this investment is the development of high-integrity nature markets. The Nature Markets Framework, issued in March 2023, provides further detail on how the Government plans to support the flow of private finance to support the ‘nature positive economy’.[10] The Framework is intended to support the development of these markets by setting out principles, standards and governance arrangements for their operation.

In her foreword to the Framework, the Secretary of State for Environment, Food and Rural Affairs recognises that many of the valuable ecosystem services provided by nature, such as carbon sequestration, clean water, biodiversity and natural flood management, are still ‘systematically undervalued’ in the UK economy.

The Framework provides:

  • a set of core principles for market operation: the Government has undertaken to monitor these markets and support their development in line with the core principles;
  • a restatement of the current rules for how farmers and others managing land and coastal assets can access markets and combine income streams, together with an indication of plans for policy development;
  • an arrangement with the British Standards Institution on the development of high-integrity nature investment standards, to support the development of new markets and the scaling up of existing ones, and
  • an indication of the next steps required to clarify and to develop the institutional and regulatory roles and the market infrastructure required to ensure good governance of these markets.

In the 2023 Green Finance Strategy, issued alongside the Nature Markets Framework, the Government undertook to consult on “the specific steps and interventions needed to support the growth of high integrity voluntary markets and [to] protect against greenwashing”, and to deliver a “UK Green Taxonomy”: definitions of which economic activities should be labelled as green, intended to support the quality of standards, labels and disclosures used in green finance.[11]


Terms of reference

The Committee plans to examine the following principal questions in the course of its inquiry:

  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 (NCEA) 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 the UK’s natural capital?
  8. What role does the UK have in establishing international standards for natural capital investments, alongside other jurisdictions and financial centres?

Call for evidence

Written submissions addressing any or all of the terms of reference set out above, or other related issues in the Government’s suite of policies to develop natural capital markets, are invited, to be submitted to the Committee not later than 5.00 pm on Friday 22nd September 2023.

It is recommended that all submitters familiarise themselves with the Guidance on giving evidence to a Select Committee of the House of Commons .


[1] HM Treasury, The Economics of Biodiversity: The Dasgupta Review, February 2021

[2] HM Treasury, The Economics of Biodiversity: The Dasgupta Review: Government Response, CP 504, July 2021, para 1.1

[3] Environmental Audit Committee, Biodiversity in the UK: bloom or bust?, First Report of Session 2021–22, HC 136

[4] Environmental Audit Committee, Biodiversity in the UK: bloom or bust?: Government Response to the First Report of the Committee, Third Special Report of Session 2021–22, pp. 8 and 9

[5] Ibid., p. 9

[6] Ibid., p. 10

[7] The Financing UK Nature Recovery Coalition issued a recommendations report ‘Financing Nature Recovery UK: Scaling Up High-Integrity Environmental Markets Across the UK’ and an accompanying roadmap in June 2022:

[8] In March 2023 TNFD released the final version of its beta framework and announced that it was ‘on track’ to publish its final recommendations in September 2023.

[9] HM Treasury, Autumn Budget and Spending Review 2021, HC 822, para 4.85

[10] Department for Environment, Food and Rural Affairs, Nature markets: A framework for scaling up private investment in nature recovery and sustainable farming, March 2023

[11] HM Government, Mobilising Green Investment: 2023 Green Finance Strategy, March 2023, pp. 107 and 47–49

This call for written evidence has now closed.

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