Strenghtening Systematic Resilience: Upscaling Nature-based Infrastructure Solutions (NbIS)

3.1 Introduction

The application of nature-based solutions has far-reaching potential to support the transition to low-carbon-resilient infrastructure.

Owing to the long lifecycles of most infrastructure assets, choices made today on the types, features, and locations of infrastructure will heavily influence the world’s ability to shift to lower carbon trajectories and strengthen systemic resilience.

Efforts to limit global warming to 1.5°C above pre-industrial levels Included as an aim, but not a binding commitment, under the Paris Agreement. now require rapid and far-reaching transitions in energy, land, urban and industrial systems, and infrastructure.

Ninety percent of today’s infrastructure has been built over the last 50 years (IPCC, 2018). Meanwhile, 60 percent of the infrastructure needed by 2050 is yet to be built. This increases the need to immediately transition from a ‘business-as-usual’ to a low-carbon-resilient infrastructure.
The application of nature-based infrastructure solutions (NbIS) in sectors such as water and hazard mitigation has far-reaching potential to support this transition (Box 3.1). NbIS not only have a low carbon footprint and address climate mitigation objectives but also offer a wide range of other co-benefits. For example, the use of deep-root systems for slope stabilization has been estimated to produce 85−90 percent savings compared to traditional engineered solutions (Truong, n.d.) Likewise, mangrove conservation and restoration not only protect coastal areas against storm surges but also improve water quality, replenish fish stocks, safeguard ocean health, and reduce coastal erosion (INFC, 2022). For example: https://www.iucn.org/regions/asia/our-work/regional-projects/mangroves-future-mff and https://cicloud.s3.amazonaws.com/docs/default-source/s3-library/publication-pdfs/guyana-green-gray-infrastructure-engineering-guidelines-inclexecsumm-finalupdatedfront.pdf?sfvrsn=fa704d98_2. In urban areas, green roofs, permeable surfaces, and vertical gardens address urban flooding and heat islands while at the same time reducing energy consumption.

Both climate change mitigation and adaptation (Rydge et al., 2015). As a result of the long lifecycles of most infrastructure assets, choices made today will heavily influence the ability of countries to shift to lower carbon trajectories (OECD et al., 2018) and strengthen systemic resilience, in LMICs where most infrastructure investment will occur in the coming decades.
Low- and Middle-income
(LMICs)

If investments in fossil fuel-based infrastructure continue, countries will be locked into higher emissions, making it impossible to limit warming to 1.5°C or 2°C. It will also lead to leaving behind stranded assets in the energy, building, and transportation sectors and increasing fiscal constraints, thus reducing options for future responses (IPCC, 2018). Avoiding this lock-in requires a radical change in infrastructure governance and how infrastructure is designed and used (Seto et al., 2016).

Countries will have to transition towards low-carbon infrastructure systems to establish low-carbon and climate-resilient pathways that align with the Paris Agreement and meet their commitments under their Nationally Determined Contributions (NDCs). This is critical for limiting climate change and potentially catastrophic increase in disaster risks (Saha, 2018). Given the magnitude of already accumulated risk in LMICs, not taking aggressive action now means reducing future options for strengthening systemic resilience, as increasing loss and damage will further widen an already massive infrastructure deficit (Denton et al., 2014).

Chapter 1 discussed how the contemporary urban process, underpinned by investment in high carbon infrastructure, systemically generates risk, which then feeds back into increasing infrastructure loss and damage. Systemic resilience, therefore, is contingent on designing infrastructure investments in a way that does not generate new systemic risk. Climate change mitigation and adaptation are the principal paradigms through which systemic risk is currently being addressed. However, progress in climate change adaptation is still ‘unevenly distributed, fragmented, small in scale [and] incremental’. As a result, ‘gaps exist between current levels of adaptation and levels needed to respond to impacts and reduce climate risks’. These gaps are ‘partially driven by widening disparities between the estimated costs of adaptation and documented finance allocated to adaptation’, meaning that the ‘overwhelming majority’ of global climate finance has so far been targeted at climate change mitigation (IPCC, 2023).

Systemic risk is associated not only with climate change but also with a range of concatenated drivers, including loss of biodiversity, poorly managed and planned urban development, growing social inequality, and weak governance. Strengthening systemic resilience, therefore, is not limited to climate change mitigation and adaptation but addresses a broader agenda. As Chapter 2 highlights, while climate change will increase the risk to infrastructure assets, particularly in LMICs, most of the infrastructure risk is already locked in or associated with geological hazards, such as earthquakes, tsunamis, and earthquake-induced landslides.

Fortunately, how infrastructure is developed and used is undergoing a rapid transformation. Disruptive technologies in the energy, transportation, and construction sectors are now achieving the economies of scale necessary to be economically competitive. Fossil fuel-generated electricity costs 5−17 cents per kilowatt-hour, while solar energy-generated electricity costs only 3−6 cents per kilowatt hour and is trending down (IRENA, 2021). In high-income countries, new building technologies, electric vehicles, and more efficient appliances are enabling a reduction in energy consumption.

Moreover, smart energy systems, such as microgrids, are enabling renewable energy to feed more efficiently into national grids.

These technological changes are already reconfiguring investment flows. As highlighted in Chapter 1, about three-quarters of private infrastructure investment is concentrated in high-income countries, half of which has flowed into renewable energy generation, storage, and transmission. Unfortunately, LMICs have attracted only a quarter of this investment which is still flowing into sectors such as non-renewable energy and transport, which will further lock in systemic risk.

Other required transformations, for example, in urban layout and design, are lacking. Figure 3.1 highlights how more efficient urban layouts and design can dramatically reduce infrastructure costs, make more efficient use of land, reduce transportation costs and associated carbon emissions, and mitigate urban flood hazards.

Figure 3.1 Comparing Costs of Infrastructure and Utilization across Different Urban Configurations
Source: Adapted from Vermeiren et al. (2022)

3.2. Ecosystems are Declining

Healthy ecosystems sustain life on the planet and provide ecological integrity, biodiversity, economic systems, and human well-being through four categories of ecosystem services: Supporting services, such as nutrient cycling, soil formation, and primary production; Provisioning services, such as food, water, wood, fibre, and fuel; Regulating services, such as flood control, climate regulation, disease control, and water purification; and Cultural services, such as education, recreation, aesthetics, and spiritual values (Millennium Ecosystem Assessment, 2005).

The degradation of ecosystems means these services cannot be provided. As of 2021, over a million species are under threat of extinction. Since the 1870s, over half of the world’s corals have disappeared, and 75 percent of the land surface has been significantly altered. In the last 50 years alone, 85 percent of wetlands have been lost (Díaz et al., 2019). Ecosystem degradation, compounded by anthropic climate change, is a core risk driver. Thus, protecting ecosystems from degradation is critical to strengthening systemic resilience. Protection has greater potential to supply ecosystem services than trying to restore ecosystem functions on degraded landscapes. Therefore, without protecting the ecosystems on which living beings depend, NbIS cannot prosper (Box 3.2)

As Box 3.3 highlights, NbIS can be used to complement, substitute for, or safeguard traditional ‘grey’ infrastructure, particularly in the water and hazard mitigation sectors, thus representing a paradigm shift towards designing and building with nature (McHarg, 1969). NbIS also increases opportunities for women’s involvement in decision-making and governance, particularly in rural areas (IISD, 2021), offering a win-win for both the environment and the society (Bassi et al., 2021)

Figure 3.2 illustrates potential applications of NbIS to address riverine flooding, urban heat islands, water scarcity, and coastal erosion and flooding. Additional hazards and potential solutions can be found in position paper 3.1 (USFS, 2023).

It is estimated that NbIS cost, on average, only 51 percent of grey infrastructure projects and that 11 percent of all grey infrastructure could be replaced by NbIS (Bassi et al., 2021). The greatest potential for NbIS is in the water sector due to the importance of functional ecosystems for water capture, storage, filtration, and transmission and in protecting grey infrastructure (UNEP, 2023). Over time, the effectiveness of grey infrastructure degrades while that of NbIS increases. For example, as sea walls depreciate in quality, well-protected mangroves become stronger and more widespread as they grow older, thus strengthening resilience.

Figure 3.2 Potential Applications of NbIS Source: USFS (2023)

As NbIS provide social, environmental, and economic co-benefits, their widespread adoption would influence the achievement of 115 of the 169 targets across all 17 SDGs. In specific infrastructure sectors, adopting NbIS would influence up to 25 to 44 percent more SDG targets compared to using grey infrastructure alone
Nature-based Infrastructure Solutions
(NbIS)

Unfortunately, despite this potential, the current investment in NbIS represents only 0.3 percent of overall infrastructure investment (WEF, 2022). In LMICs, substantial barriers exist to the widespread acceptance and implementation of NbIS, including those related to education, policy, governance, and finance (Ghosh & Soundarajan, 2023; Håkanson, 2021; S. Sarabi et al., 2020; S. E. Sarabi et al., 2019). To address each of these barriers and realize the potential of NbIS, innovative solutions need to be adopted.

3.3 Challenges and Opportunities for Integrating NbIS into Infrastructure Delivery

3.3.1. Knowledge and Capacity

Many LMICs also lack core knowledge of ways to introduce NbIS. Few professionals have experience in the planning, designing, implementing, maintaining, and monitoring of NbIS. Local government officials, civil engineers, households, investors, insurers, and MDBs, among others, may not have managed or previously imagined how NbIS can strengthen infrastructure resilience.
Multilateral Development Bank
(MDB)

While grey infrastructure projects are generally planned and designed solely by engineers, NbIS require new interdisciplinary knowledge and skill sets that engineers and architects do not necessarily possess. For example, incorporating rain gardens or wetland features into urban infrastructure requires a holistic analysis rather than a linear calculation of surface runoff in a storm drainage system. Knowledge about the sustainability of ecosystems is required to avoid further degradation that would undermine the potential for NbIS. University curricula are often outdated, slow to change, professionally siloed, and unfit to address interdisciplinary challenges such as NbIS. Rarely can one find research that quantifies ecosystem services, integrates nature-based values into modelling and cost-benefit accounting, and facilitates the design of NbIS. Even if such research exists, it is often not translated into practice. Moreover, it is difficult to access literature on NbIS which has been peer-reviewed for veracity, relevance, or trustworthiness. Finding literature on NbIS in languages other than English is rarer still.

As a result, a new approach is required to build capacities and share knowledge. Integrating NbIS concepts in engineering, urban planning, and architecture curricula is critical, as is introducing capacity-building programmes for infrastructure planners and managers in national and local governments, regulators, and utilities. Carefully reviewed, curated, up-to-date, and publicly available research, libraries, guides, design standards, and case studies, tagged by topic, are essential, including in different languages and multimedia formats such as mobile apps, webinars, and podcasts. All countries, particularly LMICs, will need national centres of excellence in NbIS, with the capacity to document and research good practices, disseminate knowledge, provide outreach to practitioners, and network information with other countries. Box 3.4 illustrates UNDP’s efforts to integrate NbIS to strengthen storm and flood protection along the 3260-km coastline in Vietnam.

Curating literature on NbIS will encourage the emergence of Communities of Practice (CoPs). Bringing together land use planners, civil engineers, coastal specialists, foresters, infrastructure policymakers, hazard and risk modellers, financing experts, and others As an example, the Global Green-Grey Infrastructure Community of Practice is a forum for collaboration across the conservation, engineering, finance, and construction sectors to generate and scale-up green−grey climate adaptation solutions. The multidisciplinary CoP has grown to a global membership exceeding 140 organizations in the NGO, academic, government, and private sectors working to share ideas and facilitate collaboration; innovate and pilot new approaches; expand science, engineering, and policy activities; and implement and learn from projects in varied geographies and settings.. in CoPs will be critical to moving NbIS into the mainstream. CoPs can help bind together and provide mutual support between local initiatives, increasing the confidence of households, communities, businesses, and local governments and sharing good practices to assist other communities facing similar issues.

Mature CoPs will also stimulate the national markets for professional services and technology necessary to implement NbIS projects through the creation and spin-off of small- and medium-sized NbIS businesses. Exotic locally championed and isolated projects may become quotidian normative practices, supported by mature markets for technology and professional services and readily available finance.

Box 3.5 illustrates how a not-for-profit organization can adopt an innovative initiative, utilize diverse funding sources, and support the contextual application of NbS through training and education for local government staff, developers, community members, and other relevant stakeholders (INFC, 2022). Monitoring project performance is critical to providing evidence-based proof of concept; it supports the adaptation of designs and adoption of additional and more expansive projects and helps to prioritize and focus on NbIS to enhance beneficial outcomes. Standardized quantitative metrics on data types, costs, benefits, and performance over the long term are required to develop benchmarks for success and effectiveness that can be compared across different interventions, sectors, contexts, NbIS, and engineered solutions (UNEP, 2022).

Linking NbIS monitoring to the achievement of the SDG and the goals of the Paris Agreement, the Bonn Challenge, the New York Declaration on Forests, the UN Decade on Ecosystem Restoration, and regional commitments, such as the 20×20 Initiative in Latin America, may also facilitate greater uptake of NbIS (Buckingham et al., 2019).
Sustainable Development Goals
(SDG)

3.3.2. Identifying, Mapping, and Estimating Risk and Resilience

Figure 3.3 illustrates the connection between a healthy ecosystem, its functions, and its services. NbIS often harness the protective functions of ecosystems such as stormwater retention, wildfire resilience, slope stabilization, and infiltration.

The GIRI does not currently estimate the risk to ecosystems, though it should in the future. However, the necessary information on global biodiversity hotspots and vulnerable ecosystems is already available (Chaplin-Kramer et al., 2022). As highlighted in Chapter 2, probabilistic risk identification and estimation, including modelling the underlying climate-related and geological hazards, the existing or potential future infrastructure assets exposed to those hazards and their vulnerability, and the modification of all the above through climate change and other risk drivers are the factors that need to be considered when estimating the contingent liability in infrastructure. A credible and robust risk identification and estimation process, at an appropriate scale, can help clearly identify the resilience dividends that can accrue through adopting NbIS.
Global Infrastructure Risk Model and Resilience Index
(GIRI)

Figure 3.3 Mapping and Understanding Ecosystems Source: USFS (2023)

Figure 3.4 Assessing the Net Value of NbIS Source: Bresch and Aznar-Siguan (2021)

3.3.3. Policy and Regulations

Effective legislation to protect and enhance ecosystems and their services is necessary to affirm a longer-term commitment. It will provide investors with greater confidence and reduced risks, thus encouraging greater investment in NbIS. For example, in June 2022, the EU Commission proposed the EU Nature Restoration Law that, if enacted, will establish legally binding targets to protect and restore rivers, wetlands, forests, peatlands, marine, and urban areas to benefit biodiversity, climate, and people (European Commission, 2019). The Paris Agreement provides a framework to initiate similar actions across the globe. Similarly, the UN System of Environmental and Economic Accounting promotes a broader framework that includes social capital and environmental-economic accounting measures (UN System of Environmental and Economic Accounting, 2021), which, if adopted, could create a positive enabling environment for NbIS. Such legislation should integrate with existing environmental policies that protect air, soil, water, floral, and faunal resources. Working within an established environmental policy can help government sectors achieve resilience targets set by legislation (TARU Leading Edge, 2022). As all infrastructure development projects and operations should comply with national environmental policies, the use of environmental impact assessments can also become a vehicle for mainstreaming NbIS.

By 2020, the submitted NDCs under the Paris Agreement were found to be insufficient to keep the global temperature rise below 2ºC (Seddon et al., 2019). However, NDCs do provide a policy umbrella for the adoption of NbIS. In comparison to high-income countries, LMICs NDCs often give greater emphasis to NbIS with a particular focus on forest protection and restoration. As NDCs expand to include other NbIS, such as protecting and restoring rivers, wetlands, coastal and marine ecosystems, and improving soil and forest health in wildlands, agriculture, and urban areas, this can create further momentum (UNDP, 2019).
Nationally Determined Contributions
(NDC)

Some countries are considering the transition to net zero in the energy, transportation, and other sectors to be a critical issue of national security. For example, a massive reallocation of public and private capital in the USA is already occurring to catalyze the transition (Box 3.6).

Figure 3.5 Projected US Infrastructure Investment Gaps by 2040 Source: McBride & and Siripurapu (2021)

3.3.4. Good Practices and Performance Standards

Design and performance standards that include and codify NbIS are uncommon. NbIS good practices are rarely systematically codified. This hinders the development of clear policies, regulations, codes, and standards. The lack of appropriate norms and standards for NbIS may slow down or complicate the approval process for new projects. It can also make it difficult or impossible for engineers or other professionals to sign off on NbIS projects, as it may invalidate their professional liability insurance.

Resilience standards are often scattered across different laws, regulations, guidelines, decrees, environmental assessments, and manuals, and are dispersed in multiple locations and formats. In many contexts, it is difficult, if not impossible, to identify what is appropriate for NbIS.

Prescriptive global standards for NbIS could provide a pathway for greater project financing. However, their application can be counterproductive unless standards are nationally and context-appropriate (TARU Leading Edge, 2022). Nationally developed and adopted performance-based standards for NbIS, based on good practices, may provide a more flexible route.

‘Best or Good Practice’ is a professional procedure that is accepted or prescribed as being correct or most effective in particular contexts. The term conveys a sense of acceptability, respect, and professional endorsement. Developing a framework of ‘good practices’ within a body of curated literature would encourage convergence around what could be the most appropriate performance-based standards in each context.

Developing and refining good practices may be a ‘bottom-up’ process to arrive at nationally or context-appropriate performance standards. For example, a ‘Nature-based Infrastructure Design Hub’ could leverage modern computing and information collection technology using an online, open-source structure, thus allowing users to input knowledge and data to crowdsource information about NbIS technology, performance, and cost to inform performance standards (Conservation International, 2022). Such a voluntary, collaborative effort would contribute to improving NbIS design, selection, implementation, cost-effectiveness, and performance.

It is particularly important to monitor if NbIS are constructed as planned, and maintained and enhanced over time (Furniss, 2014). Third-party certification may be needed to ensure that NbIS are based on standards when they exist and professionally sanctioned good practices when they do not. In other sectors, such as in building, third-party certification has played an important role in enabling change, as Box 3.7 shows. However, until a significant hazard event tests the functionality of an NbIS, it may not be practical to certify that it delivers as expected. The concept of ‘Pay for Performance’, which is often a requirement in investments, may not be appropriate for NbIS until performance monitoring improves and is fully codified (Blue Forest Conservation, n.d.).

Ultimately, if exotic isolated projects are to mature into quotidian normative actions, the implicit knowledge existing throughout societies and across professional disciplines needs to be unveiled. As such, building local and user involvement and co-ownership of NbIS projects is fundamental to social acceptance, economic success, and sustainability (Centola, 2021).

3.3.5. Integrating NbIS into National and Local Planning

National infrastructure development policies, strategies, and plans can provide a supportive environment to introduce NbIS at the national level and safeguard biodiversity and vulnerable ecosystems at the local level.

Locally, planning can recognize the capacity of providing goods and services needed for infrastructure supply and protection, of regional or national ecosystems such as rivers, lakes, wetlands, forests, grasslands, savannahs, agricultural lands, and coastal zones.

Assessing ecosystems and the services they provide and of the risks, costs, and benefits of different alternatives for providing resilience can provide a sound basis for the development of such policies, strategies, and plans, both at the national and at the local levels and include sector-based planning by integrating territorial plans at the local level.

However, a profusion of complementary but often overlapping planning processes, including development plans, land use plans, environment plans, adaptation plans, and disaster risk management plans (Berke et al., 2015), does not necessarily make for good planning. Strong national normative capacities may be undermined by weak capacities for formulating and implementing plans at the local level. Land use planning is often not integrated with sector-based planning and evaluation of public investment, meaning that the resources needed to implement local plans may not be available. In LMICs, much development is unregulated and informal, invalidating the benefits of planning.
Low- and Middle-income
(LMICs)

In LMICs, instruments such as National Adaptation Plans (NAPs) can be used to integrate NbIS into the planning process with sectors such as urban and infrastructure (Box 3.8). For local planning, in countries such as India, integration of NbIS can be targeted through the State Action Plan for Climate Change (SAPCC).

3.3.6. Reconstruction Following a Disaster

Unless NbIS is already mainstream in the country, the necessary support for well-established good practices, standards, trained professionals, and technology will likely not exist in post disaster contexts.

Introducing new ways of implementing infrastructure resilience in post disaster contexts remains challenging. In theory, post-disaster reconstruction could be an excellent opportunity to introduce NbIS. However, the urgency of restoring essential services often leads to replacing like with like and reconstructing pre-existing risk, precluding the possibility of introducing innovations such as NbIS that could strengthen resilience. Repairs usually occur as rapidly as possible, often replacing damaged assets in the same location without analyzing the causes of failure and considering other more effective alternatives.

For example, upper watershed degradation, inappropriate land use, loss of wetlands, and poor or inappropriate levee construction may have been the cause of flood damage to infrastructure in the lower watershed. A rapid bridge repair provides a provisional patch, responding to immediate social demand. At the same time, a NbIS project that could address the risk drivers may take years to design, approve, and finance (Box 3.9).

The application of methods such as FORIN (Alcántara-Ayala et al., 2016), through detailed analysis, can identify the cause of infrastructure failure in disasters and lay the ground for changes in policy and practice in favour of NbIS (Bella, 1997). As effective progress is not possible without robust failure detection, analysis, and adaptation, the knowledge gained from methods such as FORIN could help NbIS practitioners implement solutions that offer better outcomes.

3.3.7. Governance for NbIS

Weak infrastructure governance is a major obstacle to the adoption of NbIS. Infrastructure projects’ planning, designing, and implementation are often fragmented and siloed across different ministries and departments, discouraging a holistic approach to complex problems, such as urban heat islands. As Box 3.10 highlights, NbIS normally require interdisciplinary and cross-departmental coordination, with the extensive engagement of and ownership by communities and other stakeholders (Green et al., 2016), and processes that challenge entrenched bureaucratic structures and procedures. For example, implementing a successful stormwater upgrade with NbIS would require civil engineers, community organizations, government regulators, landscape architects, natural resource professionals, horticulturalists, financiers, and others to build a common vision and reach a consensus. Centralized and short-term budget cycles further hinder the adoption of NbIS.

Participatory planning and co-ownership of NbIS projects by the households and communities that provide or benefit from the ecosystem services generated are fundamental to their success and sustainability. Participatory engagement increases accountability and creates greater public visibility and resources to address public needs (Carothers & and Brechenmacher, 2014).

3.3.8. In Search of a Political and Economic Imperative for NbIS

The prioritization of short-term economic gains over environmental integrity is an example of a moral hazard (Maskrey et al., 2023). Economic gains are privatized, while any resulting systemic risks are shared and transferred to other social groups or territories. NbIS may sometimes be unattractive politically precisely because it shares social and environmental gains and reduces opportunities for privatized profits.

NbIS is often a slow solution in a context where many infrastructure requirements need quick action. For example, grey infrastructure, such as a seawall, can be constructed in a relatively short time frame to deflect storm surges. At the same time, mangrove establishment or restoration is a longer-term venture. Even though effective, NbIS are often slower to mature and provide tangible benefits than grey infrastructure. The lengthy time frames required for planning and achieving measurable results may not mesh well with electoral cycles, thus undermining the political imperative for their adoption. Politicians normally favour highly visible projects with immediate results.

Similarly, investors prefer infrastructure projects that provide clear, tangible, and immediate benefits. The resilience dividends from NbIS may be slow to develop and require additional costs, while the social and environmental benefits do not accrue to the investor. At the same time, in many LMICs, powerful economic interests advocating grey infrastructure undermine the case for NbIS. Economic imperatives, such as the need to attract foreign direct investment, may override proposals to introduce NbIS if these are seen to hinder investment.

Additionally, NbIS often require more land than traditional infrastructure. High-priority areas for protecting or restoring ecosystems may not be publicly owned or may require negotiations with landowners to proceed, particularly in cities with limited green space, creating increased resistance.

Box 3.11 highlights how extractive activities, such as mining or timber, often fail to value the benefits provided by ecosystem services (such as wetland flood attenuation) to enhance infrastructure function (such as sediment and erosion control), and protect engineered assets (for example, mangroves protecting coast telecommunication networks) and co-benefits, including potential for increased ecotourism, food security, and employment opportunities.

There is no single recipe for improving political will in a way that would facilitate the uptake of NbIS. In many countries, adopting a national resilience strategy, policy, and plan following a catastrophic event that galvanizes political will may provide a vehicle for adopting NbIS. To be effective, a national resilience strategy would require political support at the highest level of government and developed with a long term vision. It would need to provide a framework for infrastructure planning across different sectors and at the territorial level. This would also require an interdisciplinary approach bringing together the skill sets currently siloed in different sectors, such as environment and public works, with the technical capacity to value the ecosystem services provided. Ultimately, and as discussed in Chapter 4, adopting a strong resilience policy and strategy may positively change the risk perception of the country in question, increasing investor confidence and analyst ratings and reducing the cost of capital. If a strong economic, financial, and social imperative emerges for nature-based infrastructure, it may generate a stronger political imperative.

3.3.9. Building the Business Case for NbIS

Many businesses and public services have good reasons for investing in NbIS. To stay viable, they depend on ecosystem services, including clean and abundant water, fertile soils, healthy forests, and biodiversity. Business leaders often state that investing in nature helps to achieve sustainability goals, strengthen their market brand, manage regulatory requirements, promote employee wellbeing, and reduce disaster risks (The Nature Conservancy, n.d.). Highlighting the positive social, economic, and environmental benefits that can accrue from NbIS is critical to its political attractiveness and viability. While reduced loss and damage should be accounted for in calculating the costs and benefits and rates of return on investment of NbIS projects, it should be noted that local politicians rarely win elections on promises of avoided future losses but rather on tangible present benefits (Lavell & Maskrey, 2014).

However, providing ‘proof of concept’ that NbIS can provide these benefits, by itself or in concert with grey infrastructure, continues to be a challenge. Much of the existing evidence is not widely available nor easily accessible. Rather than generating more proof, the challenge is to disseminate and market existing proof.

The conventional methods used in infrastructure financing to account costs and benefits and rates of return often fail to include the systemic risks posed by infrastructure investments on the environment. The net present value calculations do not account for the potential appreciation of the performance of NbIS over time, compared with the depreciation of traditional infrastructure, thus largely undervaluing NbIS. Notably, the long term benefits of protecting, supporting, or supplementing infrastructure with NbIS are not accounted for or monetized in a way that encourages investment.

In contrast, environmental cost-benefit (OECD, UN Environment, et al., 2018) may show how including NbIS in a project would have a greater cost benefit ratio than grey infrastructure alone. In the USA, it was found that for every 10 percent increase in forest cover above a water source, there was a 20 percent decrease in water treatment costs. Costs were 211 percent higher for a watershed with 10 percent forest cover than one with more than 60 percent (Ernst et al., 2004). The USA has now begun to protect watersheds by limiting human intervention above municipal water supply points.

Unfortunately, environmental accounting methodologies and their use in cost-benefit analyses are still not standardized. At the same time, they require interdisciplinary input from natural scientists, engineers, and economists to minimize uncertainty and accurately account for all costs and benefits to societies and the environment (Center for Neighborhood Technology, 2011; The Water Research Foundation, 2021).

The ‘valuation of ecosystem services is often confused with commodifying or privatizing nature’ (Costanza et al., 2014). However, calculating and monetizing the environmental, social, health, and economic benefits of applying NbIS is fundamental. Valuation builds a more comprehensive, balanced picture of the resilience dividend accrued using land and ecosystems to support social and environmental well-being. Its importance, therefore, cannot be underestimated (Costanza et al., 2014).

Several methods (e.g., replacement costs, market pricing, hedonic pricing, avoided costs) exist that can monetize the economic value of ecosystem services. Due to the time required to gather the raw data for most of these valuation methods, the simpler benefit transfer method is often used. This method accumulates information from studies done in similar ecosystems to provide a low- and high-value range of ecosystem types and service values (Plummer, 2009). Improvement in the confidence of the benefit transfer methodology can be accomplished through in-depth studies shared by NbIS practitioners.

For the valuation of ecosystem services to become common practice in environmental policy and infrastructure investment decisions, three shifts need to happen: the realization that ecosystem services have a value, understanding and knowledge of how to monetize ecosystem service value, and a requirement to undertake valuation exercises to decide future land use.

3.3.10. Developing Markets for NbIS

Various conservation finance instruments have been used to protect and enhance the ecosystem services provided by given areas of land (Box 3.12). Conservation finance programmes require underpinning by strong community-based, local institutions. The engagement of local institutions plays an important role in the viability and sustainability of any conservation finance programme (Thuy et al., 2013). Therefore, it is critical that communities be engaged upfront in project design and CoPs be established to accompany them in the future.
Community of Practice
(CoP)

When developing programmes that pay for ecosystem services, it is important that payments prioritize the land that offers the most significant level of ecosystem services or risk reduction. For example, a water company may fund landowners whose property drains directly into a water supply reservoir or stream system above its water intake system. The landowners would be funded based on the capacity of their land to reduce erosion and increase water infiltration to replenish groundwater. Similarly, cities or downstream communities could make payments to landowners to maintain or restore wetland and riparian areas to increase stormwater storage and attenuate peak flows to minimize flooding and improve the water quality downstream.

Potential threats, such as deforestation, mining, rainforest conversion for palm oil, soy, cattle grazing, and so on, to these ecosystem services should be identified and payment rates and schedules established to compensate landowners for not pursuing these other, often lucrative, land uses.

A known user base is also required to identify ecosystem service buyers (Box 3.12). For example, users of electricity from a hydropower plant, building owners or renters who benefit from reduced energy costs from green roofs, transport users benefiting from resilient roads, communities or powerline companies protected from wildfire, and so on. Ecosystem service providers can also be identified by identifying, estimating, and geolocating risks. For example, owners of land that affects adjacent and downstream infrastructure resilience. Infrastructure developers can then pay for the management of that land so that it provides the required ecosystem services. Payment rates could vary based on the ecosystem condition.

Figure 3.6 Examples of benefits and values of ecosystem services

3.3.11. Achieving Scale

According to a 2016 Forest Trends and JP Morgan report, over $3.1 billion in sustainable investment capital remained idle due to a lack of investment opportunities in conservation finance, and only 51 percent of government climate funds had been deployed due to a lack of projects in the pipeline or projects that were too small for private finance (Buchner et al., 2021). As a result, conservation-focused investors have not had sufficient opportunities to support NbIS projects (Hamrick, 2016).

Many NbIS projects are too small scale, and the expected returns on investment are too far into the future to be attractive to private investors. The challenges described above conspire to limit the development of self-sustaining national markets for NbIS. These markets remain small and undeveloped. Even when an investor wishes to include NbIS in a project, it may be difficult to access the necessary technology and expertise.

However, while pilot projects are often initially expensive, costs can be reduced as good practices are curated, norms and standards codified (Blue Forest Conservation, n.d.), and investors and project designers gain confidence. In particular, the identification of financial incentives and innovations unlocks solutions to some of the systemic challenges. Bundling NbIS projects into investment pipelines that mutualize risk across sectors may draw private investors’ interest and enable a centralized funding source for local NbIS practitioners to access. This structure combines bottom-up locally anchored knowledge and processes in project design and implementation with top-down investment opportunities and is further discussed in Chapter 4. Integrating NbIS into existing pipelines of grey infrastructure delivery systems can be a way to achieve scale, reduce loss and damage to infrastructure assets, and prevent loss of biodiversity. For instance, Jamaica Systemic Resilience Assessment Tool (J-SRAT) was developed to identify the co-benefits derived from NbIS (Box 3.13).

Figure 3.7 J-SRAT Tool Showing Sub-national Hazard Hotspots Source: Oxford University