INVESTING IN NATURAL ASSETS

cowyardvioletManagement

Nov 6, 2013 (3 years and 7 months ago)

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INVESTING IN NATURAL ASSETS
A business case for the environment in the
City of Cape Town
ICLEI/LAB workshop: “Ecosystem Services Mapping in the City of Cape
Town: informing Investment in Ecological Infrastructure”, Rondevlei
Nature Reserve, 28-29 Feb 2012
Why this study?
Influence budget allocations by developing focused economic
arguments for investing, maintaining and expanding the City’s natural
assets.
Rationale for this study is to develop a financially-motivated business
case for investing in natural assets in the City.
Why invest in, maintain and expand natural assets?
Natural assets produce a flow of goods and services that has value
for people living in and visiting the City of Cape Town
Degradation of urban natural assets impedes on the ability of the
municipality to deliver services in a cost-effective way
What is different from other arguments?
Arguments to preserve the natural environment have traditionally not
focused on the financial logic of investing in natural assets.
Overview presentation
• Natural assets and flows: definitions and
concepts
• Economic value of natural assets and flows
• A business case for the natural environment
1. NATURAL ASSETS AND FLOWS
Distinguishing between:
Money in a bank account (capital) a flow of interest.
Natural capital a flow of EGS
• Natural assets/capital:
Stock of natural resources
owned by the City (beaches, rivers,
wetlands, parks, reserves, mountain..)
• Ecosystem Goods and Services
(EGS):

Flows of benefits
derived from these assets.
Ecosystem Goods and Services
NATURAL ASSETS

Renewable resources:
forests, plants, animals


Non-renewable resources:
minerals, oil

Environmental resources:
water, coasts, atmosphere
• Land
Ecosystems Goods and Services
Supporting
soil formation
photosynthesis
primary production
nutrient cycling
water cycling
Provisioning
food
freshwater
fibre
fuel
genetic resources
medicine and
pharmaceuticals
Regulating
air quality regulation
climate regulation
water regulation
erosion regulation
disease regulation
pest regulation
natural hazards regulation
(including fire, flood, storm
surge)
Cultural/
Informational
reflection
recreation
inspiration
aesthetic enjoyment
cultural diversity
educational value
Ecosystems and poverty alleviation
Maintaining and expanding EGS flows
can contribute to poverty alleviation by:
-Helping poorer communities meet their
basic needs:
• Water
• Firewood
-Increasing:
• secure and sustainable livelihoods,


health conditions


income


property value.
“Nature’s factories” to the benefit
of human beings
Natural Assets as Public Goods
Anyone can enjoy. At anytime.
NO PRIVATE INCENTIVE TO MAINTAIN AND
INVEST
Lack of management
Urban pressure
Interrupted
flow of EGS
and loss of
value
City functions related to environmental goods and services in the
City are: environmental resources, parks, tourism, heritage, sports and
recreation, wastewater, storm-water, solid waste and spatial planning
Participatory rapid assessment with line function managers and
senior staff
Staff focus groups to identify and motivate most important linkages
between identified EGS in the City and:
- beneficiaries (number and value)
- development objectives (closest links with natural assets)
- City’s environmental mandate and
- ability to influence and ecological and socio-economic risks.
2. Economic valuation
How were values prioritised?
9
Prioritised ecosystem services
Higher
High
Medium
Lower
Natural hazard regulation
Water purification and
waste treatment,
assimilation
Climate regulation – local
(air quality)
Climate regulation global
Recreation and Tourism
Space for biota
Small scale urban farming
Fresh water provision
Aesthetic values and sense
of place
Water regulation
Building materials
provision
Fish and marine resources
Provision of inspirational
beauty
Educational users
Cultural and artistic
practices
Religious practices
Erosion regulation
Disease regulation
Harvesting
Materials for craft and
fashion
Use in productions,
advertising and
publications
Natural hazard regulation (buffering function for flooding, fires, sea
level rise/ coastal surge)
Provision of natural characteristics that are conducive to tourism
and recreation
The improvement of water quality and the assimilation of waste -
ecosystems help filter and decompose organic wastes
Provision of space for globally important biota, and
The aesthetics and sense of place provided by the natural
environment
VALUABLE FLOWS TO VARIOUS BENEFICIARIES
Natural/
semi natural
environment
beneficiaries
VALUABLE FLOWS TO VARIOUS BENEFICIARIES
Natural/
semi natural
environment
beneficiaries
Tourists
International
National
Local
Recreation groups
Beach bathers, sailors,
picnic & braai
cyclists, hikers
Harvest groups
Fishers, wild plants
harvesters,
fuelwood gatherers
Informational and
cultural groups
Education,
Scientific research,
Religious experience
Industry groups
Film and advertising
industry, Shipping,
Tourism
Residential
groups
Rich and Poor
Valuable flows
Low
Medium
High
Tourism
965
1 829
2 948
Recreation
408
449
494
Natural hazard
regulation
5
18
60
Film industry
133
265
398
Other (est.)
453
1 024
1 950
Total
1 963
3 586
5 850
Table 1: The value of ecosystem services to the City of Cape Town: 2008: R
million: A partial analysis
Nature’s Value in Tourism and Recreation
Beaches: R70 – R85 m/a
Nature Reserves: R 68 – R83 m/a
Green open spaces: R270 – R326 m/a
Tourism: R965 m - R2.95 bn/a
Tourism
• In order to estimate the value of Cape Town’s natural
assets from a tourism perspective, the following steps
were thus followed:
– Estimate the travel costs associated with all tourist trips that include Cape
Town in their itinerary (i.e. the cost of transport) (R12bn pa)
– Isolate the relative prominence or weight of Cape Town in the travel
decision of tourists including Cape Town in their travel itineraries (15-35%
international; 40-60% domestic; R2.1 - R4.6bn)
– Isolate the relative prominence or weight of Cape Town’s natural assets in
the travel decision of tourists coming to Cape Town (40-60% based on
visitor surveys)
– Add entry fees paid by tourists to access natural areas to their travel
costs (R118-R145m)
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Natural Hazards Regulation
Natural Hazards
Fires
Flooding
Storm surge &
Sea-level rise
Reduced
Consequences
Damages
Management costs
People at risk
Ecosystems: natural barriers and buffers against natural hazards.
• Dune cordons and kelp beds reduce storm surges impact on land.
• Natural pervious ground cover absorb rainfall, impervious ground
cover increases water runoff and flood risk.
Lack of management: enhanced natural hazards risk and potential
damages.
• Invasive alien species enhance fire risk, frequency, intensity, soil’s
vulnerability to erosion ! enhance potential damages, fire fighting
costs, and clean up costs.

Nature’s services in hazard regulation: R5m - R60m/a
The increased risks of storm surges and their associated costs in Cape
Town have been assessed recently in terms of:
• Loss of real estate value
• Damage to infrastructure
• Foregone tourism revenue
Natural solutions: natural parts of the
coastline which act as buffers are not lost to
development
Sea-Level Rise and Storm Surge:
Investing in the coast line
Increase buffering: creating kelp beds,
rockier beaches and sand dunes that will
increase the absorption capacity of the
coastline.
Flooding: Investing in rivers and catchments
Informal settlements affected
Damaged structures
People directly affected
People housed at emergency shelters in community halls
People displaced in safety zones
Number of meals served twice a day
Number of blankets distributed
70
7500
30!000
3000
2480
22!000
13 000
Table 2: Impacts of the July 2008 floods in Cape Town
Source: City of Cape Town, media release No 330/2008, 10 July 2008.
Storm water runs off of impervious surfaces and is not absorbed; runoff
volume typically increases:

twofold as the percent catchments’ imperviousness increases to 10–
20%,

threefold with an impervious surface cover of 35–40%, and

more than fivefold with an impervious surface cover of 75–100%
compared to catchments with natural vegetation cover.
Fires: Investing in alien control
R30 million to R40 million in damages attributable to the March
2009 fires in Somerset West (R25 to R30 million in damages for
Lourensford wine estate and R5 million to R10 million for
Vergelegen wine estate
In January 2000, two wildfires burnt 8 000 ha on the Cape
Peninsula resulting in insurance claims of approximately $5.7
million or R73 million
Invasive Alien Plants lead to higher
damage costs, higher firefighting
costs and avoidable clean-up costs.
Water Purification and Waste Assimilation: Investing in
rivers and wetlands
Wetlands
Water
purification
function
• processing some of the grey and
waste water outfalls
• creation of recreational and
economic opportunities
• contribution to a healthy
environment for communities.
Services provided by wetlands save cities significant amounts of infrastructural costs which
would weigh on them if the natural ecosystem wasn’t present or became inefficient.
Zandvlei
• Replacement cost of a treatment plant: R180 million
estimated.
• Replacement cost of a flood storage capacity: R24 million
estimated
• Costs of constructing an artificial wetland.
Illustrates the magnitude of the “free” services provided.
Within assimilative capacities
Space for Biota: Investing in biodiversity
Cape Floral
Kingdom
9000 plant species
70% endemic
2002 - 2006: International funding = R225 million
2008 - 2009: Environmental Education Programs =
23 781 learners from 500 schools.
Biodiversity needs to be recognised and valued as a critical
‘umbrella’ service without which most other valuable ecosystems
services would be diminished or may even become unavailable.
Aesthetics and Sense of Place: Investing in
wellbeing, City brand and property
• Enhanced health and wellbeing (e.g. preference for natural to
built environments, restore mental fatigue, attention deficit
disorder, lower stress, neighbourhood satisfaction)
• Contribution to the Cape Town brand and an enhanced
business environment (desirable living attract key human
capital and business, inspiration, creative thinking), as evident
by many quality of life awards
• Property value enhancement
Film making: Investing in scenery and aesthetics
Number of
productions
Average expenditure
per production (Rm
2006)
Total
expenditure
(Rm 2006)
Long form (features)
30
37,2
1 115.6
Local Commercials
142
0,9
162,5
Service Commercials
400
1,8
631,8
International Commercials
58
2,6
77,9
Stills
2 100
0,3
659,8
Provincial Total
2 730
2 647.6
Cape Town Total
2 027.0
Table 3: Number of productions and expenditure in the Cape Town and
Western Cape film industry (2005/2006)
Source: Standish & Boting (2007)
Film and advertising total values associated with natural
assets of between R133 million and R398 million
3. MAKING A BUSINESS CASE
Net present value of combined natural assets:
! R43 billion to R82 billion.
Ratio of environmental expenditure to the value generated EGS
! R1 spent by municipality on natural assets " R8.30 (range
R4.50 - R13.50) of ecosystem goods and services (EGS) generated
compared to
! R1 spent by municipality overall " R 7.30 added value
generated in local economy
Indicator
1
Indicator
2
Leverage of municipal
expenditure on economic
value of EGS
Leverage of municipal
expenditure on the broader
City economy.
>
Between 1.2 and 2 times
Insights into the level of environmental expenditures in relation to
the benefits received from the natural environment.
Investing into underlying natural assets can leverage relatively high
economic value in the broader City economy (1.2 - 2 times higher than
overall municipal expenditure).
Investing and maintaining the City’s natural assets or ‘ecological
infrastructure’ yields highly valuable services which provide the backbone
for value addition and employment in City’s economy.
CONCLUSION
It is conservatively estimated that the City’s natural assets yield a flow of
services valued at R4 billion per annum, within a range of between R2 billion
and R6 billion per annum.
As an entity focused on service provision and as an enabler of economic
growth and development, the municipality has the mandate and opportunity to
invest adequately in natural assets to maintain a healthy flow of services to the
benefit of people living in and visiting Cape Town.
Nature provides a free lunch, but
only if we control our appetites.

William Ruckelshaus, Business Week, 18 June 1990