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Diversification of funding - Marco Franzoi - Report 4 - Investment

opportunities in green infrastructure - 2019

The Future of Green Infrastructure: Innovative Investment and Development

Opportunities

Summary

This report analyses possible alternative vehicles of investment in green infrastructure, identifying

appropriate investors and investment structures that could have a role in greenspace creation and

maintenance in Scotland. The report is structured in sectors - public, private and financial - and for

each sector it analyses possible revenue streams, the investors attached to these streams, and

investment structures. The focus is on investment opportunities that assure clear returns, which may

be in the form of financial returns on investment, a demonstrable avoided cost or a desired social

outcome. The paper proposes some actions to develop these investment opportunities.

Introduction

Urban greenspace1 and blue space have been proven to have measurable impact on the health and

productivity of individuals (Mitchell et al., 2012; Villenue et al., 2012; Richardson et al., 2013; White

et al., 2013; Ward Thompson et al., 2019), to provide protection against flooding and extreme

weather (Bengtsson et al., 2004; Gill et al., 2007; Bracalenti et al. 2016; Nisbet and Thomas, 2016),

and to enhance wildlife and biodiversity. With further advancement of the research, greenspace is

gaining recognition as an extremely valuable asset for society, economy and nature. However,

investment in greenspace still comes from few sources, mostly local authorities with some from

national government and philanthropic investments. With rising threat of the climate emergency

and high urban pollution levels in many parts of the country it is necessary to find ways to draw new

funding into greenspace projects.

The paper does not analyse methods of implementing or maintaining greenspace projects by the

“usual actors”2, but focusses on involving alternative stakeholders in greenspace investment.

For each sector – public, private and financial – the paper answers three questions:

- what are the revenue streams for relevant industries and stakeholders in each sector,

- what are the key investors in each sector,

- what investment types are best suited and their governance structure, including case-

studies,

- what actions can be taken to help these investing opportunities grow in a way that is fair for

society and the environment.

This framework is illustrated and summarised in Table 1 (pages 11-14) in order to clearly show the

chain of links from the investment instruments to benefits, beneficiaries, obstacles, and applied

1 Greenspace and green infrastructure are used interchangeably as a generic term for urban nature-based solutions (NBSs). 2 More information available on this topic at: http://growgreenproject.eu/wp-content/uploads/2019/03/Working-Document_Financing-NBS-in-cities.pdf .

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case-studies. Moreover, this report relies on another paper on the evidence of the benefits of

greenspace (Report 5).

The public sector: innovative uses of public funding

The public sector currently provides most of the funding for greenspace, mainly from local authority

budgets for parks and gardens. These budgets are mostly used to maintain or restore existing

greenspace. Creation of new greenspace or green infrastructure is limited and usually necessitates

other investors, such as national bodies, the National Lottery Heritage Fund or through developers

and conditions placed on planning consents. Although recognition of the importance of green space

in the UK has increased in the last two decades3, after the spending cuts arising from UK austerity

policies the capacity of local authorities to invest in the provision or management of greenspace has

diminished in Scotland, negatively impacting the perceived quality of greenspace4. The decrease in

investment (almost 24% across Scottish Councils between 2014 and 20175) has occurred at a time of

growth in research on the benefits of greenspace in most developed countries. Scholars have

especially evidenced the positive effect of greenspace on health, learning capabilities and its

importance as soft-engineering measure against flooding and other extreme weather events. These

results combined with the need to tackle the climate crisis and to reach the net-zero emissions

target further show the importance of increasing and changing the way the public and other sectors

invests in greenspace. An innovative centralised or regional approach to invest in greenspace could

help to deliver more through cooperation and involvement with public stakeholders that have a

direct connection to greenspace. Accordingly, it is important to identify the most relevant

stakeholders by looking at the benefits from green infrastructure.

From benefits to investors

Within the public sector, some benefits are in the form of cost-savings that can readily be

monetised, such as the reduced costs of health provision and flood management, or they represent

social targets that are more difficult or do not need to be quantified monetarily (e.g. well-being,

quality of life, longer lifespan, lower inequality, climate change targets). Regarding greenspace, the

most obvious benefits for various public stakeholders include:

- Improved health: Greenspace research in the last 20 years has highlighted how greenspace

is strongly correlated to individuals’ mental health and its positive impact is actually

measurable (Mitchell et al., 2012; Richardson et al., 2013; White et al., 2013; Ward

Thompson et al., 2019). Physical health is also improved by access and use of greenspace,

thanks to the increased physical exercise (White et al., 2013). These results represent the

great opportunity for the NHS to implement preventative spending in greenspace, hitting a

crucial social target and possible cost-savings (studies, such as Fields in Trust (2018), are

looking at the possibility to quantify this value monetarily).

3 Analysis in the changes in England available at: https://webarchive.nationalarchives.gov.uk/20070305132929/http://www.communities.gov.uk/index.asp?id=1144084 . 4 The quality of greenspace is derived from the Scottish Household Survey (p.37): https://drive.google.com/file/d/1x_GfzPxFf059X-3Imz20Mj51EHCoN8F6/view. 5 Data from :https://drive.google.com/file/d/1aQLMu60G5WRi4QKBCuZJ92oT8eM2sxd3/view (p. 37).

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- Lower inequality: Hoffimann et al. (2016) showed how more deprived areas in European

cities have lower accessibility to greenspace and the available greenspace is of lower quality

(e.g. worse natural and amenity conditions, damaged or missing facilities, lack of community

activities). Better funding of greenspace through nation-wide social programmes can help to

tackle inequality in more deprived areas.

- Reduction of crimes in well-designed greenspaces: neglected urban greenspaces could

become a haven for crime (Drayson, 2014), but well-designed and managed parks have been

proved to reduce crime in the area and increase greenspace use. Consequently, the

importance of greenspace should lead in the future to a stronger cooperation between local

authorities and Police and Crime Commissioners.

- Improved learning outcomes: Greenspace can increase children learning capabilities (Ward-

Thompson, 2018; Davdand et al., 2015; FCFCG, 2013; O’Brien and Murray, 2007). These

positive effects could be capitalised by Education Scotland in various ways that offer pupils

of all ages better quality of and access to greenspace.

- Energy from greenspace: A new research field of greenspace pioneered by greenspace

Scotland is analysing ways for parks to provide and store green and local energy which

would produce an income stream for the community and the maintenance of greenspace.

The project could attract funding from the Energy Directorate and could be part of the

Energy policing in Scotland. National governmental bodies can provide financial and

technical assistance to local communities and authorities for the implementation of projects.

- Enhancing resilience to extreme weather events: Greenspace, nature-based solutions and

soft-engineering measures (such as green roofs and SuDSs) have been increasingly used as

substitutes to hard-engineering interventions and a wealth of evidence points at their

capability to tackle extreme flooding events, to reduce water runoff and to provide higher

surface water quality (Bengtsson et al., 2004; Gill et al., 2007; Bracalenti et al. 2016).

Although this positive effect from greenspace and green infrastructure is only now being

acknowledged6, it represents a mostly untapped opportunity to expand investment in

greenspace from environmental agencies and other public bodies.

- Labour productivity: Access to greenery within and outwith the working space has been

linked in numerous studies to improved capacity at work and better focus. Better mental

and physical health from the use of greenspace can also diminish absenteeism and

presenteeism (working while sick)7, and consequently labour productivity. Public bodies can

implement policies where greenspace becomes a statutory or highly prioritised requirement

for offices, and if these greenspaces are publicly open they would provide benefits to public

employees and entire communities.

- Carbon offsetting: measuring the enhanced carbon sequestered through activities such as

tree planting and grassland management on greenspace presents an opportunity for public

bodies to offset unavoidable carbon emissions, and this could be further incentivised

through carbon pricing. This will be an important component of the transition to a net zero

economy.

The need for innovative and comprehensive investment structures

6 See: http://www.opengreenspace.com/opportunities-and-challenges/climate-change/flood-management/ 7 Other socioeconomic factors can include income and criminality which are mostly studied to highlight inequalities within a city (Hoffimann et al. 2017).

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Although the evidence of these benefits is essential to attract other public investors in the

development of greenspace and green infrastructure, the appropriate investment structures have to

be identified. Part of the funding and investment can come from designed partnership between

public organisations and departments where mutual benefits are realised. Drayson (2014) and Mell

(2016 and 2018) signal the need to expand public greenspace funding well beyond local authorities

through cooperation with different public sector organisations. The Green Health Partnerships and

Green Exercise Partnerships set up in Scotland8 or the work of schools in New York to make their

playing space into greenspace for the community (NYC Global Partners, 2013) exemplify clear steps

in the right direction, but they are still very limited.

The solution recommended by researchers (Drayson, 2014; Grow Green, 2019; Mell, 2018) is to

make investment in the local green infrastructure common procedure for the local healthcare

provider, the national education department, the police department and other departments

benefitting from it. Greenspace would have to become a priority of the entire public sector

spending, rather than just the concern for local authorities, for example through Community

Planning Partnerships and Local Outcome Improvement Plans. Practical examples include better

access to greenspace in NHS estates, schools and early years (outside school hours and during

weekends and holidays) for the wider community.

Public stakeholders can be directly involved with the funding and maintenance of local greenspace

through endowments, rents or commuted sums9 for the maintenance of local greenspace (Mell,

2016), e.g. the co-funding of a park in the proximity of a school so that it provides a safe space for

children to play outside of school.

Local and national partnerships comprising various public organisations might represent a way to

enable high levels of greenspace investment in the future thanks to their ability to hold a clearer

overall vision of greenspace across a city or region and to the possibility to involve other

stakeholders (public or private). Due to the high number of stakeholders, governance could be led by

a board of the main stakeholders, overseen by local or regional authorities.

Examples of cooperative work currently happening in Scotland are the NHS Lothian Greenspace and

Health Strategic Framework and the Central Scotland Green Network (CSGN). The NHS Lothian

project centres on the desire to achieve high results from green activities across NHS Lothian’s green

estates. It generated a whole-system approach on the use and development of its green estates with

the help of greenspace Scotland and SNH, replacing short-term plans to cooperative and long-term

strategic plans across the Lothian region. The CSGN is the biggest greenspace partnership in Europe

and could be a catalyst for developing a stronger and more cross-departmental partnership to invest

in urban nature with the help of national organisations (environmental, educational, etc.), the

national government, local authorities and communities.

8 More information available at: https://www.nature.scot/green-exercise-partnership-briefing-note and https://www.nature.scot/professional-advice/contributing-healthier-scotland/our-natural-health-service/green-health-partnerships. 9 An amount of money paid by a developer to the Council, when the size or scale of a development triggers a requirement for a specific target, but it is not possible to achieve it on site.

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Recommendations and challenges Turning these ideas into reality requires:

- Sharing knowledge and expertise: This includes help in collecting and analysing data from current green infrastructure projects; developing the evidence base on the benefits of green infrastructure; writing and sharing guidelines on greenspace investment and evidence among public bodies, both national and local.

- Supporting partnerships and cooperative projects: projects such as CSGN and the NHS Lothian Greenspace and Health Framework play a vital role in promoting the value of greenspace across the public sector. Analysing the impact of these and other projects will strengthen the evidence base and support the development of planning strategies for ambitious investment and growth within cross-departmental partnerships, such as Community Planning Partnerships and Local Outcome Improvement Plans.

- Engaging stakeholders and developing governance structures: facilitating public departments and bodies to align investments and other effort by collaborating around place-based approaches, such as Community Planning Partnerships and Local Outcome Improvement Plans to attract momentum towards wider investment in greenspace. Where finance is involved, appropriate governance structures and accountability will be required.

The private sector: innovative opportunities for nature, people and businesses

The financial sector has usually not been involved in greenspace financing. Some notable exceptions

include big financial and tech corporations and universities that have included green areas or green

infrastructure within their building complexes and campuses. However, research on greenspace has

shown that businesses highly benefit from greenspace, both indirectly (e.g. through better

employees’ health) and directly (e.g. through higher property values). Consequently, the inclusion of

the private sector in the enhancement of greenspace is essential and symbolises the responsible

choice for society and businesses, especially at a time of needed transformation into nature-rich

cities and towns. To achieve this, it is necessary to try to look at the issue systematically through

place-based approaches in which public and private work jointly across neighbourhoods, cities and

regions.

The benefits of greenspace for businesses

In contrast to the public sector, these benefits have to be at least partially monetarised, because

private investors mostly handle investments with certain and quantifiable returns and risks.

However, it is essential to note that even though only certain benefits can be quantifiable they

catalyse a multitude of other benefits and co-benefits that can be more difficult to value.

- Labour productivity: Further research in Scotland on the benefits of greenspace close to

offices and other commercial activities on the workers can lead to more investment from

the private sector into green infrastructure, especially for those companies keen to improve

workers’ wellbeing.

- Enhancing resilience to extreme weather events and damage to buildings and associated

travel disruption: Greenspace and urban nature-based solutions reduce flooding risk and

water runoff, and improve surface water quality. These benefits extend to urban businesses

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and insurance companies since they experience lower damage costs and lower insurance

premiums from averted risks.

- Higher property value: According to a national study by the ONS (2018) residential

properties close to greenspace are valued £4000 more than others on average. Positive

results were found in a neighbourhood study by Drayson (2014), and similar impacts have

been connected to commercial properties. The main actors in the private sector that benefit

from higher prices are developers and estate agencies, but other businesses benefit from a

price premiums on their properties.

- Business opportunities: Greenspaces are often seen as an unproductive area, but cafés and

other visitors facilities improve the quality of greenspace with more people using it and lead

to revenues for companies and the park management. Moreover, commercial areas and

shopping centres that are close to greenspace and connected to residential areas via green

networks (e.g. accessible green infrastructure for bikes and pedestrians) have the potential

to experience higher sales and more customers due an improved connectivity and a better

customer experience. Retail-oriented businesses, such as department stores, supermarkets,

etc., could benefit from funding local greenspace or, in new developments, from investing

into green infrastructure around shopping centres.

- Energy from greenspace: Energy storage and production on parks (ParkPower, greenspace

Scotland) can provide a constant and quantifiable income stream. Projects could attract

investment from the energy industry especially in light of the transition to renewables across

Scotland.

- Marketing revenues: Sponsorship and other private greenspace funding can enhance

corporate image or increase brand awareness. The commercialisation of public greenspace

can prove controversial among users (Drayson, 2014), but sponsorship doesn’t have to rely

on logos or branding and it might not be perceived negatively if the sponsor is local. Local

businesses and companies can sponsor events, facilities, routine upkeep of greenspace, or

even finance green infrastructure features available to the whole community.

- Carbon offsetting: Similarly to the public sector, the management or creation of greenspace

could be a means by which private companies offset unavoidable carbon emissions, which

could be further incentivised through carbon pricing.

Inclusive investment structures and opportunities

The investment structures for private sector stakeholders are not very different from those which are established by the public sector, but the private sector does require continuous cash flows from the investment. Therefore, a proactive attitude from local authorities and other public departments willing to include the private sector in the funding of greenspace is essential in designing appropriate investment opportunities. In many occasions public organisations have to take the role of intermediaries both between citizens and businesses, and among private sector stakeholders. This section focuses only on measures that are attractive to the private sector, excluding compulsory instruments such as taxes and levies imposed by local authorities (although these are still valuable measures10).

- Sponsorships and endowments:

10 Drayson (2014), the Grow Green research (2019), and Mell (2016, 2018) are good sources for information regarding the funding of greenspace through this kind of approaches.

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Sponsorships of a park or another greenspace feature can be implemented through direct investment from local businesses, bringing benefits for communities and increasing the public image of the business at least locally. The use of visible branding should be discouraged or carefully managed due to negative reactions from park users (Drayson, 2014). Examples include the Hyde Park 10 day summer festival sponsored by Barclaycard, which consequently pays for a lot of the maintenance of the park over the year, and the Millennium Park cycle centre in Chicago, funded by McDonald’s.

Businesses interested in buying urban land for building, developing or redeveloping a certain area can commit to greenspace endowments by creating and maintaining publicly accessible greenspace as part of the development agreement with the local authority (Mell, 2018). This assures higher property values and better brand visibility for the developers and it can lead to easier negotiations with local planning authorities. In the future, opportunities also arise from the biodiversity requirements for developers, such as Biodiversity Net Gain where developers are required to offset unavoidable biodiversity losses associated with infrastructure and development through work in loco or in a separate place. The Atlantic Gateway in Merseyside, England, is a private infrastructure project where the developers work with the local authorities and other businesses following environmental and social targets (Mell, 2018).

Sponsorships and endowments are great opportunities for business park and shopping centre investors. Both options do not require complicated and legal assurance since regulations are already available, such as S106 (Mell, 2016). Moreover, green infrastructure and greenspace would provide additional benefits such as improving their revenues through better connection (e.g. green pedestrian and cycle networks) and better labour productivity.

- Partnerships: Businesses can assure specific desired benefits from greenspace in an area by investing jointly with other partners. The word partnership is used here as a general term for collaborative work. Partnerships can be business-led, public-private or solely public (see public sector section); they can be structured in various ways with different levels of governance. They are voluntary, which means that there must be a strong commitment across stakeholders in order to achieve the goals. They also require a high level of administrative and legal expertise to be set up and to run smoothly. However, partnerships can help generate the right conditions to attract investment in greenspace from new stakeholders.

a. Payment for Ecosystem Services (PES): PESs are schemes that remunerate land owners and managers for the provision of ecosystem services (e.g. flood resilience, water quality) and they have been implemented in rural areas (Defra, 2013). In the case of urban environments PES can be set up by environmental organisations or local authorities for the benefits generated by greenspace. Issues can rise from the difficulty in estimating the level of service provision (Grow Green, 2019). These schemes are often led by NGOs or environmental agencies who also act as intermediary between investors and landowners.

b. Business improvement districts (BID): Businesses and other stakeholders enter an agreement with the local or national government to contribute an additional tax or levy to fund infrastructure in a specific area. BID can be used to improve the conditions of local greenspace by businesses or implement green infrastructure projects to protect against flooding, as they did in Sheffield after the 2007 flooding11.

11 A collaboration of businesses, insurers and the public sector; available at: http://ldvflooddefence.co.uk/wp-content/uploads/2014/12/Sheffield-LDV-BID-Business-Plan-FINAL-23102013.pdf.

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Differently from PES, BID focuses on specific goals that are decided by the board, making it easier for businesses to manage their investment which are based on the projected costs of the interventions. Environmental organisations with the help of local authorities and business associations can help to set up the BID and, by keeping an advisory role, to steer towards greenspace and green infrastructure projects.

c. Public-Private Partnerships (PPP): PPPs are contractual agreements between public and private parties for the provision of an asset or service. Compared to BIDs and PESs, in these partnerships the private sector bears significant management responsibility and risk. A case study of this instrument is the Zorroatzaurre PPP in Bilbao, Spain: funded roughly equally by public and private stakeholders the project aims to regenerate an industrial area along the Nerbioi River through nature based solutions and the creation of greenspace, together with residential development. The public sector stakeholders (local, national or European) normally start off the project and fund the first steps of PPPs, making the case for environmental measures and nature-based solutions much stronger.

d. Urban Landscape Enterprise Networks (LENs): Originally planned for rural environments, LENs is a local partnership of mostly private stakeholders (but open to the public and third sectors), which started off in rural areas with catchment-sized projects. Local businesses that rely on services from the area (e.g. flooding prevention) invest in nature-based solutions to ensure their supply chains are not disrupted. Payments are based on the direct monetary benefits for the business and agreed with the suppliers, i.e. the owners of the greenspace or of the vacant area that can be regenerated. New online tools, such as the reverse auction platform EnTrade12, allow to estimate easily market prices for specific interventions. It is similar to PES schemes, but it relies on stronger private sector presence and drive thanks to the focus on the dependencies of businesses. Its governance structure resembles PPP or BID, and it can be organised ad hoc. Although the opportunities for an urban LENs project are fewer than its rural counterpart because of the lower number of businesses directly connected to ecosystem services in cities, the LENs approach could help to redevelop vacant and derelict land for new green infrastructure, to improve resilience against flooding, to create better infrastructure for workers to go to work. The partnership is flexible depending on the needs of its investors and focus on various benefits at once. A LENs project normally requires an intermediary, such as a public body or an NGO, to help projects in their first stages, to organise a fair governance system, and to identify shared interests and dependencies.

Recommendations and challenges Although there are important differences between the public and private sectors, the foundations for investing in greenspace are, broadly, similar.

- Sharing expertise and knowledge: support for the collection and analysis of data on greenspace for businesses, using common frameworks and guidelines that are easy to use for businesses and that offer information on evidence gathering and on investing in greenspace (i.e. about governance structures, cash-flows, returns, benefits sharing, etc.).

- Engaging with stakeholders: to create the means by which businesses are able to fund greenspace in partnerships with other private and public stakeholders. Stronger relations, built on trust, will be required across the public and private sectors, stemming from active

12 EnTrade is an easy to use online transactions platform for farmers and businesses developed by Wessex Water. It currently focusses only on nitrogen and phosphorous mitigation transactions, but it will soon include transactions for a variety of natural capital assets and ecosystem services (https://www.entrade.co.uk).

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networking with industry associations and directly with businesses as well as using existing partnerships (e.g. the CSGN) to embrace an approach more open to private investors.

- Developing resilient governance structures: as public/private partnerships willing to invest in greenspace start to form, governance structures will be required to apportion risk, accountability, profits or other returns and public goods. This will require evidence of the returns (planned and actual) and benefits analysis of interventions. (Experience of existing successful partnerships, including the emerging Ayrshire LENs project, will provide sound foundations.)

- Building trust: trust is an essential ingredient of partnership working, and governance structures will need to be held together by trusted intermediaries who are able to deliver on environmental and social targets. Ideally these intermediaries will have a positive brand image, based on successful projects that inspire companies to invest. Successful projects that provide a return on investment and enhance public goods will enhance the brand image of all partners.

Greenspace and financial markets

The financial sector has a pivotal role to play in investing in nature due to the extensive available

funding. Financial investors can directly invest into debt issued by local or national public authorities

to finance environmental projects, or into partnerships comprising businesses and public

stakeholders that benefit from greenspace interventions and pay back investors with the increased

profits. Both types of investment require high returns for financial investors, which can be a limiting

factor in greenspace related projects. Nevertheless, greenspace investments with low monetary

returns can appeal to alternative financing options (e.g. diversification of portfolio, ethical investors,

etc.).

- Debt-financing methods for public authorities: Local authorities can fund greenspace issuing

debt through two instruments, the Pay-for-success schemes, which are also called

Environmental Impact Bonds (Environmental Defence Fund, 2017) and Green Bonds. The

former refers to a contracting method between a local authority (or a public organisation)

and a private company, which delivers the required project. The payments from the public

organisation are contingent on the performance targets set for the project (similarly to

Environmental Impact Bonds). Examples of this instrument are DC Water Bonds to reduce

waste water spillage, and the Atlanta Environmental Impact Bonds for the development of

the city’s green infrastructure. In both cases, repayments come from the public bodies that

experience cost-savings in water treatment and flooding protection.

- Green Bonds have been applied in some European and North American cities and states

(Grow Green, 2019). They are bonds issued by a public body whose proceeds are reserved

for green projects within the region, city or local area. While these projects have to provide

a constant cash flow and high returns, since the issuer has to repay the creditors as in the

case of traditional bonds, the bonds bring in a lot of otherwise unavailable funding if the

projects are well-managed. Moreover, these methods to raise funding might turn into legal

and administrative burdens for the issuer of the debt.

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- Blended finance: A type of investment where public and philanthropic funding is used as

catalyst to attract private investment13. The model needs a constant cash flow from the

investment (e.g. energy saving products, or sustainable redevelopment of low value derelict

land). Since public and philanthropic funding only demand the original investment back, the

returns for the financial sector are increased attracting private investors. Investors finance

also private companies or partnerships, especially in the renewable energy industry where

clear revenues models are more easily implemented. The Ginkgo Fund, which turns vacant

and derelict industrial areas into high-value green residential areas through initial

investment from the European Investment Bank, is the most relevant case of green

infrastructure blended finance project. The European funding catalyses private investors,

especially developers, and because of its success the project was renewed for another round

in Belgium and France.

- Reinsurance: a form of insurance where multiple insurance companies share risk by

purchasing insurance policies from other insurers to limit their own total loss in case of

disasters, i.e. it cedes part of the insurance liabilities to another insurance company, or, in

short, insurance for insurance companies. Reinsurance offers the opportunity to quantify the

risk reduction benefits from natural assets, like greenspace, as reduction in contingent

financial liabilities, i.e. the cost to insurers and reinsurers if a natural asset wasn’t there or

was damaged (for example the economic cost of missing greenspace on urban areas in case

of flooding). Using these values can attract investment from reinsurers and other private

stakeholders because it would provide clarity to investors, lowering pay-outs and premiums.

Willis Tower Watson is currently working through the Global Ecosystem Resilience Facility (a

risk analytics agency) to view ecosystems as natural capital infrastructure and quantifying

the financial liabilities from damage or collapse of natural assets.

13 OECD paper on Blended finance: https://www.oecd.org/environment/resources/Session%204%20Blended%20finance%20for%20water%20security%20investments.pdf.

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Recommendations and challenges The involvement of the financial sector represents possibly the most difficult challenge for greenspace investment, but also the most rewarding. Current changes in the attitude of financial markets towards the need to respond to the Sustainable Development Goals, Climate Emergency, nature-based solutions and green investment must be captured. The challenges outlined above for the public and private sectors apply here, together with:

- Supporting debt-financing opportunities: Environmental organisations across the world are depending on these methods to raise project funding. Strong business cases, with clear cash flows and returns, are the basis of investment proposals from environmental or sustainable trusts, banks and funds, such as the Natural Capital Financing Facility or the newly established Scottish National Investment Bank. More experience of organising and administering debt-financing and blended finance for green investments is required across the public sector.

- Steering interest: The Scottish Conservation Finance Initiative has generated momentum around financial investment opportunities in nature based solutions. This includes greenspace, which, while retaining local delivery and character, has the potential to be scaled up by accumulating a large number of local projects into a portfolio of a scale that could attract institutional investors.

- Learning opportunities: Reinsurance gives a clear – albeit underestimated - monetary evaluation of some nature-based solutions. Although this is normally quite a complicated process, the potential scale of investment would amply reward organisations who are willing to work with reinsurers and other organisations to offer a better business case to investors in green infrastructure projects.

Conclusion

Green infrastructure in cities is a key part of the response to the Climate Emergency, helping to

enable the transition to a net zero economy while adapting to climate change that is already locked-

in and enhancing the state of nature. Exploring new ways to invest in greenspace would allow for

extra and more efficient investment and would attract different investors. This paper especially

highlighted these factors as enablers to advance greenspace investment:

- The collection of data and evidence among private and public stakeholders with

environmental agencies and other bodies helping to share the information, expertise and

knowledge.

- The rise of collaborative investment in greenspace through the creation of partnerships

across the country that include both private and public stakeholders, especially those

involved in education, health and safety, and construction.

- The conceptualisation of greenspace as a matter of interest across the entirety of the public

and private sector, setting up a national framework for greenspace investment.

By acting now and helping attracting interest in urban nature across sectors and industries, there is

an opportunity to make these objectives achievable, to connect cities and nature, and to improve

the quality of life in urban Scotland.

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Table 1

Investment type

Instrument

Benefits and beneficiaries

Obstacles

Examples and case-

studies

Public sector investment in greenspace

Innovative uses of public funding

More cross-departmental public sector investment in greenspace:

- public partnerships, collaborative work between public bodies with governance led by a board of the main stakeholders and oversighted by local or regional authorities.

- systematic vision of greenspace and green infrastructure across towns, regions and nationally.

Better health and public health outcomes benefit the Scottish NHS. Lower crime rates from high quality greenspace benefit the Police and Crime Commissioners. Improved learning outcomes from greenspace use positively affect Education Scotland. The Energy Directorate benefits from energy storage and production.

Little evidence of returns from investment in projects. Issues in governance and prioritisation. Administrative and legal burden of the partnership.

Green Health Partnerships and Green Exercise Partnerships between SNH and the Scottish NHS. New York schools and city council made schoolyards greener and open to the public outside of school hours (NYC Global Partners, 2013).

Private sector investment in greenspace

Corporate and

private sponsorship

Sponsorships of parks or other greenspace features can be implemented through direct investment from local businesses.

Sponsorship investment: - provides benefits to the local

community; - improves the brand image of

investing businesses.

Difficulties in agreeing on amount of funding. Low supply of interested businesses.

Barclaycard sponsors the 10 day summer festival in Hyde Park; McDonald’s sponsors the Chicago Millennium Park cycle centre.

Sale and endowment

Businesses interested in acquiring land for developing or redeveloping a certain area commit to greenspace endowments by creating and maintaining publicly accessible greenspace as part of the development agreement with local authorities.

The main beneficiaries are developers and estate agencies:

- Higher property values; - Better image; - Easier land sale negotiations

between the developer and the local authority.

Initial cost of appropriation. Negative public reaction.

The Atlantic Gateway: a private infrastructure project where the developers work with the local authorities and other businesses (Mell, 2018).

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Partnerships involving the private sector: voluntary and collaborative work between businesses or across sectors.

Payments for Ecosystem Services (PES): rural schemes that remunerate land owners and managers for the provision of ecosystem services (e.g. flood resilience, water quality, etc.). Urban PES would be set up by environmental organisations or local authorities for the benefits generated by greenspace.

Systematic and large-scale approach to the creation and regeneration of the greenspace of a neighbourhood, town or region. Better connection between urban and upstream areas opens investment opportunities and enhances nature across the country. The benefits for public and private stakeholders:

- Public bodies, businesses and insurers benefit from flooding and water runoff prevention measures.

- Better health outcomes benefit the NHS.

- High-quality greenspace improves children learning capabilities, attracting educational funding.

- Good greenspace reduces crime, benefitting the police.

- Improved workers’ wellbeing and productivity for local businesses.

- Shops in regenerated areas experience increased sales.

- Green infrastructure networks decrease traffic and pollution.

- Developers and estate agencies benefit from the increase in property values.

Governance issues.

Analysis of multiple

services was difficult.

Lack of urban

examples.

Pumlumon PES scheme in

Wales (Montgomery Wildlife

Trust): examples of

investable services were

lower flooding risks, better

water quality, carbon off-

setting, habitat restoration

(Defra, 2013).

Business Improvement Districts (BID) are agreement between businesses and the local or national government to contribute an additional levy to fund infrastructure in a specific area. Goals are set by the board of businesses. Business investment is based on projected intervention costs.

It requires high number of local businesses. Less applicable for mixed land use.

Sheffield BID co-funded the installation and maintenance of flood defences in strategic city area along the Don river contributing to 17% of total costs. The defences include nature-based solutions.

Public-Private Partnerships (PPPs) are contractual agreements between public and private parties for the provision of assets or services with a significant private sector involvement. The local community is directly involved in any decision made.

Higher returns needed for private investors. It requires strong business commitment. Single project focus.

Zorroatzaurre PPP in Bilbao: regeneration of industrial area through residential development and greenspace for resilience flooding. Equally funded by the public and private sector.

Urban Landscape Enterprise Networks (LENs): partnership of private sector stakeholders within a catchment or a delimited area. Payments are based on the monetary benefits for businesses and agreed with the owners of the affected greenspace. Online tools, like the reverse auction platform EnTrade, estimate market prices for specific interventions. Public organisations help set up the governance system and identify shared benefits.

Lack of urban examples. Difficult to assess benefits in cities. Lack of demand-supply platform. Governance issues.

A major LENs project has been set up in Cumbria with the lead of Nestle (for resilient production of milk in the area) and of United Utilities (for water quality in a local catchment). Farmers, river trusts and other stakeholders in the Eden catchment implemented nature based solutions.

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Financial markets investment in greenspace

Debt-financing for local authorities

Pay-for-success schemes or Environmental Impact Bonds (EIB) are a contracting method between a public body and a private company, which delivers an agreed project. Payments from the public organisation are contingent on the performance of the project.

EIBs provide: - economic opportunities for

businesses; - Large-scale greenspace

projects. - assurance for the public body

of successful project delivery.

The need for a constant cash flow and high returns, since the issuer has to repay the creditors as in the case of a traditional bond. Legal and administrative issues become a burden for the debt issuer.

The DC Water Bonds: the public water utility company for DC aims to reduce sewage water runoff during extreme weather events, using the savings to repay investors. The Atlanta EIBs: focus on green infrastructure funding.

Green bonds are bonds issued by a public body whose proceeds are reserved for green projects that are managed by the public body.

The green bonds benefits: - boost to local authorities

funding for greenspace; - cost-savings for the issuing

public body and for the citizens;

- large-scale greenspace projects.

Gothenburg Green Bonds: proceeds are used for environmental projects, e.g. green housing, green transport, etc. Economic development and environmental indicators.

Blended finance

The strategic use of public and philanthropic funding to mobilise private capital flows to emerging markets. These funds aim to facilitate private investment (catalysing fund).

Returns can be lower overall since only the private sector needs interest on top of their original investment. Large-scale greenspace projects are possible because of high amount of financial funding available.

High amount of public money needed to start projects (£ millions).

Ginkgo Fund (EIB): EU catalytic funding for derelict industrial areas turned into green residential areas; private investment from developers.

Reinsurance

It is a form of insurance where multiple insurance companies share risk by purchasing insurance policies from other insurers to limit their own total loss in case of disaster.

Monetary quantification of natural assets as contingent financial liabilities, i.e. the cost to insurers if a specific natural asset wasn’t there or was damaged. Large-scale greenspace projects are possible because of high amount of financial funding available.

Lack of case-studies of reinsurance investment in greenspace.

Global Ecosystem Resilience Facility: risk analytics agency viewing ecosystems as natural capital infrastructure and valuing the resilience provided by natural assets.

15

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