While the term ‘natural capital’ may be new to many, the principle is ultimately something the agricultural industry has understood for a very long time.
Natural capital explains the economic value of the chemical, biological and physical systems that support living organisms in the ecosystem to provide us with clean air and water and provide food and fiber, which are termed ecosystem services.
National Australia Bank (NAB) Manager for Natural Value in Corporate Responsibility, James Bentley, explained that giving this a business term can help quantify its effect.
“When you start to look at the value these systems add to the economy you can start to think of these systems as a form of capital, without diminishing their extrinsic value.”
“In the past, our ignorance of natural capital has in effect been undervalued in some way or in some cases misunderstood.”
In a 2014 fact sheet produced by the GRDC, pest suppressive landscapes like native vegetation were highlighted, presenting their ability to assist in managing business risk.
In recent surveys conducted by NAB natural capital issues rated high in concerns of customers when it comes to business risk. Eighty nine per cent believed soil health was a key business risk, with 84 per cent for water scarcity and energy costs.
These results were presented by Mr Bentley at the 2017 ABARES Outlook event in March.
Growers intuitively know the importance of natural capital, for example they understand the importance of beneficial pests for insect mitigation. Unfortunately, Mr Bentley explained that currently showing a return from natural capital investment can be difficult.
“When a standard farm valuer turns up to look at an agricultural asset, standard practice is to in effect put a black marker through native vegetation as being of no value.”
But, an example of where native vegetation is having a huge impact in managing business risk is at Taltarni Vineyard in regional Victoria, with the business being able to reduce sprays by 80 per cent.
Another example is the effect of Regent Parrots in the almond industry, where they can cause $75 per hectare per annum damage, but they clean up mummy nuts at the end of the season which would otherwise cost $300 per hectare to remove for disease mitigation.
Mr Bentley explained that to progress natural capital, data collection and management through ag tech could provide the tools and systems require to more efficiently track natural capital improvements.
Given the above survey data and case studies, NAB see natural capital as a key business risk and have sort to assist in the area.
“For the last two years we have offered the Energy Efficient Bonus, a 0.7 per cent discount for any assets that are energy efficient of renewable energy.”
Investigation and communication will continue in the future Mr Bentley explained, because this is an area that “our customers have flagged” and something that effects everyone.
“We know that soil health is an issue from a risk management perspective, that farmers are investing in every year. The challenge for farmers is how they communicate that they are improving the risk profile of the soil asset over time through their investments. Understanding that communication process and developing the tools and systems that enable transparency around something like soil health, gives investors comfort that soil degradation risks are being appropriately managed.”
