The Environmental Audit Committee has launched an inquiry into the role of natural capital in the green economy.
The committee will seek to understand how government policy is supporting and promoting investment in nature recovery.
The UK is one of the most nature-depleted counties in the world and has lost more wildlife than any other G7 country.
The government has committed to leaving the environment “in a better state than we found it” and to reversing biodiversity loss globally by 2030.
Ministers have announced a number of steps to meet these goals, including the piloting of a Natural Capital and Ecosystem Assessment.
Other steps include the introduction of a mandatory biodiversity net gain requirement in the Environment Act and working with the Taskforce on Nature-related Financial Disclosures to develop metrics for companies and financial institutions to embed into their investment decision-making.
Earlier this year, in its Nature Markets Framework, the environment secretary stated that measures such as carbon sequestration, clean water, biodiversity and natural flood management remained “systematically undervalued” in the UK economy.
The government also set out further plans to support the flow of private finance to support the ‘nature positive economy’.
Natural capital, defined by professor Sir Partha Dasgupta in his 2021 review of the economics of biodiversity, is “the stock of renewable and non-renewable natural assets (e.g. ecosystems) that yield a flow of benefits to people (i.e. ecosystem services).
The term ‘natural capital’ is used to emphasise it is a capital asset, like produced capital (roads and buildings) and human capital (knowledge and skills).”
As part of this new inquiry, the committee will seek to understand whether the government’s policies to promote natural capital and investment in biodiversity protection is adequate.
It will look at the role private investment can make, and how the UK might develop world-leading markets in natural capital assets while avoiding the ‘greenwashing’ of investments.
Alongside this, the Financial Conduct Authority has proposed a package of new measures to clamp down on greenwashing.
Measures include investment product sustainability labels and restrictions on how terms like ‘ESG’, ‘green’ or ‘sustainable’ can be used.
The measures are among several potential new rules which the regulator hopes will protect consumers and improve trust in sustainable investment products.
Commenting on the Environmental Audit Committee inquiry, chair Philip Dunne said: “Nature and biodiversity are declining at an alarming rate in the UK, and adequate safeguards must be embedded to avoid any further loss.
“The financial sector will have a significant role to play in promoting the development and enhancement of the nation’s natural capital – from air to water, soil to forests – as the UK economy begins to embrace the economics of biodiversity.
“The committee seeks to understand how the UK’s markets in natural capital are developing, and whether the frameworks that have been put in place, and the measures being encouraged by ministers, are sufficient to promote investment in nature recovery while establishing the UK as a leading financial centre for nature positive investment.
“We will look at measures to prevent greenwashing in the natural capital sector so that the investment and policies really do make a material and nature positive difference to environmental recovery and levels of biodiversity across the UK.
“I encourage anyone engaged in the development of natural capital markets to contribute to our inquiry.”
