Value categories and approaches to assess NBS economic and financial performance. Invest4Nature Deliverable 2.1

Disclaimer: This version has been submitted to the European Commission and is currently under review.

The potential of Nature-based Solutions (NbS) in addressing diverse societal challenges, including climate change adaptation (CCA) and disaster risk reduction (DRR), is widely recognized in both scientific and policy domains. However, a significant gap exists in our understanding of the economic implications of NbS, which is crucial for informed resource allocation and financing decisions by policymakers and practitioners. This report aims to bridge a part of this knowledge gap by providing a comprehensive exploration of NBS typologies across six distinct landscape types and thematic areas, along with an inventory of valuation methods. It delves into the costs and benefit categories associated with NBS, and examines various methodological approaches for capturing the diverse values attributed to NBS benefits.

This Deliverable D2.1 of the Invest4Nature project organizes NbS, societal challenges, benefits, and costs into generic and specific categories. NBS actions are categorized into three types based on the level of ecosystem intervention and stakeholder involvement: i) protection/conservation of high-quality or critical ecosystems and/or sustainable management of healthy ecosystems, ii) modification of existing ecosystems e.g., restoration/rehabilitation of degraded ecosystems, and iii) creation/establishment of new ecosystems. These types are further classified into six landscapes or thematic areas: coastal areas, mountain areas, agriculture, forests, water management, and urban areas. NbS actions within each landscape are therefore grouped into three generic categories, with further disaggregation into specific NbS interventions. Six generic societal challenges are identified: climate adaptation, climate mitigation, natural hazards, environmental management, noise pollution, and socio-economic challenges, each with specific sub-challenges. Furthermore, ecological processes that underpin the delivery of multiple benefits are identified for each specific challenge.

To address these challenges effectively, it is essential to focus on multiple benefits, including those for biodiversity and society. Benefits are organized into generic and specific categories, with overarching categories aggregating a range of specific benefit categories that result from addressing each distinct societal challenge. Meanwhile, cost categories for NbS are also organized into generic and specific categories, mirroring traditional project budget groups but with the inclusion of trade-offs, indirect costs, disservices, and opportunity costs related to competing land uses.

Additionally, the report provides an extensive inventory of valuation methods for assessing the economic, environmental, and social costs and benefits of NbS, encompassing quantitative and qualitative approaches. It emphasizes the importance of considering various factors when selecting an economic valuation method, including scope, objectives, ecosystem services to be assessed, data quality, and context. The report recommends a combination of methods and integrated approaches for a holistic NBS assessment, including qualitative methods alongside quantitative ones. Furthermore, the report explores risk assessment approaches, decision support strategies, and the integration of NBS with natural capital accounting and climate data statistics to effectively address climate change challenges. Building on these insights, Invest4Nature aims to extend the total economic value (TEV) framework, incorporating uncertainties related to climate risks and impacts on disaster risk reduction, to develop an integrated assessment of NbS.

While primarily serving as a guiding framework within Invest4Nature, this deliverable also offers valuable insights to a broader audience, including practitioners seeking a deeper understanding of NbS and their economic implications. This report equips researchers and practitioners with an inventory for navigating the complex landscape of NBS, emphasizing a multifaceted, context-aware approach to evaluate and harness their full potential in addressing pressing societal challenges.