The Business Side of NBS

Quantifying the Benefits

Because NBS help to reduce risks associated with climate and environmental change, they can represent important investments for municipalities and developers looking to create resilient communities and save money in the long-term.

Evidence is mounting that NBS infrastructure solutions can be several times more cost-effective than engineered structures for mitigation of multiple impacts of climate change, while providing many additional benefits to humans and the environment, although a mix of NBS and “grey” engineering may still be required in the most extreme hazard conditions.^[1]

While some benefits of NBS are more easily measured, such as money saved by preventing a flood in a given area, environmental and social benefits also need to be quantified to explore the true cost-benefit of NBS in urban contexts. When considering the value of nature-based solutions (NBS), a cost-benefit analysis must look at the triple bottom line: economy, society and environment, all of which can be benefited by the implementation of NBS. 

Full-cost accounting, including externalities, is required to capture the economic and societal benefit that ecosystem services associated with NBS provide to a community over time. An example of this accounting is quantifying the value versus the cost of increased green space, which helps to offset other public costs such as health and social cohesion. Social benefits are difficult to quantify and often the economic value of NBS will need to include a valuation based on citizen perceptions. 

Bringing it All Together

Adapted from McCormick, K., 2020^[2], the following outlines an approach to systematically implementing NBS in a community.

Identification

First, it is important to determine what type of NBS a project represents. There are several types and some NBS implementations may fall under multiple categories, including:

• Risk Reduction: Does the project mitigate climate risks for the community? For example, will it prevent flooding or reduce the heat island effect in a city? 
• Green Densification: Does the project increase greenspace and density in an urban area? 
• Urban Offsetting: Does the project contribute to carbon offsetting within the urban context? Is a carbon sink involved?
• Vacant Space: Does the project make use of vacant space by naturalization of a vacant lot or brownfield? 
• Local Stewardship: Are local stewardship groups or community stewards involved in the project? Are there opportunities for local community members to participate in stewarding this implementation of NBS?
• Green Health: Does the project contribute to community mental, social, cultural or physical health? 
• Green Education: Does this implementation of NBS provide opportunities for education, either for children and youth formally or informally, or for the broader community? 
• Green Heritage: Does the project celebrate or restore a culturally significant or ecologically significant space? 

Valuation

Developing a value proposition is an important next step in the implementation of an NBS project. The value proposition clearly states what is being offered in terms of infrastructure benefits, as well as local benefits to the community, environment and economy. When preparing this proposition, it is crucial to remember that NBS have long-reaching and long-term positive impacts. Risk mitigation is also a value that can be quantified by what would otherwise happen in the case of a major weather event (e.g., a flood) that could cause significant damage to property and infrastructure.

This valuation tool can help municipalities and developers determine the costs-benefits associated with using different forms of NBS. Additionally, consideration must be given to any revenue generated from this project and, if so, who would receive that revenue.

Financing

Since NBS provide multiple benefits, there are often opportunities to explore collaborative approaches to funding through multiple sources and partnerships between public, private and community organizations. According to a working document by the European GrowGreen project^[3], municipalities have two options for financing NBS projects in their communities:

1. Municipality pays for the implementation of NBS projects and/or the maintenance of existing NBS in the community. This option is primarily used for projects on public lands.
2. The municipality incentivizes the implementation of NBS by private businesses, utilities and residents on private property and/or the maintenance of existing NBS on public lands.

Municipality Pays for NBS	Municipality Incentivizes Stakeholders to Pay for NBS
Secure funds from public budgets, including pooling funds from multiple departments as NBS have multiple benefits	Credit systems for offsets, biodiversity or ecosystem services, subsidies, tax rebates, and user fees
Fundraising from grants (provincial and federal – could include the Government of Canada’s Natural Climate Solutions Fund), philanthropic donations, crowdsourcing	Business Improvement Districts (an agreement between local governments, businesses and other stakeholders wherein the private sector pays an extra levy. BIDs self-manage, including finance decisions and seeking additional financing)
Revenue-generation and value-capture: taxes, sale of development rights/leases, revenues from land sales/leases, user fees, stewardship levies, offset compensation, voluntary contributions	Endowments (interest earned on donated money, property, developer contributions, land sales, etc. is used to maintain the green infrastructure)
Green finance and green bonds: loans from public and private financial institutions	Public-Private Partnerships
	Community asset transfers
	Working capital funds/revolving funds
	Standards in regulations and planning/policy
	Regulatory obligations already in place

Implementation and Oversight

Determining how to govern and deliver an NBS project is the next step. Municipalities, developers, project managers and planners, and others involved in the process should explore a variety of project governance options and determine what strategies, resources and networks will be required to move the project forward financially and logistically.