Valuing 'natural capital' on farms

Evidence has shown that integrating biodiverse plantings of native trees and shrubs into farming systems can mitigate risk, enhance productivity and provide an array of valuable ecosystem services besides.

The proven benefits of this ‘natural capital’ are rarely translated into demonstrable economic value, which means property valuers and banks still tend to consider native vegetation and other natural features on farms as having ‘zero productive value’.

What is natural capital?

‘Natural capital’ refers to the value of the planet’s stock of water, soil, air, plants and other resources. It extends the economic notion of ‘capital’ to ecosystem goods and services provided by the natural environment. Because nature provides these goods and services for ‘free’, they have historically been taken for granted and not properly valued by decision makers, even though they provide the basis for all economic activity. Including natural capital in decision making means we can better account for the true costs and benefits of any venture.

The Challenge

At the recent Regenerative Agriculture Conference in Western Australia, 78% of attendees identified hard proof of return on investment and investment readiness as key barriers to private investment and lending in regenerative agriculture.

“Given the key role regenerative agriculture can play in simultaneously tackling the climate crisis and land degradation, these barriers desperately need to be hurdled,” said Greening Australia’s Science and Planning Manager, Dr Blair Parsons.

The Solution

Greening Australia seeks to address this gap with a research project made possible by support from National Australia Bank. The project aims to develop credible metrics and standards around the financial benefits of native vegetation for landholders, by collating and analysing data that links on-farm natural capital investments and financial performance.

As a first step, a nationwide survey is being conducted to determine the value of shade and shelter for lamb survival in Australian sheep production systems. Sheep producers around Australia are being invited to participate.

Lamb survival remains one of the most significant issues faced by Australian sheep producers. Anecdotal and scientific evidence suggests that establishing belts of vegetation on farms can improve the survival rate of newborn lambs, sheltering them from extremes of temperature, wind and rainfall. Vegetation belts also provide a source of fodder for browsing, so ewes can stay close to the birthing site with their lambs, aiding quicker recovery.

“Through the survey, we are aiming to compile better data linking the costs and benefits of native vegetation and the profitability of sheep production systems,” said Dr Parsons.

“In the short term, the data analysis will support landholders, who can use this information when planning their programs.

“In the medium to long term, the aim of the project is to deliver clearly defined financial values that will support landholders, property valuers, banks and other financial institutions to incorporate ‘natural capital’ into their valuation and decision-making processes.

“Ultimately the results of the project should help improve decision making about integrating native vegetation into farming enterprises for all involved: landholders, financial institutions and land management planners. Putting a dollar figure on the value of native vegetation for farming systems could also stimulate further investment in the environment and agriculture sectors.”

Progress

We invited landholders to complete an online survey on the link between trees on farms and improvement in lamb production. Data showed that producers valued shelter provision with benefits outweighing drawbacks. Further analysis is in progress as we seek to quantify these benefits more explicitly.

This research project is supported by National Australia Bank. For more information about this project, or if you are willing to provide additional financial data to support and validate the survey, please contact Dr Blair Parsons on 08 9280 8310 or send us an online query.

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