Focusing on the bottom line to improve landscape health
We need a better business case for landscape repair…
The Australian landscape we were handed has much room for improvement; from aesthetic, biodiversity and production perspectives. Much of the work to be done needs a partnership approach between landholders – mostly primary producer businesses – and investors – mostly government agencies investing for public good.
In packaging landscape improvement opportunities we need to consider the investor audience, which given the scale of investment required, and shared equity in returns, there are really only two options to do this efficiently – government and large private landholders or institutional investors. To connect with these audiences effectively we need to use their language and decision making frameworks.
If we view the landscape as ‘green infrastructure’ requiring investment and maintenance like any asset, and package investment opportunities in a ‘business case’ framework, we may be better-placed to connect with decision makers. A further ‘small-p’ political consideration is needed when packaging the investment opportunity for governments and institutional investors – it needs to attractive to them and their constituents – voters and shareholders respectively.
How do we make that happen?
By viewing the landscape as green infrastructure we recognise it provides a suite of services to the community. When the infrastructure is well maintained and properly functioning we can expect good returns – nice clean water, clean air, few weed and feral animal problems, energy efficiency (especially in urban environments), food and fibre products, and aesthetic and intrinsic value returns from biodiversity. When our green infrastructure is aged, overwhelmed, or not fit-for-purpose the returns decline – our water is dirtier, we waste energy, lose production opportunities and lose species. On both sides of the ledger these cases impact financially on individuals and the community – for example on the downside – through reduced taxation revenues, increased water treatment costs, increased energy bills and increased subsidies for primary production to maintain capacity.
So why a business case?
When large public or private investments in infrastructure are considered, a business case is developed to demonstrate the costs and benefits of the opportunity. The case is guided by the best technical and economic information, and always, clearly joins the dots between the outcomes to be achieved (public and private) and the amount of capital investment needed, opportunities for returns, financing options and partnership approaches.
The business case framework needs to not only identify and quantify the expected benefits of investment, but also to demonstrate that the returns are above-and-beyond the business-as-usual case. In essence we need to quantify the landscape improvements, calculate the upfront capital and maintenance costs, estimate the returns on investments, and then prosecute the case successfully.
There has been a raft of scientific work done on ecosystem services in Australia, a little bit done on natural capital, an idea that a business case would be useful, but as far as I am aware, nothing done so far to bring the picture together into an investible package.
To eat an elephant you start with the little toe…
If we narrow the focus to the relationship between vegetation restoration and water quality treatment cost reduction there is good relevant cast studies we can draw on. The case for riparian restoration or protection has been made in California where vegetation management is demonstrably more efficient than building concrete infrastructure when the full life-cycle cost of the infrastructure is considered. Case studies from Oregon, Maine, and Washington have shown that every $1 invested in catchment protection works has saved from $7.50 to nearly $200 in costs for new filtration and water treatment facilities (Reid 1997 cited here).
It may even be that financially, in a sound business case, we don’t need to consider any benefits other than water quality enhancement from broad landscape improvements – the financial case might stack-up itself from reduced water treatment costs. The evidence from the American examples is that it certainly does.
If we are to grow the pie for landscape repair in Australia, it is important that we build a financially sound business case that joins the dots and connects with the investors, showing them where and how the benefits will accrue. Once we have done that, together we can then get on to promoting the case…