Green Infrastructure and the Finance sector

What is Green Green Infrastructure “is a strategically planned network of natural and semi-natural areas with other
environmental features designed and managed to deliver a wide range of ecosystem services. It
Infrastructure? incorporates green spaces (or blue if aquatic ecosystems are concerned) and other physical features
in terrestrial (including coastal) and marine areas. On land, GI is present in rural and urban settings.”
Linked together, these strategically planned networks of green elements are able to provide multiple
benefits in the form of supporting a green economy, improving quality of life, protecting biodiversity
and enhancing the ability of ecosystems to deliver services such as disaster risk reduction, water
purification, air quality, space for recreation and climate change mitigation and adaption.

The European Green Infrastructure Strategy

The Green Infrastructure Strategy proposed by the European
Commission, promotes the development of Green Infrastructure
across the EU delivering economic, social and ecological benefits and
contributing to sustainable growth. It guides the implementation of
Green Infrastructure at EU, regional, national and local levels. A main
feature of the Green Infrastructure Strategy is its integration into
relevant policies through: ecosystem-based adaptation into climate
change policies; nature-based solutions into research and innovation
policies; natural water retention measures into water policies; and
through its focus on delivering multiple ecosystem services and
their underlying factor - a rich biodiversity - into nature policies. The
Natura 2000 network in particular plays a major role in protecting
many of the core areas with healthy ecosystems.
As Green Infrastructure can make a significant contribution to
many sectors and EU policy objectives, Green Infrastructure is being
integrated into many funding streams including Structural Funds (the
European Regional Development Fund (ERDF); European Social Fund
(ESF)), the Cohesion Fund (CF), the European Maritime and Fisheries
Fund (EMFF), the European Agricultural Fund for Rural Development
(EAFRD), LIFE+ and Horizon 2020 project funds and the Natural Capital
Financing Facility (NCFF) of the European Investment Bank (EIB).

Links between the The financial sector includes banks, investment funds, insurance companies, trusts and real estate. There is a strong case for this targeted audience to be involved in financing Green Infrastructure and
to explore opportunities for private investment in this domain. Indeed, the financial sector can play a significant role in providing incentives for companies to value and account for Green Infrastructure
Finance sector & Green within the traditional frameworks of business risk. Opportunities associated with carbon and water markets are already a focus of attention for mainstream finance. With increasing attention by
businesses and the public for biodiversity and landscape protection there are large opportunities for financial institutions including investing in pro-biodiversity businesses and favouring Green
Infrastructure Infrastructure when taking financing decisions.
 Green Infrastructure and the Finance sector
Costs & benefits of Green Infrastructure in relation to the Finance sector
Green Infrastructure and biodiversity can mitigate risks and create added value as compared to some of their alternative
grey infrastructure solutions. Examples include the increased income from pro-Green Infrastructure investments,
the growing markets for certified sustainably-produced commodities, the advisory services for clients concerned
with biodiversity-sensitive projects, an improved stakeholder perception, biodiversity-related insurance cover, the
development of new markets such as habitat banking, and government-induced opportunities. By considering Green
Infrastructure and biodiversity, several major categories of opportunities can be distinguished providing benefits to the
financial sector and its clients:
Green
Infrastructure
• Green Infrastructure solutions can cut costs (e.g., reducing waste and recapturing valuable materials) and generate
revenue (e.g., new revenue opportunities through innovative solutions).
• Green Infrastructure can mitigate the impacts of extreme weather events, therefore decreasing the needs for the
insurability of biodiversity and climate risks.
• Early adapting businesses will be ready not only for reporting financially on business results, but also reporting on
their relation with environmental and social aspects.
• Including Green Infrastructure and biodiversity into business decisions can enhance brand reputation thereby
increasing consumer preference and maintaining a licence to operate.
Good practices in the Finance sector
Financial sector standards are playing an increasingly influential role in biodiversity protection. The Natural Capital
Declaration (NCD) is a commitment by CEOs from the finance sector to work towards integrating natural capital and
biodiversity criteria into their products and services. The NCD was born out of the insight that financial institutions could
benefit from greater guidance to embed specific aspects of environmental, social and governance (ESG) factors in their
management, due diligence, loans, investments and insurance activities. Similarly, the International Finance Corporation
Performance Standard 6 is a standard for ‘Biodiversity Conservation’ and ‘Sustainable Management of Living Natural
Resources’ adhered to by several major financial institutions.
If the financial sector supports the increase of using Green Infrastructure, the environment will become more
resilient and the services nature provides will increase. This is a necessary approach in dealing with priorities such
as climate change mitigation, energy security, resource conservation and job creation, long-term resilience and
quality of life. On the other hand, the loss of natural capital (including natural resources, biodiversity, ecosystems
and their services) has direct and widespread negative effects on financial performance especially in the long-term.
This provides an investment and engagement opportunity for the financial sector, which can encourage companies
towards a better understanding and management of the risks and opportunities relating to the protection of
natural ecosystems.
 Green Infrastructure and the Finance sector
The Natural Capital Financial Facility
The Natural Capital Financial Facility (NCFF) is a new instrument financed by but not limited to: sustainable land use (including sustainable forestry and
Challenges and
the European Investment Bank (EIB) and the European Commission. It will agriculture); biodiversity conservation; clean transportation; and clean water opportunities
provide loans and investments in funds to support projects which promote and / or drinking water. A growing number of leading businesses recognise
the conservation of natural capital, including adaptation to climate change, the necessity to assess their relationship with nature and to evaluate whether The main challenges for exploiting the links between Green Infrastructure and the
in the Member States. The main aim of the NCFF is to demonstrate that solutions based on nature provide them a competitive advantage. Returns on Finance sector are:
natural capital projects can generate revenues or save costs, whilst delivering investment therefore can be increased by supporting these businesses.
• Sustainability Indexes such as the FTSE4Good demonstrate that companies on
on biodiversity and climate adaptation objectives. The NCFF is to establish such indices trade at a premium, which is an opportunity for the finance sector.
a pipeline of replicable, bankable operations that will serve as a “proof of
concept” and that will demonstrate to potential investors the attractiveness • The financial sector has the possibility to provide a positive contribution to
of such operations. Halting the loss of biodiversity and ecosystem services Green Infrastructure on a large scale. Indeed, very few sectors have the power
to influence other sectors’ financing priorities to such an extent as the finance
requires increasing investment in natural capital and going beyond
sector does. The finance sector can take biodiversity into account in its own
traditional grant funding. The total budget for the NCFF amounts to EUR business activities, but also stimulate other sectors to do the same.
100 – 125 million for 2014-2017. The European Commission contributes EUR
50 million as a guarantee for the investments and finances a EUR 10 million
support facility. The size of each NCFF investment will typically be between
EUR 5 million and EUR 15 million. An important eligibility criterion for project
proposals is that the approach shows that the financial benefits overall
exceed the costs.

The Green Bond Principles

Financial institutions can help society and their clients to invest in forward-
looking environmental technology and Green Infrastructure. It is in this
context that a coalition of major financial institutions created the Green Bond
Principles (GBP). Green Bonds enable capital-raising and investment for
new and existing projects with environmental benefits. The GBP recognise
several broad categories of potential eligible “Green Projects”, including

wildlife overpass

Contract details: EC DG ENV, ENV.B.2/SER/2014/0012 “Supporting the implementation of the European Green
References European Commission, DG Environment: http://ec.europa.eu/environment/nature/ecosystems/index_en.htm Infrastructure Strategy”
http://ec.europa.eu/environment/integration/green_semester/index_en.htm Presented by: Trinomics, Alterra, Arcadis, Regional Environment Centre, Risk & Policy Analysis, Stella Consulting.
http://ec.europa.eu/environment/life/funding/financial_instruments/ncff.htm
Disclaimer: The information and views set out in the factsheet are those of the author(s) and do not necessarily
http://ec.europa.eu/research/environment/index_en.cfm?pg=nature-based-solutions reflect the official opinion of the European Commission (EC). The EC does not guarantee the accuracy of the data
http://www.ceres.org/greenbondprinciples included in this factsheet. Neither the EC nor any person acting on the EC’s behalf be held responsible for the use,
http://www.naturalcapitaldeclaration.org/the-declaration, www.ifc.org which may be made of the information contained therein.
http://www.unepfi.org/ UNEP FI is a global partnership between UNEP and the financial sector. Over 200 institutions, including banks, insurers and fund managers, work with UNEP to understand the impacts of
environmental and social considerations on financial performance.