New industry-backed initiative looks to establish nature as an asset class

By Rebecca Delaney

March 14 - (The Insurer) - Flood Re, Howden and Zurich are among the founding members of ReFlood, an organisation committed to expanding the use of natural flood management (NFM) as a risk reduction tool and for environmental co-benefits.

ReFlood was unveiled at Conduit's 'Insurance in a changing world' conference in London on Thursday. CEO Paul Van Zyl outlined the initial members from the insurance industry, as well as Barclays, the National Trust and the Crown Estate, among others.

"ReFlood will seek to use innovative finance to significantly expand the use of wetlands and other forms of natural flood management to protect homes, assets and infrastructure from the known risks of flooding, while seeking to maximize multiple environmental co-benefits, such as carbon sequestration, biodiversity gain and water quality management," said Van Zyl.

Jonathan Kassian, head of research at Flood Re, compared the growth of nature as an asset class to that of renewables around 20 years ago.

"We see NFM as an underutilised tool in the risk reduction toolkit," he said.

"15 or 20 years ago, conversations in the renewable space would have been a lot like the one today: how do we get big investment? How do we get pension funds? How do we get institutional assets into renewables? What did that business model look like?"

Smaller revenue streams in the nature market include carbon credits, water quality, biodiversity net gain and commercial infrastructure protection, topped up by an NFM payment.

"We view that as primarily a government responsibility. That NFM payment essentially could do what a contractor difference or feed-in tariff does: it makes a new benefit," said Kassian.

"Right now, if government does NFM, they effectively pay 100% of the cost with a small amount of contribution. This crowds in a lot of other investment."

He added that Flood Re has acted as a research partner on the Wye Valley NFM project, which has acted as a proof of concept for this business model, although he added that it does require government to view such projects as a priority of responsibility.

ClientEarth chair Emma Howard Boyd warned in a separate panel that the government flood budget is currently under review as part of a raft of measures announced in the Autumn Budget late last year.

"When government funds flood defences and takes an area of the country from being at extreme risk to being protected, there needs to be some way of sharing the growth that comes after those flood defences are put in place," she said.

"This is where the business community and the insurance industry can help, because it's all the same money that's coming from taxpayers, but ultimately some of those profits also need to be shared back with communities and governments to allow more to be done."