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Natural Environment

Drought and flood: Harnessing nature to fight climate risk – Part 3

Green infrastructure assets promise an array of environmental and economic benefits. But without the correct financing and governance frameworks, they can strain existing ecosystems and further expose vulnerable communities. Policymakers must rise to this legislative challenge. 

Organisation for Economic Co-operation and Development (OECD)
11 August 2021

Governance arrangements

Considering the number of policy areas and public authorities potentially involved in the deployment and financing of nature-based solutions (NbS), good governance is an essential enabling factor. The impacts of an NbS are spread through a system and influenced by decisions made by individual sectors. For example, the introduction of increased green space to manage urban flooding can reduce operational costs for the housing sector (through a reduction in energy use for cooling), and offset the negative environmental impacts of the transport sector (through a reduction in road runoff pollution). Different agencies are often not set up to provide the level of coordination needed for NbS as they tend to operate in sectoral silos, with their own vision, legal frameworks, planning documents, resources and procedures.

Key policy elements to be evaluated:

  • Responsibilities for different aspects of NbS planning, implementation and maintenance
  • Coordination mechanisms (horizontal and vertical)

Supportive policies

Clear mandates from the highest policy level have the potential to accelerate NbS uptake. Different sectoral policies can additionally influence the attractiveness of NbS. Policies relating to spatial planning and land use, biodiversity conservation, agriculture, water management, and health are key to the feasibility and appeal of implementing NbS, however the use of NbS are rarely explicitly encouraged in these policies. Worse, there may be directly conflicting interests between NbS and other policy objectives. For instance, many NbS are land consuming and there can be strong competition for land, particularly in urban or peri-urban areas.

Key policy elements to be evaluated:

  • Clear mandate and support for NbS
  • Coherence between sectoral policies, and mechanisms to address trade-offs
  • Encouragement of NbS within infrastructure planning processes
  • Methodologies in place for measuring benefits
  • Inventory of existing natural capital/assets

Appropriate regulatory environment

Regulatory environments have a powerful influence on the feasibility of using NbS for adaptation to water risk. In general, the prevailing regulations and technical standards have been developed from grey infrastructures as the main, or only available, option to address given challenges, which can create bias towards the exclusive use of grey infrastructure.

Appropriate regulatory environment

Regulatory environments have a powerful influence on the feasibility of using NbS for adaptation to water risk. In general, the prevailing regulations and technical standards have been developed from grey infrastructures as the main, or only available, option to address given challenges, which can create bias towards the exclusive use of grey infrastructure.

Key policy elements to be evaluated:

  • Land-use regulation and zoning
  • Permitting
  • Safety and performance codes and standards
  • Procurement policies
  • Land rights
  • Environmental protection regulation

Regulatory environments have a powerful influence on the feasibility of using nature-based solutions for adaptation to water risk. In general, prevailing regulations have been developed for grey infrastructure; this creates bias towards the exclusive use of such solutions.

Technical capacity

Gaps in technical capacity can impede the design and wider implementation of NbS. As for other risk management approaches, the use of NbS rely on an understanding of risk drivers, the processes and mechanisms by which an approach can be expected to

work, the limitations to its effectiveness, and measures that can enhance that effectiveness and provide co-benefits. The skills and knowledge needed to identify and implement NbS are often not in the training of the professionals often involved in designing and implementing risk management interventions, such as engineers.

Key policy elements to be evaluated:

  • Partnerships and information sharing
  • Integration of NbS training in civil engineering and urban planning curricula
  • Training and education

Access to finance

Limited access to appropriate finance is cited as a major barrier preventing the delivery of NbS. Increased uptake of NbS depends on rerouting or unlocking new funds to

support them. NbS currently lack appropriate financing instruments and standardised financing models, which make them particularly unattractive for potential financiers. One major challenge is to associate NbS benefits with private values, rather than public goods, which can repay those who contribute to the funding schemes. This can be especially challenging considering many of the potential co-benefits of NbS are not traded in the market. Many investors may consider NbS to be high risk and low reward, and may default to better known and tested solutions, in the absence of robust NbS performance data.

Key policy elements to be evaluated:

  • Availability of targeted incentives
  • Ability to capture revenue streams
  • Financing requirements
  • Distribution of liabilities

This article is excerpted from the OECD policy paper: Nature-based solutions for adapting to water-related climate risks

Download the full report here