Double components, three domains of impact and three valuation languages for assessing the insurance value of Nature-Based Solutions

Abstract

Assessing the insurance value of Nature Based Solutions requires deciding, first, what is being valued and, second, in what terms. This contribution addresses both questions and proposes a structure for keeping them apart.

The double components are the two distinct sources of value that a Nature Based Solution carries: the reduction in expected damage that it delivers, and the reduction in uncertainty that comes with it. The second is not a smaller version of the first — it is the part of the value that a risk carrier, rather than a beneficiary, is positioned to recognise.

The three domains of impact separate effects on the biophysical system, on the socio-institutional system, and on the economic system, which are assessed by different methods and on different timescales. The three valuation languages correspond to the terms in which each domain's results can legitimately be expressed — monetary, quantitative but non-monetary, and qualitative or deliberative — and to the decision contexts in which each is the appropriate medium.

The argument is that conflating these dimensions is what produces the recurring mismatch between ecosystem assessments that find large value and investment appraisals that find none.