The challenge

A rising demand for space in delta areas in conjunction with environmental threats such as climate change, accelerated sea level rise and subsidence, require innovative and multi-functional approaches for water and disaster risk management of the built environment.

Water-related hazards as a subset of natural hazards account for 90% of all natural hazards, These include floods, mudslides, storms and the related ocean storm surge, heat waves, cold spells, droughts and waterborne diseases (UN Water). Disasters are often the result of a combination of hazards, some related to water and others of geological and biological origin. The frequency and intensity of water-related hazards expected to increase due to climate change. The Economics of Climate Change working group of the IPCC estimated annualized damages to GDP due to climate risk to rise by around 7% by 2030 (IPCC, 2014).

Climate change is also expected to magnify urban heat island effects and increase the frequency of floods for many cities. The impact of both phenomena will be likely exacerbated by the expansion of “hard” surfaces linked to urbanization processes (Field et al 2012; Gartland, 2011). Worldwide, hard surfaces cover as much of 67% of the land area of cities and “green” areas cover only 16% in some cities (Gartland, 2011).

There is increasing awareness that nature and natural processes engineered in a smart way could be the key to provide viable solutions to these societal challenges.

The idea

Nature Based Solutions (NBS) which integrate natural processes and ecosystem services in the design process of infrastructure are a cost-effective measure to improve the resilience of built environments. They achieve this by contributing to the climate risk management of infrastructures through both the building of protective infrastructure39 and the climate proofing of productive infrastructure.

NBS follow a design process that takes into account natural processes and ecosystem services, both used and optimized to fulfil multiple functions. As a result solutions are costeffective, environmentally sustainable (e.g. low energy use and material requirements) and often also require less periodic maintenance efforts and/or rehabilitation investments than traditional grey infrastructure. This is because ecosystems are able to adapt to changing circumstances and therefore make for a more robust design in the long term. In addition NBS contribute to the visual quality of landscapes and the natural capital of a region or country.

Examples of NBS are the creation or restoration of mangrove forests, shallow foreshores, sand dunes and reefs. These will not only reduce the wave load on coastal defence systems, but will also contribute to carbon fixation, and improve water quality. Moreover, several of these systems naturally adapt to sea level rise, as they have the capacity to trap sediment. Other examples include green roofs, permeable vegetated surfaces, urban forests and urban wetlands (Byrne & Yang, 2009; Douglas, 2011; Foster, Lowe & Winkelman, 2011). There are different ambition levels in design moving increasingly from man-made to a natural approach, and thus starting from an ecological optimization of land use, going through the design of artificial ecosystems and the creation optimal conditions for ecosystem development, and up to the reinforcement of existing ecosystems.

Their design process follows a multidisciplinary and multi-stakeholder approach. This systemic approach is required to deal with the technical challenge of integrating the dynamic behaviour of nature in the design of infrastructures with a very long useful life.

Although technological readiness (EARTO 2014) of NBS varies per solution, most of them are at level 6 of Technology Demonstration40, where prototype subsystems are being tested in relevant environments but due to the smaller scale applications one cannot yet say that the technology has been proven to work in its final form in an operational environment and perform to the specified functional requirements. In the pilots implemented while their hydrological and biophysical benefits have been well documented; the business case for their economic and financial performance versus grey solutions has received less attention until now.

The impact

Nature Based Solutions (NBS) are multi-functional and adaptive, which makes them a promising and robust long term solution. NBS seem a win-win strategy as they combine a risk buffer function by reducing future climate and water-related risks and the creation of a new form of capital: natural capital, which generates a flow of material benefits (ecosystem services)for a variety of actors and economic sectors (Matthews et al. 2015) . Due to their characteristics NBS contribute to climate adaptation as well as to climate mitigation.

As acknowledged by the European Union, NBS provide sustainable, cost-effective, multi-purpose and flexible alternatives for multiple objectives; between them biodiversity and ecosystems, natural resources management, sustainable urban development, climate change adaptation and mitigation and disaster risk reduction. Green infrastructure can help in regulating ambient temperatures, reducing storm-water runoff, reducing energy use, sequestering carbon and by creating affordable recreational opportunities to improve residents’ health and well-being. Working with nature, instead of against nature, can also accelerate the transition to a greener and competitive economy.

The following table (Deltares 2016) shows an overview the risk mitigating impacts of a specific NBS (mangrove forest restoration) on water quality and flooding; two key corporate and public sector risks.

The Nature-based engineering paradigm understood as the enriching of the traditional infrastructure planning process with green and hybrid solutions besides traditional grey infrastructure options can be seen as an opportunity for infrastructure and spatial planners. As stated by Matthews et al. (2015), the building with nature approach provides them with a framework to accommodate competing interests and combine environmental goals with dominant economic imperatives.

The barriers to innovation – and the solutions

Regardless of the many benefits of NBS for climate risk management and disaster resilience of infrastructures and built environments in general; their application and full scale implementation remains limited. Barriers during the different infrastructure phases – planning, design, project delivery and operation and maintenance – as well as important funding and financing constraints hinder their wider adoption. The most important barriers are discussed in this section.

Key internal barriers

NBS are perceived by the construction sector – public and private parties- as more risky than traditional and proven grey solutions and the sector is very risk averse.

Aiming at the prevention of casualties, societies have set very high standards and safety regulations for the “built environment” and construction sector procedures. In infrastructure projects the motto is to work only with proven technologies to limit construction risks to a minimum. The development of innovations has to happen in isolated and small scale pilots that minimize risk. Meanwhile the benefits of NBS are highly dependent on the scale at which they are implemented. Additionally the performance of NBS cannot yet be engineered with as much precision as grey solutions and due to the natural processes at hand their performance is expected to show a rather cyclical behaviour.

Definitional ambiguity and difficulties in conceptualizing green infrastructure and its advantages over grey:

The proponents of green infrastructure are often ecologists and biologists who approach these challenges from a different scientific paradigm. They therefore speak a different language to the key decision makers, who are often civil and financial engineers at the service of public authorities, contractors and financing institutions. While the former are convinced of the effectiveness of NBS in terms of their long term effect on flood and drought protection (mainly due to their adaptive capacity), given their research focus on the biophysical dimension of NBS in their pilots they may be failing to generated the right arguments and the quantitative evidence for key decision criteria. For example, they often leave less studied the socio-economic and political and institutional concerns surrounding NBS, such as life-cycle costs , total costs of ownership, and value for money offered by green and hybrid versus grey solutions. In their absence, key implementing actors can often then perceive elevated risks for NBS versus traditional grey infrastructure measures.

Key external barriers

Public-sector procedures and preferences: mono-sectorial infrastructure planning, public procurement and the focus of government on reducing transaction and agency costs.

In the planning phase the rational spatial planning approach assumes an objective, politically neutral and analytical process driven by the interests of a single sector or public agency and confined to a defined time scale. This is an important barrier for the uptake of NBS given their multifunctional character that results in benefits spread over a variety of economic sectors at different geographical and time scales.

In a later phase, NBS face new barriers as they need to be procured following the same public procurement rules and contracting frameworks as regular infrastructure. A key challenge for NBS is posed by EU public procurement rules and international trends in national procurement strategies.

Shaping the Future of Construction: Insights to redesign the industry 69 These demand that unambiguous Key Performance Indicators and functional requirements are defined on which to base payments to private contractors implementing NBS, in accordance with a preference for performance based contracts. Additionally most EU governments have the aim to keep their size limited and opt for procurement strategies that require limited in-house personnel for their oversight.

Meanwhile, up until now NBS are often conceived and piloted along community driven governance arrangements that require a significant amount of coordination and oversight; either by the NGOs piloting them and/or by the governments in charge. There can also be uncertainty about who are or will be the NBS (private) “service providers” to take care of the whole green infrastructure life cycle and who will be held responsible for the solutions over a longer period of time. These mismatches hinder the uptake of NBS as part of the national infrastructure planning and procurement process.

This brings us to a crucial barrier for the full scale implementation and mainstreaming of NBS: no clear and/or significant pipeline of projects, and consequently not yet a well-established pool of service providers.

Besides the perceived elevated risks of NBS, a key barrier for the further uptake of NBS, whose main functions are associated with climate adaptation and disaster resilience, is the daunting financing gap faced by governments around the world. This brings us to our last barrier.

Financing gap: limited public funding for disaster resilience and climate adaptation and lack of bankable NBS projects to attract private financing. Adaptation costs for developing countries have been calculated by the World Bank (2010) to be between $70 and $100 billion from 2010 until 2050. The Global Canopy Foundation (2009) report a financing gap of $90 billion for mitigation and adaptation to climate change. And according to the World Bank (WB Easin 2012) approximately 85% of these funds must come from private finance. For these projects to be financed and implemented by the private sector, they must generate an attractive Internal Rate of Return.

Due to their intrinsic characteristics NBS conceived as disaster resilience and climate adaptation investments present unique risks because of their cash profiles (Altamirano et al. 2013). They encompass the challenges of regular climate adaptation projects: capital–intensive and unique, delayed and dispersed benefits, non-guaranteed and nonfinancial benefits, and limited autonomous earning power, accompanied with a high risk profile (Gleijm and Herdes, 2012). They then combine these challenges with those specific to green infrastructure projects (World Bank Easin 2012) such as elevated perceived risks, capital market- and information gaps due the “newness” of the technologies, and a risk-reward profile that makes these projects financially unattractive, in absolute or relative terms.

Solutions

To deal with the barriers mentioned above, Deltares, in close collaboration with the Dutch water sector, international research partners, multilaterals and conservation NGOs, has engaged in the following initiatives:

– Public-Private alliances, like the Dutch Water Sector alliance EcoShape, where top dredging companies, engineering consultants and research institutes work together to further develop and operationalize the concept of NBS and demonstrate its applicability and benefits in diverse contexts.

– By working together, trust is built and a common language established for the “eco-engineering” discipline.

– Extensive piloting and demonstration of NBS in the Netherlands and around the world, where the hydrological and biophysical benefits are quantified. Examples from the Netherlands are the national Room for the River programme and the Tidal Park in Rotterdam. International examples include the multifunctional coastal protection scheme for the East Coast Park area of Singapore, where sea grass beds and coral reefs play an important role and a large scale pilot of mangrove regeneration and permeable dams in Demak, Central Java in Indonesia.

– Development of design standards with key players such as USACE.

– Development of tools that allow for further operationalization of NBS design and create awareness about their potential. An example is the MI-SAFE tool developed in the FAST EU research consortium that allows evaluating worldwide the potential of natural foreshores to reduce flood risks by making use of remote sensing data, and which offers advanced services to public agencies and/or consultants to assist them in the design of hybrid flood risk mitigation strategies for coastal areas.

– Expert input to the Climate Bonds Initiative and the drafting of technical guidelines for NBS/green infrastructure water bonds.

Last but not least, we have developed a collaborative business modelling protocol where key actors for implementation and researchers engage in the development of a common language and a Return on Investment (ROI) model for NBS. Together they draft alternative project delivery and financing methods with the aim of structuring bankable ecosystem restoration projects. In order to speed up the uptake of NBS, a crucial step to be taken by NBS proponents is to align their research with the concrete information needs of the actors responsible and liable for the implementation of NBS. The creation of a common language between researchers and practitioners is a necessary first step. Our experiments with collaborative modelling techniques (Altamirano et al. 2013) have affirmed their potential to reduce the risk perception of implementing actors by increasing their understanding of NBS and consequently their sense of control over them.

The way forward

In summary, even though at policy and strategic levels the value of resilience and the role of nature are being acknowledged, implementation remains limited. The implementation challenge requires a different R&D approach than the one applied so far; one that is truly collaborative and places clearly the stakeholders in charge of the implementation of NBS and liable for the consequences hereof as the direct clients of the research process. Concrete pathways to go from isolated pilots up to full scale implementation in Natural Assurance Systems, and to ensure the financial and institutional sustainability of NBS in the long term, need to be drafted jointly with, and agreed upon by, key actors: public procurers, infrastructure financing agencies and project developers.

For NBS to become an equally valid option in the process of infrastructure planning and financing, they must pass the same tests and tick the same boxes as grey infrastructure projects in each phase of the infrastructure life-cycle: planning, design, build, operation and maintenance. These include, for example, design principles and building codes, or risk and quality management approaches for operation and maintenance. The construction sector and the infrastructure community are best positioned to lead this process.

Other important steps that need to be taken include:

Governments need to develop the instruments that allow them to “buy” or procure these solutions as easily and in the same standardized manner that they can purchase grey solutions. At the same time, they must also stimulate the creation of a private market of service providers through innovative procurement mechanisms available in the European Union, such as Pre-Commercial Procurement (PCP), Public Procurement of Innovation (PPI) and Innovation Partnerships.

The construction sector must start investing and expanding their eco-engineering expertise in their role as experienced project developers. These actors are crucial to the process of structuring bankable NBS projects and making NBS suitable for performance based contracting.

In their roles as experienced risk managers and providers of capital, the financial sector and insurance sector are encouraged to show their commitment to a sustainable future by engaging with the research community, national governments and the construction sector in a joint search for innovative financing arrangements and insurance schemes; accompanied by necessary changes in national regulatory frameworks . These could encompass, for example, hybrid PPP (project finance) models combining availability payments with revenues from user fees and other alternative sources linked to the additional ecosystem services created by NBS. These innovations would need to account for the internalization and monetization of the many positive externalities of NBS, leading to the structuring of financially viable and bankable projects. A European H2020 project Initiative that exemplifies this collaboration and engage public authorities, insurance companies and researchers on the operationalization of the insurance value of ecosystems was recently launched under the title NAiAD: Nature Insurance value: Assessment and Demonstration (Mapama 2016).

Important systemic changes are also required to allow for a proper economic and financial valuation of the multifunctionality of NBS. These would reflect the change from predominantly mono sectorial infrastructure planning and financing to a nexus approach where the synergies and conflicts between the investments plans of different sectors are taken into account and valued, and where joint financing and procurement of multifunctional solutions are consequently stimulated and properly supported by renewed valuation methodologies.

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