Theory and methods of incorporating risk reduction within the total economic valuation (TEV) framework (TEV4Nature) Invest4Nature Deliverable 2.2

This report presents an extension of the traditional Total Economic Valuation (TEV) framework to incorporate risk reduction and social resilience of nature-based solutions (NbS): the TEV4Nature framework. NbS has roles in managing environmental and climate risks, reducing the impacts of these risks on nature and society, supporting biodiversity, and enhancing both ecosystem and social resilience. The report first introduces four value categories of insurance value of nature associated with NbS: value of protection OF nature (maintaining ecosystem function and risk reduction), the value of protection BY nature (impact mitigation), social resilience value (community wellbeing), and value of ensuring future (value for future generations). The four categories NbS values are then incorporated in TEV4Nature framework. The report then elaborate how the insurance values of NbS can guide private and public investors to support their investment decision related to nature, ESG reporting, and help to attract financing to scale up NbS initiatives. Furthermore, the report explores different assessment methods to quantify the insurance value of NbS, including both traditional economic valuation methods and the risk assessment methods. Four methods, Value-at-Risk, Bayesian Belief Networks, Avoided Damage Costs, and Value Transfer Methods, are elaborated in detail as these methodologies are applied to empirical case studies in the four living labs of Invest4Nature project, that is Life Lech project in Tirol Austria, blue forest ecosystem restoration in Norway, rewilding of Ribeira Das Vinhas in Cascais Portugal, and nature restoration of agricultural land in Aarhus Denmark. To make the TEV4Nature framework operational, stepwise assessment procedure is proposed: that is, scoping, methods, data collection, assessing the insurance values and designing NbS investment strategies. Following the assessment procedure, qualitative description of how to evaluate the insurance value for each of the four empirical cases is provided. In each case, we demonstrate how NbS contributes to climate change and disaster risk management and impact reduction, protecting ecosystem function and biodiversity, and contributing to long-term social resilience. We hope the TEV4Nature framework could support policymakers, financial institutions, companies and other stakeholders in making sound investment decisions, fostering climate resilience, and ensuring sustainable development for future generations.