Private nature funding opportunities for farmers
Part of the 800ha Wendling Beck project © Dan Casson Private investment funds have repeatedly claimed that billions of pounds are available to be invested in nature.
However, so far, little has actually found its way into farmers’ pockets.
One of the barriers is that global funds generally like to own the properties they are investing in.
This means they can benefit from capital growth as well as income. That, of course, is of little interest to landowners who have no desire to sell.
See also: Opportunities develop in nature markets
However, a new collaboration discussed at the recent Nature Finance UK Conference between fund manager Abrdn, nature-based solutions provider Palladium, NatureScot and the UK Infrastructure Bank (now known as the National Wealth Fund or NWF) offers a potential alternative blueprint that could benefit farmers.
In a joint venture, clusters of Scottish landowners will receive an annual management fee for allowing the creation of carbon and biodiversity credits that will deliver acceptable returns for Abrdn’s investors without the ownership of the underlying land. If future nature-based opportunities arise, the landowners will still be able to take advantage of them.
Promising model
James Shepherd, the natural capital lead in Knight Frank’s rural consultancy department, said the model looked promising and it was encouraging that the NWF now had a broader mandate and increased appetite for risk that would allow it to invest in the green economy where there was an undersupply of private finance.
The NWF is the replacement for the previous government’s UK Infrastructure Bank. Launched just a month ago, the NWF will support the government’s industrial strategy and has a budget of £27.8bn to help catalyse private investment.
James said the conference’s closing speech, delivered by Defra’s minister for nature, Mary Creagh, offered the most hope.
Regulation and standards needed
“Buried within the usual politically ambitious statements were some suggestions of real substance,” he said.
“Her speech seemed to suggest the government is prepared to provide the regulations and standards that will help unlock the vast sums of money institutional investors say they want to invest in nature-based carbon projects.
“She also alluded to potential engagement with the Treasury to incentivise participation of the private sector in nature’s restoration, which was a pleasant surprise and, dare I hope, code for possible tax relief?”
John Varley, chief executive of Clinton Devon Estates, said the conference demonstrated that green finance as a concept was exciting, had the potential to be a game changer for nature, and was not going away.
“Yet it remains very early days,” he said. “And while there will be opportunities for some innovative players, it being the silver bullet to replace the need for public money for nature’s ‘public goods’ is a little way off.
“At Clinton Devon Estates, we believe in patient capital – but we are going to need to be a bit more patient, I think.”
Commenting on the development of the natural capital market, Susan Twining, chief land use policy adviser at the Country Land and Business Association (CLA), said: “Some progress is being made, but more needs to be done.
“While actions including introducing the biodiversity net gain compliance market and investing in Landscape Recovery and the Natural Environment Investment Readiness Fund programme are positive, the market is not fully functioning.
“The up-front costs and risks for landowners can be high, and the turmoil of politics and policy within the farming sector is driving uncertainty.
“There is also a knowledge and skills gap, which could be addressed by extending the Future Farming Resilience Fund to specialist independent advice on natural capital market opportunities.”
Success stories
Successes highlighted at the conference included the privately funded Nattergal rewilding fund which chief executive Archie Struthers said had recently brokered the sale of “charismatic” carbon for £83/t, as well as gaining the first Section 106 agreement for the sale of biodiversity net gain credits.
Originally coined to describe voluntary carbon offsetting projects in the global south that offered additional livelihood and social benefits, usually to poorer communities, the term “charismatic” carbon is now more broadly used to differentiate offsetting schemes that have a storytelling narrative attached and are considered of higher integrity and, hence, sell for a premium.
The Wendling Beck nature recovery project in Norfolk was also highlighted.
This is an 800ha collaboration between landowners and a wide range of partners including Anglian Water, Norfolk Rivers Trust, Norfolk Wildlife Trust, the Nature Conservancy, Norfolk County Council, Farming and Wildlife Advisory Group, Natural England, and Breckland Council.
The North East Cotswold Farmer Cluster has brought together more than 150 farmers covering 42,000ha to enhance the natural capital on their land, tackle the climate emergency and build more resilient food and farming businesses.
Both of these projects were supported by the previous government’s Natural Environment Investment Readiness Fund (NEIRF), which is now closed.
This had a total pot of £14m and gave financial support of up to £100,000 to help landowners and others develop nature projects in England to a point where they could attract private investment. It is hoped that this will be replaced with a similar initiative.
A Defra spokesman said that beyond NEIRF funding, the department would consider carefully how to support investment readiness for nature projects across England, reflecting on the outcomes of the independent evaluation of the NEIRF so far.
Scottish nature framework launched
The Scottish government has launched a new communities-focused natural capital market framework.
This is designed to provide guidance for investors, land managers and communities on attracting responsible private investment into peatlands, woodlands and nature restoration.
Its focus is on maintaining the high standards that have been set by the woodland carbon and peatland codes, alongside ensuring that private investment in natural capital benefits local communities and supports the country’s environmental objectives.
Scotland’s natural assets contribute more than £40bn to the economy each year and support about 260,000 jobs, the Scottish government says.
Emma Cooper, head of land rights and responsibilities at the Scottish Land Commission, said Scotland was setting a new standard in the UK by clearly defining the role of community benefits in natural capital investments.
Announcing the framework at the conference, Tom Arthur, Scotland’s minister for employment and investments, said: “Scotland’s breathtaking landscapes, rich biodiversity and abundant natural resources are much more than a source of pride – they are the foundation of our future prosperity with investment being key to economic growth.
“It is abundantly clear that to meet our targets for cutting emissions, we need private investors to share the load.”
Australian approach
Tanya Plibersek, Australia’s minister for the environment and water, shared details of the country’s nature finance strategy, which some attendees said sounded more joined up than the UK’s fragmented approach.
When it goes live next year, the Nature Repair Market will be the first government-legislated programme allowing private capital to invest in pre-certified schemes, the minister said.
This is part of Australia’s wider Nature Positive plan, under which participants in Nature Repair Market projects can apply for a biodiversity certificate which can be sold to generate income.
These certificates will describe the biodiversity benefits from each project in a consistent way, allowing market users to compare and value projects.