Spring 2024 Newsletter
25th March is Lady Day, one of the traditional Quarter Days when agricultural rents were due and new tenancies began on livestock farms, so it seems an appropriate date to look forward with a sense of hope and consider what is coming up in the world of natural capital.
We hope that this update is helpful, but do please contact Kate Russell at kate@tellusnatcap.com if you would like to discuss your own – or a client’s – particular situation.
In this update we discuss:
- Natural capital markets
- Local Nature Recovery Strategies
- Landscape Recovery
- Countryside Stewardship & Sustainable Farming Incentive
Primroses: photo credit Kate Russell
Natural Capital Markets in Spring 2024
Biodiversity Net Gain
It’s finally here! BNG became law in England on 12th February 2024 for most development. The scheme for small sites is due to start in April, with BNG for major infrastructure schemes due in 2025.
It is now a challenging time for the market, with many habitat banks being developed but very few verified and registered Biodiversity Units available to buy. This is a problem for those developers who need them now, but it may change quite quickly once sellers are confident enough of the market. Option agreements are likely to have a role in creating that confidence.
We are all still feeling our way forward with the process and starting to understand the transaction costs. One significant area will be the costs of monitoring and verification over the 30 year period; some local authorities are asking for their fees for this to be paid upfront.
Nutrient neutrality
Nutrient neutrality is still proving a tough nut to crack, because of uncertainty around delivery of nutrient savings and the very long term liabilities which landowners are being asked to take on. There is scope to stack BNG and nutrient neutrality on the same parcel of land and this might prove to be one way to get the best returns – both environmental and financial – from a site.
Carbon
Commentators are increasingly critical of carbon capture projects across the globe, with concerns about the net value of projects and the risk of greenwashing. Demand in the UK for carbon offsets remains muted. Meanwhile we are still hoping to see a Hedgerow Carbon Code and work continues on new Codes for agro-forestry and saltmarshes.
Does the future lie in bundles?
Given that land use change rarely results in only a single outcome, does the future lie in bundled environmental credits, rather than single benefit credits for carbon OR biodiversity? Steps in this direction have already been taken by the likes of Wilder Carbon and the Forestry Canopy Foundation and it seems likely that we will see more of this approach in future. Natural flood management schemes, in particular, seem well suited to deliver multiple benefits for nature in addition to reducing flood risk.
Local Nature Recovery Strategies
The process of designing Local Nature Recovery Strategies (LNRSs) is well underway in many parts of England. Many of the Responsible Authorities (usually County Councils or Unitary Authorities) are holding engagement sessions for communities and for groups including farmers and landowners. Already this spring Kate has attended events in County Durham, Buckinghamshire and Oxfordshire to discuss local nature conservation priorities on behalf of clients. Do keep an eye open for events in your area and attend if you can, as this is a crucially important opportunity to shape the local agenda for nature where you are.
Landscape Recovery
The first round Landscape Recovery projects are now halfway through their initial two year development period, grappling with the practical challenges of making blended finance work in practice to fund the significant habitat restoration and land use change which is sought. We are delighted to be working on the Three Dales Landscape Recovery scheme in Yorkshire with Accelar consultants and we hope to be working with some of the 34 groups who were successful in the second round.
Countryside Stewardship and Sustainable Farming Incentive
While privately-funded markets are emerging quite slowly, the Government funded environmental schemes are gathering pace and momentum. Payment rates for several options were boosted early in the year, numbers applying for the SFI are growing and later this summer we can expect more news about the next iteration of Countryside Stewardship. For many farmers who are interested in natural capital but consider them too risky at the current time, these schemes look to be a more certain and attractive prospect for the short-to-medium term. The risk is that baseline measures will be boosted by participation, so eroding the headroom for private schemes in future: it’s rather a game of a bird in the hand or two in the bush.
Contact us
To discuss any natural capital issues, questions or potential projects, please contact Kate Russell at kate@tellusnatcap.com.
25th March 2024