There will be trade-off between the amount of environmental enhancement delivered within a development site and what is offset elsewhere. One driver of this tradeoff will be the viability of a development scheme – for example a certain number of houses will need to be developed for the scheme to be profitable – thus the ability to secure remaining environmental gain off-site will help enable development to go ahead. Habitat banks in ecologically strategic locations can provide a solution to developers where habitat created generates ‘credits’ (e.g. biodiversity units, carbon credits, or nutrient credits) to be traded.
As of December 2022, landowners in strategic locations in relation to nutrient neutrality catchments were invited by Natural England to utilise their land for nutrient mitigation, helping both developers and landowners to improve water quality and allow development to progress.
What are the differences between natural capital in England and in
Scotland?
MH: The main difference between England and Scotland when it comes to natural capital is that the Scottish Government has been slow to legislate for biodiversity net gain (BNG). As a result, this compliance market does not yet exist north of the border, meaning developers are not required to secure positive effects for biodiversity. There are signs that BNG will be introduced when the latest National Planning Framework (NPF4) is implemented in 2023,
which will help to secure large amounts of investment for nature recovery.
The other significant difference is that Scotland has far more land that isn’t suitable for agriculture. Currently some of this land is used for sheep farming, though this activity is generally loss-making without subsidies and has led to habitat degradation over large areas of the uplands. As a result, many more Scottish landowners are interested in woodland creation and peatland restoration than in England, leading to Scotland being the main source of carbon credit generation in the UK.
LB: In comparison to Scotland, England’s natural capital markets include biodiversity units and nutrient credits, which are both compliance markets and are restricted by location. This provides a potential for landowners in England to create and enhance habitats to support more biodiversity or establish nutrient neutrality in affected river catchments, and then trade the units/credits generated to local developers. There is a need for such offsetting to be delivered in proximity to the development site and for nutrient neutrality in a location that will influence the affected river catchment.
Carbon offsetting is currently a voluntary market and is not restricted by location. The most significant and tangible nature-based solutions for carbon offsetting are tree planting and peatland restoration which are well established in Scotland due to the lower land values and availability of suitable land, in comparison to England. Organisations are beginning to consider how their carbon offsetting can also deliver other ecosystem services to meet their ESG targets which is moving organisations to look more locally. For example a new woodland created locally would not only sequester carbon but also provide community green space and improved biodiversity, which may drive more woodland creation in England. Furthermore, the Peatland Code is being expanded to incorporate lowland peat which will enable carbon sequestration in these habitats to be accounted for and potentially open a new market for carbon offsetting in the lowlands.
Why is it important to invest into nature recovery and environmental net gain?
MH: At a basic level, nature recovery is essential because biodiversity, like a stable climate, underpins our economies. Our society is embedded in the biosphere and if it becomes degraded that will impact on humanity’s prosperity in profound ways. This point was made emphatically in the Dasgupta review (2021), an extensive piece of research commissioned by the UK government, which drew an explicit link between biodiversity and our social and economic well-being.
However, globally and in the UK biodiversity is not faring well. We’ve witnessed huge declines in the abundance and diversity of thousands of species, across multiple taxa, with human activities increasing the rate of extinction by orders of magnitude.
The UK has the lowest biodiversity intactness in the G7, lower than almost every other country in Europe and 12th worst in the world. Yet our trend is still down, with 41% of UK species in decline. It’s clear therefore that our current approach to conservation is not working and huge investment is now required to try and bend the curve on biodiversity loss in all four UK nations.
This matters because activities that are moderately or highly dependent on nature account for more than half of the world’s GDP, or $44 trillion, according to the World Economic Forum. The continued depletion of natural capital represents a real risk to businesses, their earnings and investors. Unless we can unlock regenerative business models that drive investment into nature recovery at scale, this issue will start to affect the bottom line of businesses right across the planet.
