Hi, I'm Helen Avery with the Green Finance Institute and
you're listening to Financing Nature.
In this episode, I'm joined by Thomas Pickford at The Nature
Conservancy and Glen Anderson of landscape project Wendling Back
to talk about biodiversity, net gain in England and the
implications for the EU. I think we all need to be saying
that it's public funding plus private markets all the other
way around. You know, they, they both need
to be in the game and both need to be scaling up at the same
time. And I think we're starting to
see that heading in the right direction with the messaging
that we're seeing from the EU framework and the IAPD.
We see the nature markets. It should be a triple win
basically. So, you know, you can grow a
whole green economy off the back of compliance markets, which
also enhance your underlying natural capital.
So to kind of deregulate that process and destroy nature as,
as, as part of development, you know, it's just ludicrous
because you're, you're destroying your natural capital
which sits on the the Treasury's balance sheet as opposed to
enhance it. So you should have a kind of a
triple fiscal win as part of these nature market framework.
Hello, I hope you're enjoying the summer.
If that is the season you are indeed in, it's something to be
back. Today we have a bit of a bumper
episode in that I'm going to be joined by two guests, Thomas
Pickford, who is the Nature Conservancy's engagements and
relationships lead in the UK and Glenn Anderson, who is a
founding partner of a landscape scale project called Wendling
Beck, which has been selling biodiversity net gain units.
And the two have worked really closely together on biodiversity
net gain since early days, sort of longer than five years.
And that is really what we're going to be talking about today,
England's biodiversity net gain market or BNG as we we love to
call it and what is it, how does it work?
And then Glenn's going to give us some real colour and depth of
what it looks like for a farmer or land manager to be engaged in
BNG and offering those units up. And Thomas is also going to
share more with us about BNG in the so various movements
happening in the EU lately, most notably the EU road map for
nature markets that launched in July.
So buckle up for our BNG ride. So hi, Thomas, thank you so much
for joining us today. And well, firstly, how are you?
I'm very well, Thank you. Yeah, all going well.
How are you? Yeah, I'm well, thank you very
much. And so I hope that TNC doesn't
really need an introduction. So I think we're just going to
dive straight in to biodiversity net gain in England.
And I just wondered if you could start by sharing with those who
aren't as familiar as us with BNG of what is it of?
Course, yes, it is a a complicated concept, so it's
good to get the basics right. So biodiversity net gain is a
policy that applies in England, which requires that all new
developments achieve a measurable increase of at least
10% in biodiversity when compared to pre development
site. It's a pioneering policy really
it's, it's, it's first of its kind and it really has that
potential to channel private finance towards nature right
across England and integrate biodiversity into planning
processes. The concept actually emerged in
the 2021 Environment Act, although the regulations didn't
come into force until February 2024, so last year.
And it's, as I said, a mandatory requirement for all major
developments to achieve 10% net gain.
And it actually comes into force under the Town and Country
Planning Act, which sounds like a technicality, but I think
that's important for us to understand that first and
foremost, this is a planning tool.
It's a way for the planning system to contribute to our
nature goals as a as a country. But what does net gain mean?
I mean, for a lot of people, it doesn't mean much beyond the
gym. So it it means that developers
have to go beyond just compensating for the impacts of
their development on biodiversity and actually
achieve an increase as compared to the biodiversity on that site
before the development was built.
So listeners may or may not be familiar with the concept of the
mitigation hierarchy. That's basically a system that
says that developers must first avoid any negative impacts and
then those that they can't avoid need to be minimised and
mitigated. And then those that you can't
minimise or mitigate, you then restore or rehabilitate.
So basically compensate and then you only then use offsets to
achieve no net loss. While the concept of net gain
requires that developers do all of the above.
So minimise, mitigate, compensate and then go even
further and enhance biodiversity beyond what was already there.
Now not all developers will be able to achieve 10% increase on
the site, right? It might not just be possible
space wise or what the development is going to be
doing. And that's where the concept of
biodiversity units or credits comes into play.
If a developer can't achieve a 10% uplift on site, then they
can buy biodiversity units off the market, essentially paying
someone else who's restoring and protecting nature elsewhere.
And this is usually done in the guise of buying units from what
are called habitat banks, which is basically an area of land
that's been set aside by a land manager for nature restoration
for the long term. And then finally, if a developer
can't find offsite biodiversity units which are appropriate or
suitable for their needs, then they can buy what are called
statutory credits, which are a last resort option.
It's the most expensive option and that's essentially a
government backed credit. So you're essentially paying the
government to do nature restoration somewhere in
England, a more strategic level. So essentially what this policy
has done is create a government regulated compliance market for
biodiversity credits in England, which is, as I said, pretty
pioneering. And the reason why TNC has been
so interested in it is because we believe it's only through
such government regulated markets that you can actually
achieve true integrity in biodiversity or nature markets
and actually achieve scale as well.
Thank you. That was an absolutely brilliant
and concise explanation of BNG. So amazing and sort of coming
down into the weeds a little bit.
And I know we'll get even more into the weeds when Glenn joins
us. So how does it work if you could
explain that? I know there's a spatial
element, a temporal element, and then of course there's the Defra
metric. Yes.
So maybe starts with the metric then.
So Defra developed a standardised metric which uses
habitat as a proxy for measuring biodiversity.
And it allows developers to measure the level of
biodiversity on a site before the development and then how
much of the habitat that they will need to restore, either on
site or offsite to achieve net gain after development has been
has taken place. And developers can only actually
achieve planning permission if they've conducted this
calculation and come up with a net gain plan for biodiversity
on their site. So that's where that planning
element comes in. So the the metric assessors
habitat type, distinctiveness, condition, size and strategic
significance. So how it fits into the broader
landscape or ecosystem essentially.
And again, it does use habitat's proxy, which obviously has its
limitations. There is a spatial multiplier
built into the metric which intends to promote that
mitigation hierarchy we were talking about.
So it encourages on site 1st and then it encourages local
compensation within the boundary of a local planning authority or
what we call national character areas, which are basically just
landscapes of the same type. And essentially if you buy an
offsite unit from a habit bank beyond that specific that local
area, you have to buy more units.
So it's it's more expensive to do.
So that's what the the kind of incentive is to be local.
Right. And then any habitat improvement
has been maintained for 30 years.
So that requires the developers to have in place a plan for
maintaining on site habitats for that period of time.
So with their planning permission, they'll have to
submit that plan for how it's going to be managed for 30
years, quite a long time. And then any offset biodiversity
units, they have to be secured and managed for 30 years and
through legal agreements like conservation covenants or
Section One O 6 agreements with local authorities.
There's also the complexity of irreplaceable habitats.
So that's things like ancient Woodlands and blanket bogs and
basically BNG is not really applicable in those
circumstances. Recognising that development
shouldn't be impacting those areas at all.
And you actually have to have a full compensation strategy
required if you are impacting on irreplaceable habitats, which
you shouldn't be anyway. And of course there's like
there's a lot of limitations, which I'm sure you know, Glenn
can also speak to later. But you know, habitats to proxy
does mean that specific considerations for species left
out or ecological functionality isn't really accounted for, but
it does give us that common, consistent, standardised science
based framework for nature credits, which is that basis for
integrity. And it's a means of getting
payments into farmers and any land managers, isn't it, to
develop these habitat banks? Yeah, that's right.
So we've seen farmers like Glenn who we'll hear from later, you
know, putting aside their land and there was a lag time between
the investment in the nature restoration and potentially the
the income lost if it was productive land beforehand and
the lifetime between that and then any biodiversity credits
being produced. And So what we are starting to
see is, you know, investment in those habitat banks.
It's kind of a long term investment strategy which is
which is really exciting to see. We have Vanessa Garcia on a
couple of weeks ago who was talking through mitigation
banking and sort of this biodiversity credit market
that's under development in Colombia as well, which is not
dissimilar. And also a net game was built in
there. And you know, the reason we're
again, we're talking about this today is very much in the
context of B&G is, is this model that can potentially mobilise
private investment into nature restoration, not just like this
net net that we've seen before. But honestly, I know it's early
days, but what sort of amounts are we looking at here that can
be can be invested? It's a, it's a really good
question and the figures are hard to come by partly because
it's still such early days. You know, the policy has only
been in effect for what 18 months and it's a complicated 1.
So it does take time for the market to embed from for our
market actors to get up and running.
We've seen 3000 hectares of land go on the register in the 1st 16
months, which isn't a bad start at all.
You know that that's significant.
But less than 2% of that has actually been sold.
So it's actually very small amount which is suggests that
that demand is low. But that kind of points towards
some underlying factors which are kind of some of the reforms
that some organisations are calling for with biodiversity
net gains. So it does insinuate that most
developers are choosing to achieve 10% BNG on site.
There are various issues with that.
I mean, one of the main criticisms is that they're not
necessarily the highest integrity when developed on site
and there isn't really a monitoring framework in place to
keep track of whether they are actually achieved in that gain,
especially over the whole 30 years.
You know, local planning authorities often just don't
have the capacity to be checking up on on these various different
on site. And there has also been a report
from F Tech which was commissioned by Wildlife Trusts,
Wildlife and French Side Link and the Lifescape project which
came out just this month actually, which found that 86%
of all approved planning applications in the first year
of BNG actually achieved exemptions from BNG, which is
concerning. And you know, that is obviously
limiting demand in terms of what's actually been achieved so
far. So the best data available is I
think what I can see from WCL Link which found that 680
hectares of land has been secured for off site habitat
creation enhancement and a further 95 hectares on site.
So it's about 773 hectares overall, which is quite a
shortfall on what Defra predicted would be generated
annually, which is about 5000 hectares annually.
So demand just isn't quite there yet, but we are starting to see
that tick up gradually and I'm sure you'll hear from Glenn
shortly. You know he's had a lot of
demand for his credits for starters.
We're also going to see and it's been proposed recently by
government the integration nationally significant
infrastructure projects into BNG regulations as of May next year
2026, which could unlock a lot of more demand for biodiversity
units. So watch this space there.
At the same time as that proposal there, we're also
seeing proposals to remove small sites from biodiversity net gain
and we what we think is about 70% of developments purchasing
off site units at the moment are those small developments.
So less than 10 houses, which is about 38% of the demand so far.
So that would undermine demand even further if we saw those
proposals goes forward. So there's quite a lot isn't
there to you sort out in these early years while it's being
embedded as you would expect in any kind of new policy.
Because I remember initially some of the numbers we saw were
like 200 million unlocked annually into nature restoration
because the assumption was a lot of it was going to be going into
habitat banks. And I know that hasn't been
quite the case and there's a few leading issues with it.
Well, this is that's super helpful.
And thanks for this sort of discussion on BNG.
It's really helpful. But, and I know we'll get into
say more bit more technical detail on some of the challenges
when Glenn comes on in a bit, but I didn't want to waste this
opportunity while you're here, given how much TNC and the work
you've been doing. Thomas has been looking at
Europe so far beyond little old England and how you could have
approaches there that would unlock private sector
investment, particularly through perhaps biodiversity credits or
mitigation banking, those kinds of things.
So would you be able to sort of share with us kind of what is
the state of play across Europe at the moment in terms of do you
see a role for BNG, Is there already mitigation banking if
not with a net gain happening? Yeah, of course, it's a really
exciting field in Europe at the moment.
There's a lot going on. There isn't a huge history of
mitigation banking in Europe. We don't see it formally, you
know, integrated any government schemes.
Currently we are seeing some nascent voluntary biodiversity
credit initiatives being piloted in places like France, Ireland
and, and Italy. And and because of that, but
also because of the kind of the the extensive policy framework
that already exists at the EU level.
So the nature restoration regulations, the CSRD and all
the rest. Because of that, we actually saw
that there was a real opportunity to think about how
nature credits could be a tool in a toolbox to be stimulating
the finance needed for Europe to meet its nature goals.
And you know, we all need Europe to be meeting its nature goals,
even how large it is. And also, you know, many other
regions look towards Europe as a leader.
And so earlier this year The Nature Conservancy published a
report which sets out the case for an EU wide common framework
to enable the development of credible, effective, regulated
nature markets. You know, this is all as I was
saying, it's the context of that gaping biodiversity funding gap
for nature in in Europe, but also the the many different
frameworks and regulations that already exist which need
mechanisms to fund them like nature restoration regulation.
So what we set out in that paper is various use cases for
credits, both voluntary and compliance, but really centering
the essential role of the European Commission in setting a
common science based framework of principles, you know,
protocols for certification, verification, enforcement,
monitoring, governance. What we're trying to make the
case for is that that's the role of the European Commission to
set out that framework, which the member states can then pull
from to develop their own national schemes in the
confidence and trust that the the scientific rigour exists
behind that framework already. And make sure that we don't see
this fragmentation of many different schemes across the
different nation member states. Which would, you know, possibly
disincentivize private sector investment in these nascent
markets, but also would undermine attempts for, you
know, trans boundary where appropriate trans boundary
landscapes acknowledging that nature doesn't end at the
border. So, you know, we're quite clear
that we don't see any nature market that is not government
regulated by the voluntary or compliance reaching scale
integrity needed. But what we do see is that real
potential for the European Commission to take a step
forwards. You know, excitingly, just this
month we have seen that with the the publication of the the Road
Map towards Nature credits. Yes, and I'm sure your paper was
hugely influential in that road map development.
So on that, could you just walk us through what that road map
lays out? So it's important to say that,
as we were talking about earlier, the EU road map is a
voluntary scheme. So it's government regulated but
voluntary, and the suggestion is to create what are called
certificates, which recognise nature positive actions beyond
individual legal obligations and mandatory mitigation hierarchy.
So it's actions that go beyond what we already have to be doing
in the EU for instance. So a nature credit in this case
would be considered as a unit that represents a nature
positive outcome derived from a certified independently verified
action, which is quantified using a recognised metric or
indicator. And that's what we're hoping
would be designated by this EU wide framework.
And So what it's actually proposing is a 2 step model of
certification going into crediting.
So essentially I would propose A conservation or restoration
plan, which I would then take to a third party independent
verifier who would then verify it based on the criteria which
is set out in the EU framework. So that there is that that
credibility and confidence that what I'm doing is high integrity
for both people and nature, importantly.
And then based on that verification, I will be given a
certificate. I can use that certificate to
help attract, you know, upfront investment, but it also gives
other stakeholders that trust that what I'm doing is, as I was
saying, high integrity and then credits will be progressively
issued as the results from that plan are achieved.
So the the road map then sets out how we're going to get to
that endpoint, which is essentially the creation of an
expert body, which is going to develop those high integrity and
transparent methodologies. And they say they want to focus
on simplicity and usability, but also governance and safeguards.
And, and they also want to try to do some work around
identifying what the key drivers of supply and demand will be
within the EU. And they also, you know, quite
importantly, recognise the need for public seed funding to kick
start the market. And so that's things like de
risking finance, maybe blended finance vehicles and technical
assistance so that we can help plug the gap between the upfront
investment and the sale of the credits later on, which we know
has been, you know, one of the the challenges in BNG, for
instance, in trying to get the market off the ground.
So overall, we're moving towards development of this credible,
consistent framework. And we look forward to kind of
contributing to that process. So just to clarify, Thomas, BNG
is obviously a regulated compliance market.
What the EU road map seems to lay out is a framework for the
development of a voluntary market.
However, is that how you see it? Yes, that's right.
So BNG is a regulated compliance market in the sense that you
have to achieve 10% uplift. If you can't do that on site,
you'll have to buy a credit, right?
Whereas what the EU road map is suggesting is a regulated
voluntary market. There doesn't seem to be a
compliance mechanism in there yet, but that's not to say that
it might not be developed or that member states might not
choose to use that EU wide framework and then create
compliance mechanisms for their own country.
So it remains to be seen how it will actually pan out and.
When we say regulated voluntary market, we mean sort of
regulated at the level of what the methodologies need to be in
the standards, right? That's brilliant.
So Glenn's going to come on imminently and just before he
does, just so listeners understand the connection
between you and Glenn and why you're both here together, Could
you just briefly tell us how you've been working with
Wendling Beck? Yeah, of course.
So the partnership with Wendling Beck began before my time at
TNCI. Think it's at least 5 or 6 years
actually. Well, TNC actually published a
paper on best practise for biodiversity net game even
before the regulations came out, setting out what we thought a
good scheme would look like. And then we were connected with
Glenn who was really interested in what the modelling and the
business case for this might be. And we, we struck up the
partnership and Glenn and the other land owners within the
Gwendolyn Bet scheme are fantastic.
They're, you know, really pioneering and it's really
exciting to see what's going on there.
I visited twice and I come away optimistic each time that these
schemes can work and can help us to transition towards nature
restoration. So TNC has just been supporting
with some of the modelling work, the business case.
And at this point now we're also trying to kind of amplify the
messaging that's coming out of the work at Wendling Beck, both
here in England, but also within the European Commission.
So Wendling Beck's one of the case studies that we often take
to our European stakeholders to make the case for each market.
Brilliant. Let's get him on.
Well, Glenn, thank you so much for joining us today.
It's lovely to have you here. Thanks Helen.
Thanks for having me on. And we've just been talking to
Thomas, who's sort of given us sort of the the bigger sort of
overview of where BNG sort of fits in, in terms of sort of
delivering for nature, especially within the context of
Europe. But I wondered if you're going
to sort of give us the on the ground experience, if you could
just actually start by sharing with us what is Wendling Beck?
So we are a a landscape scale land use change project.
So the project is now just over 5 years old.
We were kind of slightly ahead of the game in terms of looking
at biodiversity net gain. It was, it wasn't a policy when
we started and we've kind of collaborated with a number of of
land owners, neighbours to create something bigger and
better than the sum of the parts.
We needed a bit of aggregation to be able to deliver the, the
type of project that we wanted to and at the scale that we
wanted to. Yeah, it's been a learning
curve, but we've, we've got there and we're now market
ready. We're we're sort of trading if
you like, and that's going quite well.
Yeah, it's a, it's a couple of 1000 acres.
So we're, we're, you know, broadly we've got sort of four
farms that are about 500 acres each.
So no huge land owners or anything like that.
And we're all on quite marginal land, very thin sandy soils.
We had to do something different.
We, we, our businesses were not resilient in the form that they
were from a farming perspective. We weren't big enough.
The soil types were not resilient enough.
We were particularly exposed to drought and we're going through
a a fairly monumental drought at the moment.
And, and everybody keeps saying to the each other that we're
glad we haven't got any crops in the ground.
It's quite hard actually delivering habitat in these
conditions, but they're a lot more forgiving than than trying
to grow barley or wheat or or something like that on on this
type of land. So yeah, it's been a lot of
work, but we're pleased that we did it.
Oh gosh, it has been a lot of work.
And so I wonder if you can sort of tell us, did you say you
started about 4-5 years ago, was it now and was that sort of in
the pilot testing phase for government?
What was? What did that look like?
We did a number of things. We're actually one of the round
one nerf projects. So the nerf is the Natural
Environment Investment Readiness Fund, which is GFI quite closely
aligned to. We managed to secure some
funding as as part of that, that round one, which was trying to
put Seed Rattle into projects to help with feasibility and get
them off the ground. So that really gave us a leg up
and helped us to start thinking about how it would all work and
the feasibility and what have you.
And then we were also became a Defra BNG pilot, which was again
hugely helpful to us. It enabled us to do some of the
baselining and create some of the early habitats off the off
the back of that through, you know, kind of early
interventions and that sort of thing.
So, you know, it's, it's been really quite a positive
experience I would say overall. But I think it shows the point
that this isn't something you can just go out and do.
There is quite a lot of upfront funding, grant funding that
needs to be put in to help land managers and farmers.
Huge, huge amount, way beyond what we ever anticipated to be
honest. So the, the nerf funding was
100,000 lbs and at the time we thought that was, you know, a
huge amount of money that would do everything that we needed to
do. And I think at the moment we're
up at about two or two and a half, £1,000,000 worth of
investment. So it's and obviously that
figure now includes lots of habitat creation and capital
works that have happened since. So gosh, that's a huge upfront
investment. So sort of talk to us about, I
mean, obviously you don't have to tell us how much money you're
making out BNG, but sort of tell us how the economic stack up
with the compliance model like BNG.
You know, we've got about 3000 BNG units that we will deliver.
You never have a completely accurate figure because there's
these temporal multipliers within the BNG metric that mean
that depending on when you sell. So if you create habitat in
advance, the metric deems that there's less risk of failure and
it rewards you by giving you more units if you sell at a
later date. But obviously you don't know
when you're going to sell, so it's quite difficult to nail
down exactly how many units you're going to deliver.
Will be somewhere around 3000. When we first started the
project, the early F Tech analysis had had BNG units of a
kind of an average value of about £11,000 a unit.
By the time we got close to being market ready, they were at
about 35,000 a unit. So you can, you can do the maths
on that. It's a, it's a big chunk of
money, but it is for 30 years and it does include all of your
capital works and it also includes inflation and the
inflationary effect is huge on this.
So from a commercial point of view, we have a high kind of 125
year business model I think that sits behind this.
This is multi generational successional planning and
although those those numbers are quite big actually if you take
the the revenue that's coming off the the previous farm
systems over 30 year and apply inflation and what have you, you
actually get to a similar kind of number.
So it does need to be around those figures.
What we have seen as we're getting to market now and the
and supply and demand are becoming a bit more equalised is
that actually that price is dropping quite quickly as well.
So I think at the moment with the average price, we've gone
from sort of 35,000 a unit down to about 25,000 a unit on
average. But there's quite big variations
between habitat types as well. So you might have a very
difficult to create habitat such as a watercross unit.
That's probably quite a lot of capital works.
They might be up sort of a hundred, £150,000 a unit.
You then might have a simple grassland, neutral grassland or
something like that, that you could be down sub 20,000 sort of
between sort of 18 and 20,000 a unit.
So there's, you know, the market is becoming more sophisticated
as it evolves and people are starting to understand what's
required in actually delivering these different habitat types.
You know, and, and we might not sell all the units, we don't
know exactly how supply and demand is going to work.
So the the business model is actually predicated on that, not
selling all of the units that as long as we sell, you know, a
proportion or a decent proportion 50 to 70%, then we
should be OK. There are a number of variables
in there that we just not going to know until we get to that
point in time and that's part of the risk of doing it.
But we feel that the economics stack up better than the
opportunity cost of farming this land, particularly when you
layer in the fact that we're on poor quality land.
You know, we're, we've got the vagaries of the weather and, you
know, and the, and actually the farming policy environment isn't
terribly stable either. So yeah, we're, we're very happy
with what we've done and we're really comfortable that we've,
we've made the right decisions. But that's now kind of semi in
hindsight, whereas at the time we were making those decisions
that that wasn't quite so easy because we just had no idea
whether this was going to work or not.
Well, I bet. And then with those large
upfront costs have been quite as scary few years I would have
thought. Yeah, we've, we've mitigated it
to some extent by stacking. So we have, we've Norfolk is
generally in a neutral neutrality area and Wendling
Beck is actually delivering nutrient credits as well.
So we have managed to sell some nutrient credits quite early,
which has given us some of the working capital that we need to
then deliver the habitat. So the way we look at it from a
kind of a stacking and an additionality perspective is
that the nutrients basically pay for you to take the land out of
production. So they're, they're, they're
making up for that loss of income through that opportunity
cost of farming it. The BNG then pays for delivering
and managing those high distinctiveness habitats over
the long term. So that's that's worked quite
well for us. And should we, I mean, while
we're on the topic of stacking and it's the topic we love to
talk about in the UK in so in England, is it worth explaining?
I remember about to explain it, but you will explain it better
that you cannot stack with carbon because of the lack of
additionality. I mean to what extent do you
think that might change over time or is is should be a hard
line? There's lots of opinions on this
and it's quite a divisive subject, sorry.
To bring it up. Yeah, my personal view is that
we shouldn't have these stacking rules that you, they, they don't
exist in any other walk of life. So if I, if I'm a farmer growing
wheat, I can sell my my wheat forward on a contract to a
buyer. That buyer doesn't asked me what
I'm doing with the straw. And that's how free market
economics work is that, you know, the markets effectively
look after the the stacking and additionality through those
market economics. But the the buyers are well
aware that you might already been paying for something and
that affects the value of 1 or other of the ecosystem services.
It's helpful to us obviously, that we can stack biodiversity
and nutrients. So that is allowed within the
current stacking rules. You know, that's been a huge
lifeline for us. We're not planning on selling
carbon. We don't necessarily think that
we need to sell carbon. We are measuring all of the
carbon uplift within the project.
So we're working with UKCH and the University of East Anglia to
measure above and below ground carbon and actually to economy
as as well. They're helping with that
process and that's not necessarily with a view to
trading that in the future. Although if the BNG market
doesn't materialise to the extent that we would like it to,
then it might, we might need to do that.
So it's a, it's kind of a safety net for us that we could dip
into the carbon market. We wouldn't, we wouldn't be
double dipping. We would, you know, we would be
using it as an alternative revenue source.
But to be able to do that, you have to have a baseline and
start the project before you start the transition.
And you need to be able to measure that to a post
intervention state if you like. I think when you get to much
bigger projects, and I'm thinking particularly of the
landscape recovery projects, stacking really becomes an issue
because those projects are far more complicated.
We're 4 land owners. Some of these projects are 50 or
60 land owners. We're a couple of 1000 acres.
Some of these big projects are, you know, 10s or even hundreds
of thousands of acres. You can't deliver that scale of
project through compliance markets.
There just isn't the demand for it.
And you're going to have a blend of different ecosystem services,
particularly carbon. So carbon works particularly
well for landscape recovery projects.
But actually there are a number of those projects that are going
to be Hanford by not being able to stack biodiversity alongside
carbon. And I do think that's something
that, you know, it's not about double counting, it's about
actually making projects viable by getting them the finance that
they need. Yeah, yeah, totally.
Well, thank you for taking that question on stacking.
And for those listening, if you're not familiar, landscape
recovery is actually part of our new farming subsidy regime,
would we call it? That's for, as it sounds,
landscape scale projects with multiple farmers and land
managers coming together and they typically have to produce a
model that attracts both private sector.
And then there'll be some element where the government
will complement that through the subsidy or public funding if I
have. So maybe let's talk about
upfront finance because obviously there is a, there's a
marketplace between, you know, a buyer of units and you're
selling the units. But there is that point where
you might need the upfront investment before you find the
the buyer. Does that exist at the moment?
I mean, how do we, how does that look in England?
It's a bit of a hodgepodge. So depends on kind of right
time, right place to some extent.
So there are, there are people out there that will put C
capital into projects if they are either answering a
particular requirement or you know, they, they just happen to
be in a, in a, in a good location or, or have an
ecosystem service benefit that somebody really wants.
Other more kind of speculative projects can struggle to get
that early seed capital. So again, we, we talked about
landscape recovery. That's a that's a great way of
bringing some money for feasibility to get the projects
off the ground for, for more kind of stand alone single
estate compliance market solutions.
That becomes more difficult to, to get to bring in the the money
to do the feasibility. So baselining, you know, soil
testing, design, legal structures, all of that sort of
stuff costs quite a lot of money.
So it's either at that point up to the landowner to to try and
finance them that themselves or try and take on some debt to be
able to do that. So in some ways it creates an
opportunity for debt finance within there maybe through the
banks, but I think the banks have been relatively slow on the
uptake with compliance markets and and nature finance in
general. And we're seeing that on the,
the flip side of that coin is that if you have a charge on a
piece of land that you need the bank's permission to enter into
biodiversity net gain, the bank is unlikely at the moment to, to
allow you to do that because they don't know what's going to
happen to the long term land values.
And the charges are all based on the, on what happens with those
long term land values. And they know from a, if it's in
farming, they can, they can predict that with new markets
like biodiversity net gain, it's unpredictable when their
computer basically says no. And you know, they are working
through that at the moment. But that has caused a problem.
Similarly, the, the kind of the risk profile of, of investing in
BNGII would imagine is quite similar.
I mean, if you go and want to borrow some money from a bank
and you've got some assets that you can underpin that with,
they're always going to lend you the money.
But at the moment, all of the risk is on the landowner.
And I think as the, as the projects mature and the, and the
market matures, the risk gets mitigated.
So we need some of these early projects out there to prove the
model and and prove that the market works and then everybody
becomes a little bit more relaxed about it.
Yeah, yeah. So slightly changing topics, is
there any sort of argument for social impact from biodiversity
net gain? I know you've done quite a lot
of work with communities, but if you could talk us through that,
that'd be great. You know, I think on all of
these, these nature recovery projects, the local communities
and that wider society benefit is hugely important.
I don't think there's any particular framework that
predicates that at the moment that that needs to be part of
the design or the the execution. I think it's more of a best
practise approach at the moment that if you're doing something
good for nature, you should look at the why, the bigger picture
and start to integrate people into that mix as well.
So we're very focused on kind of habitat.
We use habitat as a proxy for species, but often the kind of
the people living close to those sites or visiting those sites
can be neglected from that design.
So that's something that we've been quite conscious to try and
make sure that we we encapsulate within the project.
So we're doing as much as we can at the moment.
So we are, we're engaging with, with local community groups,
volunteers, we've put in a cycle path to kind of connect the
local town centre to, to, for a couple of the villages.
We've got people counters on the footpath network and the, and
the cycle way to understand how it's being used and how those
numbers change over time. You know, tracking people coming
into the project, whether they're walking, running,
cycling, you know, we can because that's all part of our
natural capital account. And we need to understand what
the value is to wider society as well.
And I think because we don't 100% understand how the finance
of these projects is going to work at the moment.
So we have a we have a model that we think is going to work
through biodiversity net gain and selling environmental
credits. But if those markets change or
governments change and the policy goes or whatever it might
be, we need to find a way to justify back to government, you
know, public money for public goods at that point.
So if we need to bring in subsidies in the future, for
example, because you know, the compliance markets go and then
we're going to need that data to be able to say, look, this is
within our natural capital account.
This is our impact on health and well-being or whatever it might
be. So I think they're all really
important, but I think there's just a general kind of feel good
factor as well that you create something that you're proud of
and a space for nature and you you want to be able to invite
people in and, and kind of integrate with that and and
connect with that as much as possible.
There is always a balance between high distinctiveness
habitat, species, recovery and people because they're not
natural bedfellows and you tend to, you know, you get a lot of
recreational disturbance and things like that.
So you do need to think about it within the design.
But we've been quite careful to keep the the really high
distinctiveness areas separate from where we're encouraging
people in. And this is a big question to
wrap up here with you, Glenn. But given over the years you've
had so many visits from government officials across the
EU seeking to understand BNG, what's your sense on whether BNG
is something that should and could be applied across Europe?
You know, we're obviously testing this on a kind of a
micro scale in some ways in, in England and we can see the
potential for this as a, as a marketplace and as an
opportunity to bring private finance into nature recovery
and, and meet many of the government's metrics along the
way. So it's a, it really is a win
win economically and environmentally.
It's a, it's a win win. Once you, you kind of amplify
that to, to the scale of, of Europe or, or other kind of
jurisdictions, it becomes more complicated, but also it comes
with economies of scale and opportunities that, you know,
are quite mind blowing from a nature perspective.
And I, I think looking at something like BNG across Europe
would just have so much potential, not just from a
finance point of view, but from a, from a nature delivery and a
people perspective. And, and actually that kind of
cap reform piece as well as to, as to how that works over the
long term. I think that the lessons that
we've learnt and are still learning on a daily basis from
BNG in England are definitely relevant and replicable across
those kind of geographies. And you know, in an ideal world,
this would be a, it would be a global kind of roll out for, for
biodiversity and climate as well, because the two are
intrinsically linked. They kind of go hand in glove.
And I think we can all see from just turning on the news that we
are are facing some pretty significant challenges.
And, and no matter how much governments bury their head in
the sand or because it's not convenient, it's coming.
And sooner or later the penny will drop.
But we need to be able to do something about it.
And as you say, compliance markets are doing that.
And I also mentioned earlier that Vanessa Garcia, when she
was on a couple of weeks back was sharing how they are being
adopted across Latin America and even in, you know, some parts of
Africa and Southeast Asia. So it does feel like the EU is a
little behind, if I can say that.
But thank you, Glenn. It's really great to have this
on the ground view and stay where you are as Thomas is going
to come and rejoin us. So, Thomas, welcome back.
And I know you know well the experience Glenn has been having
on the ground and what he's just shared here.
But we thought for this final 10 minutes, it would be really
great to have you both here to share with us some of these sort
of final thoughts. And the first is really about
the challenges. So Thomas, we talked about some
of the detail around small sites exemptions and on site delivery,
but where else do you see the biggest gaps between the policy
design and that implementation on the ground?
I think from a policy systems lens, I think the biggest gaps
that we're seeing is around regulation and monitoring,
especially monitoring. We don't really have a central
regulator tasked with like enforcing BNG or holding people
accountable to those agreements and penalising non compliance,
for instance. And so like, although we call it
a regulated market, you know, it's not a very tightly
regulated market in in the actual practicalities.
And, you know, local planning authorities also just don't have
the capacity to be assessing what's going on on the ground,
both in terms of the the applications to create habitat
banks or, you know, the continuous monitoring.
And so that does create blockages in the systems.
And you know, a report recently from IES found that, you know,
local planning authorities are being really overwhelmed by
section one O 6 demands that legal agreements to secure an
area for 30 years. And then I think finally and
this has come out of our work in Norfolk, is that gap between
upfront invested investment needed to deliver and verify in
that gain and the returns from the sales of BNG credits.
And so you know what you can see is farmers or lenders not being
willing to put up that significant upfront capital
where we're in what is still a fairly nascent market.
So I think more support around that kind of gap would be
helpful. Yeah, I think there's something
around policy stability as well and the, and the kind of the
market to supply and demand side of things for BNG.
So to be able to invest in projects that are delivering
sort of long term biodiversity benefit, you have to make sure
that the goal posts are fixed in place for a period of time.
And you know, we're looking at kind of long term 30 year
delivery and we have to be sure that the policy environment is
stable enough to be there at the end of that process to be able
to invest in it. And I think we we haven't
necessarily had that today. You know, it's, it's been
slightly lumpy in terms of the roll out and now we're going
through a whole other consultation around small sites
and and things that will materially potentially affect
the market. So I think that's that's the
principle thing from a supply side perspective is that you
have to be sure that there's a market there to that is going to
have the the required demand to, to to make it investable.
So as we say, it's a, it's a great policy, we're glad it's
there. Obviously teething issues and
any new piece of regulation, but definitely has the ability to
mobilise what we all hope is private sector capital, not just
maybe from property developers, but you know, hopefully large
infrastructure providers as well.
So just kind of wrapping up last couple of questions here.
I'm really keen to ask you both. I mean, how do you sort of see,
you know, what would you like to see in terms of the development
of biodiversity markets? And that can be whether we you
want to talk about these compliance markets, these units
or whether it's more on the voluntary side or as Thomas was
explaining to me earlier, the sort of in between, in between
regulatory voluntary. In terms of where where we're
going to see the biodiversity markets moving, I think we're on
and up for this trajectory. It does depend who you ask.
I talked to some of my colleagues who've been around
longer than I have in this space and they remembered we bought
back in the early 2000s and they were like, there was loads of,
you know, energy and enthusiasm about their diversity markets
back then. And we didn't go anywhere.
And now we're having that kind of like curve of interest back.
But I do feel like we're in a different set of circumstances
as back then, you know, we have technologies and monitoring
capabilities for biodiversity that we just didn't have back
then. So the markets weren't
particularly high integrity and we couldn't measure biodiversity
gains as well as we can now. And I also think we're in a
different space in terms of corporates and their
understanding of biodiversity. You know, as we were saying
before, we've got frameworks like TNFD and SBTN which are
really alerting the private sector to their risks and
dependencies. And I think there is going to be
increased interest in these markets because of that.
And we have, you know, the EU road map announced, we've got
the IAPBS framework, we've got the work of the BCF and WEF.
And so I do hope we see this kind of proliferation of
national regulated schemes which are there to unlock private
finance for nature while benefiting farmers, while
benefiting local communities and helping, you know, close that
finance gap. What I worry about is that
potentially we start to see governments talk about private
markets as a way to make the excuse that we don't need as
much public funding going towards nature.
You know, when we're constantly hearing about, you know, the
worries around low growth and fiscal constraints, you can kind
of see where that argument could come from.
But I think we all need to be saying that it's public funding
plus private markets or the other way around.
You know, they they both need to be in the game and both need to
be scaling up at the same time. And I think we're starting to
see that heading in the right direction with the messaging
that we're seeing from the EU framework and the IAPB.
Yeah. So just just to expand on on
Thomas's point there around the wider economy, we see the nature
markets, it should be a triple win basically.
So you know you can grow a whole green economy off the back of
compliance markets, which also enhance your underlying natural
capital. So to kind of deregulate that
process and destroy nature as, as, as part of development, you
know, it's just ludicrous because you're, you're
destroying your natural capital which sits on the, the
Treasury's balance sheet as opposed to enhance it.
So you should have a kind of a triple fiscal win as part of
these nature market framework. I think we're delighted with
where BNG has got to at the moment.
We're busy on wending back with, we're doing a probably somewhere
between sort of 20 and 40 quotes a week at the moment.
So I think the market is is working better than we expected
it to at this point of its life cycle and for sure it needs kind
of tweaking and evolving as we go forward.
But I would not underestimate the the importance of having
compliance market as the foundation for wider nature
markets. Without those compliance markets
there, the the voluntary markets start to become eroded.
We're pleased that there seems to be commitment to
infrastructure by 2020, May 2026 now I think so that's really
important for the BNG market to have infrastructure playing
apart and and being bound by the same conditions and principles.
And, and some of the, the proposals for infrastructure in
the consultation, I think we're really positive as well.
But we've also got policies like TNFD sort of coming down the
line, which will be really, really important in helping to
deliver a wider voluntary nature market.
I think if you've got those two things together, then you can
really guide to go places with this.
And to Thomas's point, it's not a substitute for for public
money, but having the ability to blend, you know, really
significant sums of private money through either compliance
markets or voluntary markets that are underpinned by
compliance markets will allow governments to deliver the
targets that they're required to meet.
So I think that's a good point to end on here.
So thank you so much, Glenn and and thank you so much Thomas as
well for all your time today. A really, really rich discussion
on BNG and the broader European landscape on biodiversity
credits and appliance market. So thank you.
Thanks, Helen. Pleasure.
So that's it for this week, and you can find out more about
Wending Beck, including multiple case studies on the GFI Hive
website. And that's under our main
Investment Readiness toolkit. You'll find all the case studies
there which go into a lot of detail about how it's worked and
what Glenn's been doing for the last five years.
And you can also find the paper that Thomas mentioned, obviously
over on the Nature Conservancy's website.
We are going to be saying on this Compliance market Rd that
we've started along and I'm going to be joined by Tim Male
from the Environmental Policy Innovation Centre in the US,
also known as EPIC. And he's going to be joining us
next week to talk about mitigation banking in the US and
the importance of these policy leavers.
Until then, I hope you have a great week.