Game & Wildlife Conservation Trust CAP0033
Game & Wildlife Conservation Trust response to The Environmental Audit Committee inquiry into the current and potential future role of natural capital in the green economy, and the Government’s proposals to increase private investment in measures to support nature recovery.
The GWCT[1] welcomes the opportunity to contribute to the realisation of the role of private investment in natural capital and nature recovery. The GWCT has recently set up a Natural Capital Advisory (NCA) service[2] which is advising farmers and landowners on achieving the best environmental and financial outcomes from the natural capital market. NCA provides all executive services to some of the largest farmer groups operating in the natural capital markets, including the Environmental Farmers Group, Peakland Environmental Farmers and Swaledale & Wensleydale Environmental Farmers. It is also leading the roll out of the Hedgerow Carbon Code which was developed by the GWCT’s Allerton Project[3]. We provide this information as context for our comments below in response to the questions posed, as in many cases the market is leading policy.
Terms of reference
a) Private markets offer the financial (and environmental) incentive/opportunity for farmers to take poor performing areas (i.e. areas that farmers would rather not farm) of their farm out of food production. This is an effective way of engaging farmers to take out these areas of land and deliver nature recovery, where formerly publicly funded grant schemes have not offered adequate incentive.
E.g. A farmer has 4ha of an arable field which is alongside a woodland. Its shady and a bit wet, the tractor sometimes gets stuck in that area. The wheat grown in this area yields 20% less than the rest of the field. The farmer is earning profit of £600 / ha.
By converting to pollen & nectar mix, a farmer could provide 9 BNG Units to market. Valuing these at £20,000 / Unit, this would mean the farmer earns £180,000 for that area of land for 30 years. After management costs, this might be a profit of £1,200 / ha / annum.
Such areas will vary by farm but might include steep fields, tricky corners, wet areas, shaded areas and exposed areas. These areas were farmed in the past because the subsidy regime made it economically viable to do so. With the removal of the support payment profitability is now determined by crop output or through repurposing land and selling other goods. For farmers, they must make a business decision as to whether it makes financial sense to take the area out of production. This decision is based on some of the considerations below:
b) Private markets provide an opportunity for farmers to bring their ideas to life, with nature recovery becoming part of a farm’s wider business.
E.g. Within the Environmental Farmers Group, one Member farms on the floodplain which they use to graze cattle. They would like to dedicate a certain area of the landscape to nature, and create a mix of habitat, including wetland habitat. They cannot do this, however, as financially, it makes no sense to take the land out of production without any long-term income stream.
By measuring the environmental baseline of the existing habitat and developing a plan which recognises the long-term ecosystem services being delivered by this project, there is the potential for a long-term income stream. This might be through selling nutrient credits, BNG Units or carbon credits.
Many farmers have ideas about environmental projects they would like to deliver on their farm to enhance the environment where they live. This might be the creation of ponds, riparian buffers, woodlands, hedges etc. Government grant schemes have helped support some farmers bring some of these ideas to life. However, grants do not offer an incentive, they only recover a cost. By making it profitable to deliver environmental projects, farmers will engage in private markets.
c) Private markets offer farmers an incentive to engage with other farmers and land managers to deliver landscape-scale environmental projects.
E.g. One aggregated farmer group in the North of England is working with local and national partners on a landscape-scale tree planting scheme. By working in a co-ordinated manner, incentivised by the carbon offset markets as well as other natural capital markets, farmers can choose to participate in the landscape-scale project.
This offers farmers an alternative business opportunity alongside their farming practice. As farmers are working together, some have the capacity, land and appetite to contribute more than others. Ensuring the contract value and obligations are appropriate, farmers will engage to different degrees.
Private markets incentivise the delivery of landscape scale projects, managed by aggregated farmer groups. These projects provide business opportunities for farmers to engage with which are appropriate for their situation. Engagement will be driven by arriving at a suitable market price and terms which will engage farmers.
d) Whilst we appreciate the reason for this question focussing on the potential contribution, we feel it is important to note that the private sector has already been responsible for delivering gold standard examples of nature recovery and environmental gain. In some cases this work has had elements of public funds (largely agri-environment payments) but additional investment in important ‘additive effects’, for example predation management for species recovery or early adopters investing in wetland creation for water quality or machinery investment in min-till systems, have been funded by private interests. These examples highlight how private finance (both philanthropic and private capital) is needed to fill the funding gap in the provision of nature-based solutions. Importantly the move towards natural capital provides an opportunity for these efforts to be quantified and rewarded (which poses the problem of the application of additionality – see Q2).
e) In addition, this emphasises an important consideration: these efforts are the result of individual motivation and the desire to conserve species or deliver environmental gain. This is often referred to as philanthropic money as it is not the result of policy directives. Given the correct framework of support (both practical and financial), this suggests that private individuals can make a significant contribution to nature recovery, particularly when working in a collaborative way such as the Environmental Farmers Group[4] as this provides the necessary scale for private capital. The additional gearing provided by other private capital assets must be based on this and not purely on financial incentives otherwise perverse outcomes can result, often called greenwashing (see also Q2 & Q6). For example, the purchasing of low-grade farmland for carbon farming that maximises carbon credits through commercial monoculture and not the broader environmental benefits of mixed plantings at varying densities.
f) In addition, it is important that investment is focussed on prevention, not just offsetting. That is the whole premise of conservation and important therefore in securing nature recovery.
We propose that the following are required in order to ensure investment is aligned with environmental benefits to achieve government’s targets:
a) Government should recognise and assure how ecosystems and ecosystem services are measured and quantified. This should be done through the Nature Investment Standards Programme. By agreeing how all ecosystem services are measured, this means that we know how to measure nature recovery and the market is confident to invest in nature recovery as they know it is suitable to meet government targets.
b) There should be start up support from government (or investors) to speed up businesses who can provide a commercial structure to deliver the measurement, validation, verification, certification and monitoring of ecosystem services. These organisations facilitate the market and will meet the measurement standards set out above. Examples include the Woodland Carbon Code.
c) Targets should be set at a local level so that it is clearer for the market to understand which nature recovery projects are suitable in each area. Environmental Farmers Groups (EFG)4 are doing just this through a Catchment Scale Conservation Plan where government targets are extrapolated for each river catchment area. This gives farmers and buyers targets of what ecosystem services are demanded in each area.
d) Government requires something to capture and record the various ecosystem services that are being delivered. Natural Capital Advisory are working on delivering a market exchange with a market registry. This will only accept projects which meet the standards set as part of the Nature Investment Standards Programme and means that reports can be provided to government as to the nature recovery delivered (and what type) over certain time periods through the market.
e) There needs to be some form of recognition as to the existing ecosystems and ongoing ecosystem services which are being delivered and are not ‘additional’. These must be recognised by using the same measurement techniques as adopted in step a. Either the market or government can assign economic value to these to ensure that these assets can be put into good condition (e.g. SSSIs into favourable condition), but it is important to have an accurate and uniform way to measure these against government targets.
f) The interpretation/definition of additionality (and the reward of existing good practice) is important if government wishes to achieve or even surpass environmental targets. If additionality is strictly applied as is currently the case, then it is encouraging farmers to ‘trash’ their existing natural capital assets, some of which require maturity to deliver maximum benefits. Many of the existing assets will have been wholly or partly funded by agri-environment schemes and so this could provide transparency and traceability.
g) Additionally, as we suggested in answer to Q1, we believe that the best outcomes will be achieved where private capital is used to gear up investment by the private land management sector. Given that the outcomes of natural capital investments are highly dependent on the inputs i.e. the management systems employed to deliver the outcomes desired, then the expertise, knowledge and efficacy of the land management sector needs to be employed. Farmers and land managers/owners understand how management practices affect the land, both in a social and environmental context, and therefore their involvement provides a type of safeguard. Where investment will differ from normal ‘management’ strategies is to require transparency through the monitoring of metrics such as chemical usage, cultivation system, energy consumption and water usage. The land management sector will need guidance on how to deliver this transparency (see Q3).
h) This question also highlights the importance of stacking benefits. The GWCT seeks to identify management that delivers multiple benefits for our rural landscape, such as reduced tillage which improves soil moisture retention and soil structure, reduces crop establishment costs and carbon emissions, as well as improving water quality. Private capital investment must be encouraged to focus on the optimisation of multiple benefits as opposed to the maximisation of one output. See also Q6b.
i) Related to this is the need to ensure a net gain in each output. For example, a point of much debate recently has been the rules regarding nutrient neutrality. As the name suggests these only require that the emissions are offset; no net gain is required. If broader environmental gains are to be achieved, then each natural capital market needs to underpin a net gain.
Please see answer to question 2. Some additional points:
a) Set standards on how to measure ecosystem services and how to measure all the ecosystem services delivered over one parcel of land. It is important to recognise that every new ecosystem will provide multiple ecosystem services. E.g. a woodland will provide carbon, biodiversity, and water quality services over the same parcel of land.
b) Provide central recognition (through government or government-backed organisation(s)) of organisations which measure, verify, validate and certify ecosystem services delivered by farmers, land managers and projects. The market needs confidence in which organisations are meeting the government standards.
c) Provide guidance (aligning with international frameworks such as TNFD) on how companies in different sectors might report their impact on nature, how this might affect their ESG rating, and which ecosystem services are suitable to mitigate or offset their impact (and to make claims such as nature positive). This might be done through the Green Taxonomy.
d) Government might also produce information for consumers on claims of nature positive, net zero and carbon neutral. This will help support consumers in the purchase of products to provide assurance that any such claims have resulted in new UK ecosystem services being delivered.
e) Natural capital markets are still evolving. In order for them to develop in line with demand there needs to be consistency of policy. Changes such as those that were proposed to the nutrient standards for new developments in the Levelling Up and Regeneration Bill are likely to undermine the market and provide unnecessary uncertainty. We would also suggest that whilst natural capital markets are developing that hybrid models will ensure appropriate reward and valuation. Otherwise more advance markets such as for carbon will dominate other markets such as pollination services.
a) It is important that the measurement techniques used as part of NCEA are aligned with those used within the ecosystem services market and meet the same standards. This ensures that all parties are ‘speaking the same language’, that the multiple ecosystem services delivered in one ecosystem are recognised and accounted for, and targets set by government are appropriate.
b) Although measurement techniques might not be unanimously agreed in the short term given reliability of data, it is important that they are set to a standard, which can then be revised over time as scientific understanding evolves and improves. Clear timelines for such updates to standards would be helpful.
c) NCEA might also be able to provide valuable information for methods to verify, validate and certify various methodologies. Using remote technology might be able to significantly reduce the (in some cases) prohibitive costs of verification, validation and certification on projects and methodologies. NECA might explore how this assurance element might be established.
d) It is important that in the absence of scientific consensus experiential evidence is not dismissed where there is a proven benefit. The GWCT is currently compiling a practitioner evidence monitoring programme to collect such data/experience.
a) The work on a UK Green Taxonomy is important as it will provide a much-needed common framework for environmentally sustainable investments that will provide clarity and allow investors and consumers to make informed choices and minimise opportunities for greenwashing.
b) The work being complete on the UK Green Taxonomy must align closely with the Nature Investment Standards Programme so that standards are aligned between financial reporting (i.e. demand side) and delivery of ecosystem services (i.e. supplier side).
c) Financial reporting should include:
d) The government might also want to provide information on what good or bad looks like to be able to give the market confidence on what should be being achieved and to give consumers an understanding of this for the products or services they are buying.
Many of the key points above could be reiterated here as they contribute to ensuring genuine net gains for nature, particularly the importance of monitoring and evidence and the need for standards.
However we would also like to add the following points:
a) The market must recognise that ecosystem services are delivered by both existing ecosystems and new ecosystems. The ecosystem services being delivered by both should be measured using the same measurement techniques (meeting the same standards) and should be distinguished as either an ‘additional’ or a ‘maintenance’ ecosystem service.
E.g. Despite not being a new ecosystem, an existing ancient woodland provides multiple ecosystem services (it captures carbon, houses biodiversity and might reduce flood risk). It is important for nature recovery that such ecosystems are recognised and valued. Although the ecosystem services might not be providing an additional ecosystem service, and therefore cannot be sold as an offset or to mitigate emissions, they could be sold to different nature markets (or indeed could be purchased by government).
b) The market must define ‘stacking’ and ‘bundling’ of ecosystem services over the same parcel of land. By recognising multiple ecosystem services delivered over the same parcel of land, land managers are incentivised to deliver a suitable ecosystem for the local environment. Without recognising that multiple ecosystem services are delivered over the same parcel of land, there can be the negative effect (as we have seen) of monoculture forests across large swathes of land.
c) The market must be composed of:
Verifiers and validators which have been recognised by a governing body,
Certifiers which have also been recognised by a governing body,
Methodology providers who meet the national standards of measurement (to ensure confidence in data behind nature recovery),
A governing body which manages and records the exchange of ecosystem services (to also deliver reporting to government)
d) The concept of a border tax for carbon or nature impacts, or some form of reporting for imports, might help protect against the exporting of nature degradation.
a) We have addressed Qs 7 and 8 together given that our expertise is in the domestic market. That said many of the points we have made above about securing the integrity of the UK market will be market-leading and this will help support the creation of market standards and market entities globally.
b) In addition, it is important that there is alignment with TCFD and TNFD reporting approaches.
GWCT Policy/Natural Capital Advisory Teams
September 2023
[1] The Game & Wildlife Conservation Trust is a leading UK charity conducting conservation science to enhance the British countryside for public benefit. For over 80 years we have been researching and developing game and wildlife management techniques. We use our research to provide training and advice on how best to improve the biodiversity of the countryside.
[3] Hedgerow Carbon Code | The Allerton Project (allertontrust.org.uk)
[4] Environmental Farmers Group – Farmers protecting and enhancing nature for the public good