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Emerging Biodiversity Markets In Scotland, A Source Of Alternative Funding

14 March 2024

Biodiversity markets have become increasingly more common across the UK. This comes from a requirement for businesses to offset any negative impacts on nature or alongside more voluntary initiatives targeted to improve a business’s public image. These private markets will provide landowners with an alternative funding source to enable them to create or enhance habitats for wildlife. This investment could plug the estimated £20 billion gap required. However, it is also pushing up land pricing making it increasingly difficult for new entrants to farming.  

The Scottish government is committed to enhancing private investment with targets to create a Biodiversity Investment Plan in the ‘Biodiversity Strategy to 2045’ which will include the development of biodiversity markets funded by private investment.  

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How Biodiversity Investment Works Elsewhere

Looking south to England, the most notable biodiversity market in place at the time of writing is that related to Biodiversity Net Gain (BNG) requirements in the planning and development sector. BNG requirements in England state that developers must demonstrate that there has been an increase in biodiversity (currently set at 10%) following their development. Biodiversity is measured in units, which are calculated through a governmental developed metric (DEFRA Biodiversity Metric 4.0). Where developers cannot create enough units on site to compensate those lost through development, they can buy units through biodiversity markets. The biodiversity units are sold by landowners who work with ecologists to create biodiversity rich habitats on their land. This has opened up a new source of potential revenue for farmers in England. 

Biodiversity Markets in Scotland

While Scotland has not yet developed a biodiversity metric or unit as such, the requirement for biodiversity enhancement was introduced in the Scottish National Planning Framework 4. Although this does not provide a legislative framework to support the buying a selling of biodiversity units like that in England, it may provide an option for landowners to work with local developers to provide an option of biodiversity enhancement offsite that can mitigate any impacts onsite. 

A paper written by SRUC titled “Research into approaches to measure Biodiversity in Scotland” published by the Scottish Government in September 2023, investigated the different ways that biodiversity can be measured. A standardised, scientifically backed approach to account for biodiversity would allow the impact of any development to be accurately calculated highlighting any potential compensation that may be required to ensure a positive impact on biodiversity. Landscape Enterprise Networks or LENS for short, is a marketplace for nature-based solutions. LENS works by analysing natural capital assets of a landscape scale area, and then quantifying local business’ reliance on these, and then creating a network based upon shared goals for nature-based solutions and environmental outcomes. This first began in Cumbria, where LENS trade resulted in £700,000 in funding from Nestle, United Utilities and first milk for farmers along the Cathwaite beck to reduce phosphorus usage and created bounded habitats, resulting in reduced water purification for United Utilities, strengthened Nestles dairy supply, and provided an alternative income for farmers. Knowing what ecosystem services that natural capital provides, Lens can bring local businesses together to invest in the restoration of natural capital. 

Biodiversity & Governance

To build buyer confidence, we need to ensure that these rapidly emerging markets are properly governed. It is therefore a lot more complicated than just creating a habitat and then selling the biodiversity credits generated to an private buyer. Instead it is important that you:   

  • Conduct a proper baseline before any action is undertaken. 
  • Undertake long-term monitoring  to ensure the desired impact on biodiversity has been realised. 
  • Demonstrate that private investment in the form of biodiversity credits were required to undertake the work (i.e. actions would not have happened in their absence). 
  • Ensure that biodiversity credits are verified and validated by an independent body. 

These markets will become more accessible as they develop, and codes are put in place. We have seen this with carbon markets, where The Peatland Code and Woodland Carbon Code certify carbon credits, providing assurance to buyers that the climate benefits are real, quantifiable, additional and permanent. There are several schemes appearing for biodiversity markets including PV Nature and CreditNature who won a contract with the Scottish Government to develop a biodiversity credit system, to catalyse the voluntary market in Scotland. The CEO of CreditNature, Cain Blythe, stated that “the biodiversity credit market alone is predicted to reach £12-35 billion by 2050, and, thanks to the vision of Scotland, we can accelerate the growth of a system that is both fit for Scotland and will scale internationally”. 

How To Monitor Success?

When it comes to monitoring – what aspect of biodiversity should you monitor? For carbon the answer is easy, a metric tonnes of CO2e provides a standard and meaningful way to measure carbon across the globe. Measuring biodiversity is much more complex, it depends on where you are in the world, what species or habitats you are hoping to restore, and under what timeframe. Clearly there is no common currency, no uniform way to do this. Instead, many evolving measurements combine a suite of different indicators that are relevant to the project in question. For example, a project that looks at river restoration may combine metrics on the extent and quality or riverbank habitats, aquatic plant diversity, the occurrence of invasive species, aquatic invertebrate diversity and the diversity of birds. 

Sourcing Public Funding for Biodiversity

Alongside these developing biodiversity markets, land managers can seek public money to fund a variety of actions to create, enhance and restore habitats for nature. These include:  

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