THE Wildlife Trusts, RSPB, Woodland Trust and National Trust have today published a set of principles for ensuring “nature markets” truly deliver for nature, climate and people.
With an estimated £6 billion annual funding gap for UK nature recovery across land and sea, the UK Government has set an ambitious target to grow annual private investment in nature by at least £500 million by 2027, rising to over £1 billion by 2030. It published its Nature Markets Framework in May and is working with the British Standards Institute to develop robust standards for green financing.
Nature markets are based on the sale of environmental “credits” such as carbon credits, biodiversity units, nutrient credits, and natural flood management payments.
They are generated by nature-based solutions that have the capacity to deliver multiple benefits for society and the environment, as well as opening up new income streams for rural communities and farmers.
However, the current lack of regulation for these emerging markets has led to concerns that poor quality or low ambition schemes could create a “wild west” that allows certain industries or businesses to greenwash, while also missing out on opportunities to maximise benefits for nature and people.
Finance Earth and Federated Hermes
The Wildlife Trusts, RSPB, Woodland Trust and National Trust have worked with Finance Earth and Federated Hermes – a global leader in responsible investment management – to co-develop Nature Markets Principles, a set of voluntary principles for science-based investment, to support high integrity natural capital markets in the UK.
James Alexander, Chair of Finance Earth, says, “These principles have been co-developed as a stop-gap to influence market practice today and to contribute to the much needed emerging Government policy and regulation. The Nature Markets Principles have been informed by a range of credible UK and international sources, as well as the practical delivery experience of the UK’s leading nature charities whose aim is to support the development and long-term operation of high-integrity, high quality and high impact UK markets for nature restoration and enhancement.
“Enshrined in the principles are the need for projects to be science-based, transparent and verifiable, ideally in perpetuity and benefiting local communities as well as society more broadly. There are also stipulations about who the producers of the credits will do business with, ruling out those companies dependent on environmentally damaging activities such as fossil fuel extraction.”
Finance Earth, in partnership with Federated Hermes, will manage the government-backed UK Nature Impact Fund that aims to stimulate institutional investment at scale in high quality nature restoration projects across the UK.
The UK Nature Impact Fund intends to adopt the Nature Markets Principles and apply them across all of its activities in UK nature markets.
Eoin Murray, Head of Investment, Federated Hermes Limited, said, “Science-based investment in nature-based solutions not only offers opportunities to create value to investors but it is crucial for addressing climate change, promoting green growth, and enhancing wellbeing.
“We are therefore pleased to have collaborated with the UK’s largest nature charities on the creation of the Nature Markets Principles and believe this cross-sector partnership presents an exciting opportunity to contribute toward a paradigm shift in conservation financing. This approach acknowledges the complexity of the social and ecological systems it invests into and the Principles lay the groundwork for significant institutional investment in high-integrity nature restoration.”
The Nature Markets Principles – Supply-side
1. Science-based Nature Recovery
NbS projects are led by science and deliver net gains to biodiversity and ecosystem integrity.
2. Environmental & Social Safeguarding
Projects adopt a holistic & integrated approach (at landscape, local & national levels) to minimise leakage and not cause adverse impacts on other environmental objectives or on local communities. Existing environmental projects are not undermined by the sale of ES.
Where they sell ecosystem services, NbS projects only sell ecosystem services based on new, verifiable environmental outcomes that would reasonably be expected not to have happened without the income generated from the sale of ecosystem services.
4. Permanence & Financial Prudence
The durability of benefits is maximised, ideally in perpetuity, and the risks of reversal of the benefits are mitigated through financial prudence.
5. Seek Co-Benefits
Projects seek to maximise co-benefits for local communities and society.
Projects deliver reliable and independently measurable environmental gains through best practice management, monitoring, independent verification and reporting.
Projects commit to public disclosure of outcomes to maintain accountability and support the development of trusted ecosystem service markets.
The Nature Markets Principles – Demand-side
8. Buyer Screening Criteria
Buyers must be aligned with the transition to net zero and demonstrate support for the conservation and protection of the natural environment.
9. Commitment to Best Practices
Buyers and investors adopt best practices in terms of the management and reporting of their social and environmental impacts, such as following the mitigation hierarchy and adhering to a Paris-aligned net zero strategy.
Dr Rob Stoneman, Director of Landscape Recovery at The Wildlife Trusts, said, “Nature-based credit schemes present a real opportunity to restore nature and create regeneration and prosperity in the countryside – if done in the right way. These principles send a firm message from some of the UK’s top deliverers of nature-based solutions that we will only engage with the highest integrity schemes. Buyers must stand up to scrutiny and truly contribute to nature’s recovery in the UK, while benefiting local communities. We welcome the business community and others working in this space to join us in upholding these principles.”