Nature Shares and biodiversity net gain: A pathway to diversification

In recent years, the concept of biodiversity net gain (BNG) has gained significant traction in environmental policy. Set against a backdrop of the nation-wide residential housing crisis, the need to ensure that development projects contribute positively to the environment via a minimum 10% BNG uplift was made a statutory obligation in relation to major development sites from February of this year.

The concept of Nature Shares is an emerging idea in the Environmental, Social, and Governance (ESG) space that aims to integrate the value of nature into financial markets through the voluntary sale of environmental outcomes.

With many rural landowners considering how best to mitigate their potential exposure to future Agricultural Property Relief and Business Property Relief tax changes confirmed in the Budget, a BNG or Nature Shares project could provide insulation against the changes.

The concept of biodiversity net gain

Biodiversity Net Gain is a statutory planning principle that aims to encourage developers to leave the natural environment in a measurably better state than it was before a development. It involves:

• Avoiding loss of biodiversity where possible.
• Minimizing any unavoidable impacts.
• Restoring and rehabilitating degraded ecosystems.
• Compensating for any residual impacts by creating new habitats or enhancing existing ones.

BNG is typically measured in terms of biodiversity units through a DEFRA metric, which take into account the area, quality, and distinctiveness of habitats. The goal is to ensure that the total biodiversity impact after development is greater than before.

Implementing BNG

Developers will be encouraged, as far as possible, to deliver their BNG by designing its delivery within the boundaries of the relevant development site.  If this is not possible then the developers will be looking for an off-site solution. A closer site to the development site may be preferred because of the DEFRA grading system for BNG units, which assign greater weight to local sites.

What are Nature Shares?

Nature Shares represent a financial instrument that quantifies and assigns value to natural assets, such as forests, wetlands, or biodiversity. The idea is to create a market for these shares, allowing investors to directly invest in the preservation and enhancement of natural capital.

It is important to note that Nature Shares are a voluntary investment model. There is no statutory obligation that compels investment but it is clear that Nature Shares are becoming a key consideration to global companies’ ESG models.

How do Nature Shares work?

The mechanism behind Nature Shares involves:

• Identification: Determining the natural assets to be included in the share offering.
• Valuation: Assessing the economic value of the ecosystem services provided by these assets.
• Issuance: Creating shares that represent a stake in the natural asset, which can be bought and sold in financial markets.
• Management: Using the funds raised from the sale of shares to manage and protect the natural assets.

Benefits of Nature Shares for landowners

There is now increased social pressure on global companies to assess and improve their supply chains in an environmental context. As this idea takes hold, there will be an increase in demand for Nature Shares globally and this concept can be taken advantage of by rural landowners (both individually, and in clusters) to fund significant habitat creation projects with the likely considerable funds available in the market.

The Birketts view

The concept of Nature Shares is still in its infancy, but it holds promise as a tool for integrating nature into the financial system and promoting the enhancement of the natural world. As the ESG space continues to evolve, Nature Shares could become a key component of sustainable investment strategies and therefore a new income stream for rural landowners.

At Birketts we have the expertise to help landowners (sellers) and buyers of both BNG and Nature Shares through our specialist planning, environmental, commercial and agricultural practices. Please do not hesitate to contact a member of the team for further information.