Community Inclusion Standard

We are working in a highly collaborative and transparent way, with the following organisations signatories to our project's Memorandum of Understanding (MOU): British Standards Institute, CreditNature, Deciding Matters, Fife Coast and Countryside Trust (acting on behalf of the Nature Finance Certification Alliance), Foundation Scotland, Future Forest Company, Green Finance Institute, Highlands Rewilding, Kana, Nattergal, IUCN UK Peatland Programme’s Peatland Code, Realise Earth, Scottish Land Commission, Soil Association Certification Ltd, Soil Association Charity, SRUC, Wilder Carbon, Woodland Carbon Code, Trees for Life and University of Strathclyde.

Deciding Matters and members of the Nature Finance Certification Alliance (NFCA) incubated a project proposal in Spring 2023 to FIRNS to establish an outline business case for a new UK-wide standard for community participation and how this would translate to a clear set of community benefits, under a clear set of community wealth building principles.

We heave developed and tested the commercial viability of a certification product that would provide buyers of ecosystem service credits assurances on the approach taken to generating place-based community benefits.

As a cross-cutting, thematic, “plug-in” certification, it will complement market/ecosystem focused nature investment standards, enabling project developers to sell credits that reflect the additional value placed into local communities and businesses.

Following a co-design with project partners, an 'alpha release' certification product is currently undergoing wider consultation and testing through trial audits; supported by our Best Practice Guide: Community Inclusion for Community Benefit. The guide has been co-designed with key stakeholders from a range of live projects, with deliberative input from their wider communities as well as broader stakeholder networks, and critical feedback from an expert advisory board.

This guide is building on and complement existing frameworks, including the National Standards for Community Engagement (SCDC), the Participation Framework (Scottish Government), Public Engagement Strategy for Climate Change (Scottish Government), Community Wealth Building and a Just Transition to Net Zero (Community Land Scotland), Green Finance Institute Toolkit and recent research completed by the University of Strathclyde on ‘Carbon Offsetting for Communities’.

It provides a series of recommendations for community inclusion, with clear actions attached, and insights into the community benefits gained by undertaking such action. With a focus on developing community benefits, we will embed the principles developed by Scottish Land Commission on “community benefits from investment in natural capital” and integrate with the British Standards Institute (BSI) Nature Investment Standards framework.

A number of private-sector led Natural Capital projects in Scotland have excluded local communities in planning, management and decision making. Without their involvement, opportunities can be missed to provide additional economic, social and well-being benefits, alongside creating reputational and delivery risks for the investors in the project.

There is currently no such certification product in Scotland, or the UK, for nature-based solution projects (NbS). The international Climate, Community & Biodiversity (CCB) Standards by Verra are prohibitively expensive for most UK projects and do not address specific Scottish needs.

Our working hypothesis for the certification will be that it can be bundled with the ecosystem services, to attract a higher revenue income from the private sector.

Working with existing established codes (Woodland Carbon Code and IUCN Peatland Code), means we can have the ambition to provide project developers, codes and investors an integrated solution to developing and marketing “Community Plus” projects, by 2025.

Alongside existing codes, our project has also interfaced with the work of CreditNature, one of the most advanced, holistic, forms of Nature Positive Biodiversity Credit available, and supported via the Innovate on Nature Civtech Programme, sponsored by Scottish Government, NatureScot and SEPA. We will continue to collaborate with Scottish Government, the they support the development of an ecosystem restoration code, that will be informed by the outputs of the Civtech contract with CreditNature.

While the number of nature restoration projects involving private financing across Scotland is accelerating (predominantly involving voluntary nature-based carbon offsets), it remains unclear whether these projects will provide communities with direct benefits or control.

Furthermore, the viability of such projects can be undermined if engagement with impacted communities isn’t carried out with a strong community wealth building ethos.

Community participatory approaches are a way to build and sustain relationships between the public sector and community groups - helping them both to understand and take action on the needs or issues that communities experience. Participation, rather than simple engagement, means a more collaborative dynamic approach, especially if the community is directly involved in the development of an offset project, potentially as a part-owner or with decision making powers.

The National Standards for Community Engagement, by the Scottish Community Development Centre (SCDC), are good-practice principles designed to improve and guide the process of community engagement. Specific guidance on community engagement for natural capital projects is available through the Green Finance Institute’s Investment Readiness Toolkit, which helps identify the range of activities that could be undertaken.

The University of Strathclyde’s ‘Carbon Offsetting for Communities’ project commenced in September 2022 and is currently concluding its findings 2023. Funded by the Scottish Universities Insight Institute and the Strathclyde Centre for Sustainable Development’s COP26 Legacy Fund.

The project has explored how voluntary nature-based carbon offset projects may impact Scottish communities and how they could be designed to maximize place-based, community benefits in the future.

Community benefits toolkits are emerging, such as The Woodland Benefits Tool, that support investors with reporting social, environmental, and economic benefits of a project.

Through the work commissioned on behalf of Community Land Scotland (“Community Wealth Building and a Just Transition to Net Zero”) a set of community wealth building principles have been developed.

A recent National Strategy for Economic Transformation (NSET) workstream on community benefits from investment in natural capital, led by the Scottish Land Commission with support from Highlands and Islands Enterprise, has led to an instructive discussion paper and related case studies, that present clear recommendations with regards to community wealth building principles and desired outcomes.

These various strands of work need to be brought together, alongside further direct engagement with live natural capital project leaders, to derive best practice, guidance, and a recognisable standard for approaches to developing a community wealth building plan, that can be baselined and monitored, according to a set of community benefit metrics that can be standardised across existing and emerging ecosystem service credit mechanisms (“codes”).

At the time of commencing our project in September 2023, The British Standards Institute (BSI) had an established their programme, funded by DEFRA, to develop a Nature Investment Standards framework. Our first phase of research supported and influenced the framework and the BSI Flex 701 Nature Markets - Overarching Principles and Framework. Our second phase of work supported the decision to for Scottish Government and DEFRA to sponsor a new BSI Flex 704 Community Benefits Thematic Standard, which our work will directly feed into.

Research on Scottish land markets indicate that we are seeing rapid change in who owns and manages land, with an increase in corporations and investors entering the market for carbon offsets. There are concerns about ‘green lairds’ extracting wealth from our finite natural resources and excluding and disadvantaging communities.

This private finance brings an opportunity to support the development and sustainability of rural communities if harnessed and regulated effectively. A voluntary approach to delivering community benefits is of interest to investors (e.g. see Glen Dye Moor which specifically references the Scottish Government Interim principles for responsible investment in natural capital) and certification could provide an incentive to adopt verifiable expectations for providing community benefits.

Our project seeks to establish the outline business case for a “plug-in” standard for developing a Community Benefits Plan for any natural capital project, starting with existing and developing ecosystem credit mechanisms (“codes”) that are the subject of the British Standard Institute (BSI) led programme on Nature Investment Standards for the UK.

Our geographical scope for this development project has been predominantly Scotland, along the principle of ‘piloted in Scotland, applicable across the UK’. To ensure join-up with UK-wide developments, we have sought, and secured, the direct participation of BSI on our project.

Within Scotland, our project has focused on working with community and project leaders drawn from over 10 place-based projects, including:

• Anstruther Improvements Association & Fife Coast and Countryside Trust: Dreel Burn Investment Readiness Partnership
• Bioregioning Tayside: River Ericht Catchment
• City of Edinburgh Council: Edinburgh New Gardens – Water of Leith Catchment
• CreditNature: Drumadoon Farm
• Dumfries and Galloway Council: Solway Coast and Marine Project
• Future Forest Company: Dumyat
• Highlands Rewilding: Tayvallich Estate
• NorthWest 2045: Kinlochbervie NW2045 Land+ Futures
• Perth and Kinross Countryside Trust: Almond Headwaters
• Trees for Life: Dundreggan

We also connected with the following Scotland-wide projects and impact pathways:

• Community Contract for Marine Natural Capital (Kaly Group / Scottish Wildlife Trust, Living Seas Programme)
•  Scottish Community of Practice of 'community buy-out' projects (Community Woodlands Association)
• Standard Contracts for Biodiversity Credits (IUCN UK Peatlands Programme/ Woodland Carbon Code)

Through this approach of connecting with place-based projects, we are covering the following broad categories of natural capital:

• Native woodland restoration
• Riparian Zone restoration
• Peatland restoration
• Water management
• Marine nature based solutions

The Scottish Government’s principles for responsible investment in natural capital include an expectation that nature finance “should create benefits that are shared between public, private and community interests, contributing to a just transition”.

Advice and research published by the Scottish Land Commission highlighted the importance of nature finance in providing specific and deliberate benefits to local communities. This has led to the publication of guidance on this topic, and integration of community benefits into the Scottish Government's Natural Capital Markets Framework.

Core to the emerging advice on community benefits is the concept of shared ownership, control or governance of land, which should underpin community benefits and be rooted in quality, meaningful engagement with communities.

Although current standards in the UK ensure high levels of environmental integrity, community wellbeing in project areas is not covered in the depth required for a fair and equitable Natural Capital investment project.

The Nature Finance Certification Alliance (NFCA) therefore sees the addition of a new, community focused standard, that would 'plug-in' to habitat specific 'codes', as a key way of achieving alignment across the UK market on this critical topic.

Getting this right is not only about fairness, but research has also shown how community participation in Natural Capital projects amplifies their potential for success.

By plugging into existing standards, such as the Woodland Code and Peatland Code, which already demonstrate environmental integrity, it is expected that the standard will be more cost effective.

In the international voluntary carbon market, projects that bring demonstrable benefits to communities are priced at a premium. Research conducted by Ecosystem Marketplace found that SDG certifications sold on average at a price 16% higher than those without. SDG 1, No poverty, was the most influential, bringing a price on average 29% higher, demonstrating the demand from buyers for social benefits to carbon projects. Other co-benefit certifications, such as Verra’s Climate, Community and Biodiversity (CCB), sold at an 18% premium to those without in 2021. The buyers engagement process that will be conducted during the course of this project will aim to assess the attractiveness of the community certification product and willingness of buyers to pay extra for such certification, producing a final report on financial viability.

Buyers are increasingly looking for guarantees that projects are not adversely impacting the communities around them. Rating agencies, which are becoming increasingly influential, are also assessing co-benefits (Trove, Sylvera etc). Scottish Land Commission have been approached by a number of investors on how to embed community engagement and benefits into their natural capital projects. As such, we also expect investors to be interested in, and potentially perceive additional value in projects that have been certified. This hypothesis will be tested during the buyers and investors engagement process.

The Integrity Council for the Voluntary Carbon Market (ICVCM) Core Carbon Principles include to ‘do no harm’. All credible global carbon (and by extension of principle all ecosystem service) crediting schemes will be assessed against these principles. Demonstrable community engagement and benefit are likely to be essential for credits to gain market access and credit price points are likely to be influenced by the positive impacts of those community benefits.

The Scottish Land Commission’s (SLC) casework service through the Good Practice Programme has had a number of enquiries in delivering community benefits from investors, demonstrating a genuine interest in this approach. Consultation led by SLC with core stakeholders including the Scottish National Investment Bank and UK Infrastructure Bank have also indicated interest from the markets in clear guidance on community benefits.

Research output from the exploratory phase of the Civtech 8.6 Biodiversity Credits challenge, from Kana (a member of the NFCA) provides further insight into demand for ‘Carbon+’ and Biodiversity Credits that link to their corporate social responsibility (CSR) values.

• January 2023: Survey of 100 companies from the FTSE 350
• Firms that are further on the Net Zero journey are more likely to pay for their carbon offset units
• Top motivations to pay a premium for carbon / invest beyond offsetting reasons included, demonstrating CSR, ‘doing the right thing’, good PR and community engagement.
• To compete in a growing demand for sustainable funds, fund managers are seeking to secure the high sustainability ratings, such as those provided by Morningstar.
• Therefore, companies seeking investment through these funds, are motivated to demonstrate strong environmental credentials, through financing of high-integrity natural capital projects.

Given the potential downside reputational risks of claims of greenwashing, our hypothesis is that corporates would pay a premium for ecosystem service units with assurances of how the local communities participated and directly benefit from the project.

This hypothesis was tested and validated during the buyers engagement process conducted by Finance Earth in our Phase 1 research.

“The involvement of communities in natural capital investments is, so far, mostly absent, and the resulting deals lack ‘transparency’ in terms of the potential impacts of land use change for local communities- which are often far-reaching and inter-generational.” NW2045, Land+ project, anchored by the Assynt Development Trust

In some cases, communities have been adversely impacted by carbon projects as land prices or rent increase and land use changes impact livelihoods. In general, communities are being left behind, while a complex, opaque marketplace profits from the landscapes around them.

Therefore our working hypothesis is that our project can make a change to the status quo, to enable communities living in or in the vicinity of project areas, and often having deep rooted connections to the environment encompassed within project boundaries, to benefit from private investments in Natural Capital projects.

There is a gap in the market for a standard that ensures this is the case, and best practices are followed. Funding our application has meant that the design and development of this standard has been fast tracked, and will positively contribute to the development and roll-out of BSI's Flex 704 Community Benefit Standard.

The standard designed by this project is incentivising project developers to integrate community participation and decision making into the project. How to create community benefit agreements, following research backed best-practice, is one of the key planned outputs of our Phase 2 (led by Scottish Land Commission).

These agreements will ensure that the rights of the local community are recognised, and free and informed prior consent is given by communities to project developers. Project developers would inform communities about how these markets function and how the financing works. Also within these agreements, grievance mechanisms would be defined, allowing community members to effectively raise concerns and track progress of issues.

Project developers would agree with communities how benefits, including revenue, would be fairly and equitably distributed. Any investment in community development would be at the control of the communities. These agreements would be transparent and project developers would be held accountable against the arrangements.

This standard would be an additional certification alongside those that already recognise environmental best practices, such as the Woodland and Peatland Codes. As new ecosystem standards emerge (e.g. hedgerows, blue carbon, freshwater metrics and biodiversity credits), this standard would ‘plug in’ alongside those too - ensuring a consistent approach across all Natural Capital markets in the UK.

If successful, and there is demand for the uptake of the standard, not only would communities start to benefit from the projects, they would also be intrinsically linked to the project. This positive relationship with the project could amplify conservation and regeneration efforts as has been the case elsewhere. If the project succeeds, so does the community.

Finally, the availability of this standard would pressure buyers to demonstrate that the credits/units they purchase follow best practices when it comes to community participation and engagement. Even those projects that opt against adopting the standard, would likely need to showcase how they are delivering benefit to the communities included within their project area.