The UK is one of the most nature-depleted countries in the world. UK government is committed to restoring nature, including a legally-binding commitment to halt the decline in species abundance by 2030 and a pledge to protect and effectively manage 30% of land and sea for nature by 2030.
To meet this ambitious target we need a huge collaborative effort involving public, private and third sectors and this will include new private investment into nature restoration to create, enhance or protect various forms of “natural capital” such as woodlands, peatlands and other multibenefit natural habitats and systems
It is estimated that the annual funding gap of resources required to restore nature in the UK, beyond current public and philanthropic commitments, is more than £6 billion per year.
Opportunities for the private sector to get involved in financing nature restoration is grounded in the trading of environmental credits, which encompass carbon credits, biodiversity units, nutrient credits, and payments for natural flood management.
These credits stem from the idea that nature has the capacity to deliver multiple benefits for society and the environment, alongside generating new revenue streams for rural communities and agricultural practitioners.
In collaboration with the National Trust, the RSPB, The Wildlife Trusts, and the Woodland Trust, Finance Earth and Federated Hermes co-developed a set of voluntary Nature Markets Principles, that will support private finance to flow into UK nature restoration. These principles seek to ensure that nature markets deliver genuine benefits to nature, climate and society.
The urgency for this development arises from the scarcity of regulations governing environmental credits, potentially creating a ‘wild west’ scenario where substandard or lacklustre initiatives could permeate the space, enabling certain industries or businesses to engage in "greenwashing".
Finance Earth’s chair James Alexander said: “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."
They encompass seven key project development ("supply-side") principles, including science-based nature recovery, environmental and social safeguarding, additionality, permanence and financial prudence, seek co-benefits, verifiability, and transparency.
On the "demand side", two key principles are designed to be applied by corporate buyers and investors; including buyer screening criteria and investor commitments to best practices.
