Nature Investment Partnership
Working together to pilot a new approach to investing in natural capital
Scottish Government seeks to build a new market for investment in Natural Capital. NatureScot is working in partnership with Hampden and co; Palladium and abrdn investment to test out new approaches to nature finance, which will deliver responsible and high integrity investment into nature restoration in Scotland.
In its Climate Change Plan, Scottish Government aims to plant 18,000 ha of woodland annually up to 2050. This includes both commercial forestry for timber production and an increasing share of native woodlands to enhance biodiversity and deliver long-term carbon removal from the atmosphere. Currently, Scottish Government grants are the primary source of funding for new woodland creation, which mostly takes place on privately owned landholdings.
In a new natural capital market an increasing proportion of that investment will come from private investors, delivering better value for money for taxpayers and helping to accelerate and scale up nature restoration – a key aim of the Scottish Biodiversity Strategy.
What is the carbon market?
There is rapidly growing interest from UK companies in paying for the carbon removal services provided by woodlands and peatlands. The number of projects that have been validated under the UK’s woodland carbon code, for example, has increased from 187 in 2019 to over 500 in 2023.
Landowners generally combine existing government grants, to pay for tree planting costs, with revenues from selling carbon credits to generate a return. To help reach Scotland’s ambitious woodland planting and peatland restoration goals, our pilot project is exploring whether investment from the private sector can be harnessed to help landowners fund the up front costs of creating new woodland, or restoring peatland, in exchange for a share of the profits from carbon market sales.
If we can achieve this, we will be able to scale up woodland creation and peatland restoration well beyond what is possible using taxpayer funding alone. We are developing a new investment model which will allow multiple land managers to collaborate at landscape scale. This will reduce costs and generate multiple benefits for communities and nature.
Where are we working ?
Our first pilot is the Wild Heart Expansion Project in the South of Scotland. We are developing a pipeline of further projects and will announce the locations once initial land owner and community engagement has been completed.
Pilot Project Goals
We have set several principles that we aim to achieve:
Unlocking Productive Investment
We aim to demonstrate how capital financing from investors can be deployed into new woodland creation and other nature restoration activities. We are not acquiring land, which does not directly increase tree planting rates and can inflate land values. Instead, our focus is on enabling long-term investment into productive activities with existing land managers: using patient private capital to fund the planting and maintenance of woodlands themselves.
Value for Money
We want to demonstrate that private investment, if mobilised in the right way, can deliver strong value for the government and taxpayers. We will not increase grant funding to subsidise investor returns, or take on additional liabilities. Our goal is to use public funding to leverage private investment in a way that helps us to achieve more impact.
The carbon market
Our projects will engage with the voluntary carbon market in a way that sets an example of best practice: we will not enable greenwashing, and we will only work with corporate partners that have set and are delivering on ambitious net zero plans, which must prioritise reducing their own avoidable emissions first. We want to work with companies that are willing to pay prices for carbon credits that represent the true cost of creating woodlands and restoring peatlands and managing them over the long term.
Biodiversity and local landscapes
Our projects are focussed on creating woodlands with a diverse set of native species, each suited to the ecological conditions of the local landscape. We aim for our woodland to be planted on marginal land that is not a priority for food production and does not already hold high ecological value.
Fair deals for landowners
Our projects are being designed to ensure fair, long term partnership agreements between land managers and investors. Land managers should be properly rewarded for hosting woodlands, and investors should share long term responsibilities, risks, liabilities and rewards equitably.
Community Benefits
New native woodlands will provide significant environmental benefits for local communities – such as flood risk reduction and enhanced opportunities for recreation and access. We are applying guidance from the Scottish Land Commission and best practice from other sectors to ensure that our projects benefit local communities, and that communities in the project areas have genuine agency over the project outcomes.
We will work with local communities to design the projects in the best way to deliver local benefits, support local jobs and tackle local issues.
