£2 billion private finance pilot potential ‘vital step in restoring Scotland’s woodlands’

1 March 2023

NatureScot, Scotland’s nature agency, is partnering in a private finance investment pilot that could mobilise £2 billion in landscape scale restoration of native woodland, create new jobs and support rural communities across all parts of Scotland.

A Memorandum of Understanding is now in place between NatureScot and financial partners. If successful, the pilot could unlock private investment in natural capital, with the aim of reducing emissions and restoring biodiversity through landscape scale nature projects.

£2 billion of investment in woodland could create around 185,000 hectares of native woodland and sequester 28 million tCO2e over the next 30 years.

The partnership with UK private bank Hampden & Co, Lombard Odier Investment Managers and global impact firm Palladium is a ‘national first’ in ambition and scale, and an important step in positioning Scotland as a world leader in nature restoration through natural capital investment.

The Scottish Government has significantly increased public investment in nature through, for example, the Nature Restoration Fund, but a huge increase in private funding is also needed to tackle the twin nature and climate crises.

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The first pilot scheme will begin spring 2023. It is centred on the Wild Heart Borders Forest Trust project in Southern Scotland. The initial scoping assessment, part funded by NatureScot and South of Scotland Enterprise, has identified the potential for around 30,000 hectares of new native woodland in the heart of Southern Scotland with the potential for between £200 and £300 million of private investment and around 6 million tonnes of carbon sequestration.  The next phase of work will involve developing the funding model further and engaging with land managers and communities to explore what might be possible and the many benefits that might accrue.

This and every project will deliver against Scottish Government’s Interim Principles for Responsible Investment in Natural Capital, published in March 2022; and be designed to deliver tangible benefits for local communities.

The team will work closely with land managers and local partners to deliver high integrity, responsible investment in new and productive woodlands which lock up carbon. The additional investment will enable high quality design, delivering multiple benefits for communities and nature in a way that more traditional woodland projects cannot always afford.  It will strike a balance between maintaining existing land use and nature restoration.

Biodiversity Minister Lorna Slater said: “The finance gap for nature in Scotland for the next decade has been estimated to be £20 billion. Leveraging responsible private investment, through valuable partnerships like this, will be absolutely vital to meeting our climate targets and restoring our natural environment. Scotland is well placed to take a leading role by offering investors the opportunity to generate sustainable returns from the restoration and regeneration of our landscapes. This investment will generate multiple benefits: ending the loss of biodiversity, improving water quality, reducing the risk of flooding, regenerating local communities and creating green jobs.”

Robbie Kernahan, Director for Green Economy at NatureScot, said: “We’re delighted to be working with these businesses to deliver scalable investment in our natural capital in Scotland. To deliver the aims of the Climate Change Plan we need to bring private investment to Scotland and this new partnership will allow us to test a new approach.”

Andrew Bell, Chief Commercial Officer at Hampden & Co, said: “Landowners bank with Hampden & Co for our ability to meet their often-complex needs with a personalised and tailored banking service. This initiative presents an opportunity to help them and others to transition to new ways of developing their land to support the drive towards net-zero.”

Andrew Sutherland, Director of Nature-Based Solutions at Palladium, said: "Palladium works globally to restore nature with private finance in a way that leaves no-one behind. We’ve catalysed over US$1 Billion over the past 5 years and impacted 4 million hectares of landscapes in need, and now we’re transferring what we’ve learned to fighting the twin crises of climate change and nature loss here in the UK. This is exactly the kind of ambitious partnership that’s needed.”

Lorenzo Bernasconi, Head of Climate and Environmental Solutions at Lombard Odier Investment Managers said: “Scotland has shown international leadership in recognising the importance of investment into natural capital, as part of its commitment to a just transition to net zero. The investment gap to deliver on these nature related outcomes is estimated to be well above £15 billion for the current decade, requiring new public and private partnerships for mobilising capital at scale. We look forward to bringing our expertise and collaborating with these partners to deliver on this vision, while supporting local communities and a high-integrity market for private investment into nature.”

The focus will be on creating new and, in some locations, productive woodlands.  The carbon credits produced will only be sold to UK companies. A priority will be to quantify the impact of the investment and track and measure success. The investment model for each project will be adapted by the global impact firm Palladium, who have substantial global expertise in developing a portfolio investment approach. 

About NatureScot

NatureScot is Scotland's nature agency. Responding to the twin crises of biodiversity loss and climate change, we work to protect and restore nature by inspiring everyone to value our natural world. Our goal is a nature-rich, net-zero future for Scotland. For more information, visit our website or follow us on Twitter.

’S e buidheann nàdair na h-Alba a th’ ann an NàdarAlba. Bidh sinn a’ gleidheadh agus a’ slànachadh nàdar le bhith a’ brosnachadh a h-uile duine gu spèis a chur air an t-saoghal nàdarra againn, agus sinn a’ freagairt air an dà chùis-èiginn de chall bith-iomadachd ’s atharrachadh na gnàth-shìde. ’S e ar n-amas nàdar beairteach ’s cothromachadh carboin do dh’Alba. Airson an tuilleadh fiosrachaidh, thoiribh sùil air an làraich-lìn againn aig www.nature.scot no leanaibh air Twitter sinn aig https://twitter.com/nature_scot

About Hampden & Co.

Hampden & Co is a UK private bank that focuses purely on providing personalised banking for individuals, their families and associated business. Each client has a nominated banker who delivers a service tailored to meet their needs.  Clients include land and estate owners which will help to connect the partners with land managers who are seeking to invest in their land. 

About Lombard Odier Investment Managers

At Lombard Odier Investment Managers, we are rethinkers with one goal in mind. To provide our clients with outstanding investment solutions that meet their needs for the long term and evolve to thrive in the challenging world in which we all live. 

We are focused investment specialists, seeking out investment opportunities that lie on less trodden paths, where our diverse and talented team can add genuine, persistent, value to our clients. We constantly rethink what we know and do, innovating to create new strategies and develop new ways of investing. 

We believe that the next economic revolution has already begun and that sustainability will be a major driver of returns for the foreseeable future and beyond. For those with the skills to adapt to this new reality, sustainability will create new sources of alpha, open up new investment opportunities and lead to enhanced return and reduced portfolio risk.

Our team of sustainability experts combine sophisticated data sources, academic rigour and technical innovation to create leading-edge, science-based tools that provide unique insights that are available to all our investment professionals. 

These unique insights are reflected directly in our growing range of dedicated sustainable investment strategies that are aligned to this core belief - That our economic model must move from being Wasteful, Idle, Lopsided and Dirty to become Circular, Lean, Inclusive and Clean. We call this The CLICTM Economy.

With more than 180 investment professionals, we are a global business with a network of 13 offices across Europe, Asia and North America and have assets under management of 63 billion CHF (as at 31 August 2022).  

About Palladium

Palladium is a global impact firm founded in 1965, working at the intersection of social progress and commercial growth. It specialises in natural capital investment, including through “Revere” – a partnership with UK National Parks that uses private funding to restore nature in the UK.

Palladium works with corporations, governments, investors, communities, and civil society. With a global network operating in over 90 countries, Palladium is in the business of making the world a better place.