01 March, 2023
£2billion private finance pilot potential ‘vital step in restoring Scotland’s woodlands’
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.
The first pilot scheme will begin spring 2023. It is centred on the upper catchment of the River Tweed in Southern Scotland and will build on momentum already generated by the Wild Heart Borders Forest Trust project. The initial scoping assessment 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.
- Cat Synnot
Notes to editors
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 at www.nature.scot or follow us on Twitter at https://twitter.com/nature_scot.
’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. www.hampdenandco.com
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).
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. www.thepalladiumgroup.com
Where will the investment happen?
Partners are piloting the investment in two locations, one in Southern Scotland and one in the Atlantic Rainforest on the west coast. Once the investment model is proven to work, and has been assessed by project partners against the interim principles for responsible investment, the team are interested in other locations in Scotland. Please contact firstname.lastname@example.org if you have potential landscape scale projects.
How will communities benefit?
All partners are committed to delivering genuine and long-lasting community benefit from the investment. Partners will be speaking to communities in the project areas to find out what their needs are and to identify the best structure to deliver benefits.
How will communities be able to engage and when?
There will be several opportunities for communities to engage and we will be designing the engagement process early in 2023. Engagement on the Southern Scotland project is likely to start in spring 2023. Engagement on the other project in the Atlantic Rainforest is likely to follow in early summer 2023.
Will there be opportunities for community ownership?
This project is not about acquiring land, or changing ownership. However, if communities in these locations are interested in acquiring land, the partners will work with them to facilitate this where possible. The Scottish Land Commission are working with us to ensure we deliver the best outcome for communities and land managers.
What types of trees will be planted?
The project aims to plant mixed native woodlands but may include some productive commercial species depending on existing land use and the views of consultees.
How will this affect existing land uses, like farming?
We envisage a rich mosaic of woodland, peatland and other habitats with a range of land uses, including farming, recreation and tourism. The projects will be designed to complement and work alongside existing land use. For example, the land manager may seek to plant trees on part of a farm, but not the whole area. Approaches like agroforestry can blend food production with woodland cover, and sporting activity can still occur in and around woodland. This is not about wholesale land use change – it’s a more nuanced approach that protects existing jobs and land use, while diversifying rural businesses and creating new jobs alongside these.
Why is NatureScot working with these companies?
NatureScot, and other public agencies, are working to grow private investment in natural capital. We have been in dialogue with Hampden & Co. following a workshop on climate change, and the ‘Finance for Nature’ event at COP26. They are keen to invest in natural capital in Scotland and wanted to work with us on this. Hampden & Co brought Lombard Odier and Palladium to the table, bringing in access to wider capital and investment expertise.
Given the climate change emergency and urgent need to invest in nature, we are working in partnership with these businesses, and look forward to learning about the best ways to bring private finance into nature restoration through a new natural capital market. We are also working with other businesses on a range of initiatives and our door is open to other companies and investors – this is not the only opportunity we are working on. We will apply the same due diligence process (which involves background checks and risk analysis) to other businesses and decide who best to work with based on the investment potential and benefits for nature.
Who will make money from this?
In line with the interim principles on natural capital investment, this partnership will aim to deliver significant and lasting community benefit from these projects. Land managers will also derive an income from the projects, providing long term security for rural businesses. We will design the investment in a way that also creates jobs and delivers benefits for nature, the local economy and tourism. Our investors will also make a return on the investment from the sale of carbon credits.
How is this different to current financing mechanisms?
The funds will come from a mix of public (through the woodland grant scheme and other funds) and private investment.
What about other habitats?
The main focus of the investment is woodland, because of the more mature market for woodland carbon. However, the projects will invest in peatlands and other habitats as well, and will respect important existing habitats, such as those that support important populations of birds and other species.
Who will the carbon be sold to?
An ethical framework will be developed to ensure they are legitimate businesses who have credible carbon reductions pathways in place. Carbon credits generated through the UK woodland carbon code can only be ‘retired’ (which means used to offset their emissions) by UK based companies. It will be for the carbon offtaker to decide who to sell credits to. All carbon credits are tracked on the UK carbon market register.
Isn’t this just green washing?
Greenwashing is when companies make claims about their environmental performance that they can’t substantiate. Or, when they use ‘good news’ to try and distract from negative impacts.
Carbon offsetting is different. Locking up carbon in soils and vegetation is an essential component of getting to net zero. There is no other way to do this, as some activities will always generate some carbon emissions and they must be ‘offset’ by carbon sequestration somewhere else to deliver net zero emissions.
Is carbon offsetting appropriate in Scotland?
Yes. The UK and Scottish Government both support high integrity carbon offsetting as a valid path for businesses to achieve net zero. Carbon offsetting is an important part of global agreements on climate change. But it must be done using recognised codes and standards with emissions savings being verified by independent experts, such as the Woodland Carbon Code and Peatland Code.
How will you quantify and measure success?
The partners will develop a set of key performance indicators including: Area of habitat restored; Carbon emissions savings; Jobs created; Community benefits delivered.
Who makes the decisions?
We will be guided by, and be accountable to, a project Governance Board comprising all of the project members, Scottish Forestry and the Scottish Land Commission.
Why are you focussed on these locations?
We chose these locations (in the Scottish Borders and Atlantic Rainforest) because they offer contrasting circumstances in which to test the investment model, and both have existing initiatives that we can build on. They have a mix of public, private land and environmental NGO owned land, and a range of existing land uses (including farming, sporting estates, and commercial forestry).
Will the investment create new jobs, or lead to job losses?
The investment will create new jobs planting, maintaining, and potentially processing timber from the woodland. The projects will need deer managers and a range of contractors to deliver these projects. Where possible, we will utilise local contractors to retain the economic benefits of the project in the local economy and will work with the local community and businesses to explore both short term and long term opportunities.
We want to design investments that deliver long term employment opportunities, building skills and capacity in the local economy. These could include stalkers, rangers, visitor managers, engagement practitioners and specialists involved in ecological monitoring and maintenance.
Our aim is to deliver the investment alongside existing land use, keeping and building on the skills and capacity in local businesses, including farming, sporting and other rural skills. Where land use change leads to changes in the skills and people required, we will support a transition to new roles with appropriate training as part of a just transition to net zero.
When will the investment happen?
We aim to start delivering action on the ground in winter 23/24.
Can I get investment for my own project in Scotland?
If you are looking for investment for your own project, please contact: Brendan.email@example.com Projects need to be large (thousands of hectares), scalable and in locations with a good pathway to delivery on the ground.
NatureScot is Scotland's nature agency. We work to enhance our natural environment in Scotland and inspire everyone to care more about it. Our priority is a nature-rich future for Scotland and an effective response to the climate emergency. For more information, visit our website at www.nature.scot or follow us on Twitter at https://twitter.com/nature_scot
’S e NatureScot buidheann nàdair na h-Alba. Bidh sinn a’ neartachadh àrainneachd na h-Alba agus a’ brosnachadh dhaoine gu barrachd suim a chur ann an nàdar. Tha e mar phrìomhachas againn gum bi nàdar na h-Alba beairteach agus gun dèilig sinn gu h-èifeachdach le èiginn na gnàth-shìde. Tha an tuilleadh fiosrachaidh aig www.nature.scot no air Twitter aig https://twitter.com/nature_scot