NatureScot is partnering in a private finance investment pilot that could mobilise £2bn in landscape scale restoration of native woodland, create new jobs and support rural communities.
A Memorandum of Understanding is now in place between Scotland’s nature agency 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 projects.
The investment in woodland could create around 185,000 hectares of native woodland and sequester 28 million tonnes of CO2e over the next 30 years.
The agency claims that the partnership with UK private bank Hampden & Co, investment manager Lombard Odier and impact investment firm Palladium is a ‘national first’ in ambition and scale.
The Scottish Government has significantly increased public investment in nature through, for example, the Nature Restoration Fund, but a significant increase in private funding is also needed to tackle the twin nature and climate crises.
The first pilot scheme will begin this spring, centred on the upper catchment of the River Tweed, building 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 £200m and £300m of private investment and around six million tonnes of carbon sequestration.
In the summer, engagement on a second project in the Atlantic Rainforest on the west coast will follow.
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 should 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 with land managers and local partners to deliver responsible investment in new and productive woodlands which lock up carbon, aiming to 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 £20bn.
“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.”
Andrew Sutherland, director of nature-based solutions at Palladium, said: “We’ve catalysed over $1bn over the past five years and impacted four 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, added: “The investment gap to deliver on these nature related outcomes is estimated to be well above £15bn 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 investment model for each project will be adapted by Palladium.
NatureScot noted that the project is not about acquiring land, or changing ownership, but it added that if communities are interested in acquiring land, the partners will work with them to facilitate this where possible.
The Scottish Land Commission is working alongside to ensure the best outcomes are delivered for communities and land managers.
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.
NatureScot stated that it envisages 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.
Land managers will be able derive an income from the projects, providing long-term security for rural businesses. Investors, meanwhile, will also make a return on the investment from the sale of carbon credits.
An "ethical framework" is set to be developed to ensure those who are sold the carbon credits are legitimate businesses which have credible carbon reductions pathways in place.
Carbon credits generated through the UK woodland carbon code can only be ‘retired’ - or used to offset their emissions - by UK based companies. It will be for the carbon offtaker to decide who to sell credits to and all carbon credits are tracked on the UK carbon market register.
The partners plan to develop a set of key performance indicators including: area of habitat restored; carbon emissions savings; jobs created; and community benefits delivered.
Decisions 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.
The aim is to start delivering action on the ground in winter 23/24.
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