Biodiversity Unit Banking
Following the Environment Act gaining Royal Assent on 9th November 2021, measurably enhancing biodiversity is soon to be a new condition of planning policy with the publication of secondary legislation expected by the end of 2023. This will provide a potential new income stream for landowners, who can receive long-term, assured income for enhancing the biodiversity value of land, in addition to that derived from sensitive farming.
Whilst all areas of agricultural land are potentially suitable, those buffering existing features of biodiversity interest are most desirable. Areas of low-yielding land, areas with difficult access, land susceptible to flooding or with no foreseeable development potential, are also well-suited to this alternative use.
Image modified from the DEFRA Net Consultation Proposals December 2018
Biodiversity Net Gain (‘net gain’) is a concept proposed in the DEFRA 25 Year Environment Plan and will be mandated under the Environment Act 2021 following publication of secondary legislation. This will require a 10% increase in the calculated biodiversity value after development, compared to the pre-development biodiversity value, hence the ‘net gain’! Many developments will not be able to achieve the required 10% net gain from measures within the site and there will be a requirement for the shortfall to be delivered elsewhere. This is where the opportunity arises for landowners to provide ‘biodiversity banks’.
In simple terms, this involves a landowner initially identifying an area of land that would be suitable for this alternative use. The existing biodiversity value of the land can then calculated using the most up-to-date version of Defra’s Biodiversity Metric. Consideration is then given to whether the existing habitats could be enhanced to increase their biodiversity value, or whether new habitats of greater biodiversity value could be created in their place. Once the proposed habitat are known, a second calculation is completed to determine the biodiversity net gain that would be achieved. The amount of net gain is expressed as ‘biodiversity units’ (BU). These units can then be sold to developers who need to deliver net gain away from their development site.
There is currently no fixed price for a BU. Although the Government considered £11,000/BU an indicative value when it recently undertook an impact assessment of net gain, in Warwickshire where biodiversity offsetting has been enforced by local planning authorities, BU have traded for sums in the region of £40,000/BU. Local authorities are beginning to publish figures for BU values that they will deliver with current figures including £20,000 in Leeds and £94,000 in the Royal Borough of Sutton. This is a new concept and market forces have yet to come into play; consequently, those who enter the market early are likely to achieve the highest returns.
At FPCR we have moved biodiversity banking beyond theory and into practice. We have proven with pilot projects, that despite a lack of central government guidance, site specific solutions are viable and well received by stakeholders.
Our first major scheme has recently received agreement by an LPA with oversight from Natural England. This scheme delivers 60+ units on 25ha, targeting wildflower grassland creation. As part of this process we adopted a strategy that delivered significant gains for biodiversity and consequently, a guaranteed income for the landowner, far in excess of that achievable from mainstream agricultural cropping. The approach to the valuation of the units has been designed to allow for further rounds of funding should the habitats created deliver units above the initial estimate.
As part of this process we have worked alongside land agents and legal professionals to reach a bespoke legal agreement between the LPA and the landowner to secure the BUs and register them for immediate sale. The BUs delivered by this scheme have already been brought to market with sales agreed. This scheme has already been showcased as an exemplar by one of the country’s leading Real Estate businesses as one of the first private biodiversity banks in the UK.
We are currently working with other major landowners on schemes across the UK with over 14,000 BUs in the pipeline, including a new approved scheme in Solihull which will provide the Local Authority (LA) a number of biodiversity units in 2022.
The images below provide an indicative guide to the potential uplift that could be delivered on commonly encountered habitat types. Low productivity arable land and poor-quality permanent pasture can often deliver the best returns, both for biodiversity and financially. Furthermore, entering into a scheme would not preclude the continuation of farming, providing improvements for biodiversity can be demonstrated.
The first step in the process is to identify appropriate parcels of land to bring forward. Ideal areas are those buffering existing habitats of high biodiversity value and those located within locally identified priority areas. The habitats to be created should fit within the local nature recovery strategy and be the best replacement for the habitat being lost through development.
Prior to entering a scheme, it is important to be aware of several considerations:
- The Environment Act requires a minimum 30-year management period based on an approved management plan;
- At the end of the management period, legislation will restrict the ability for the land to be returned to primary agricultural use;
- During the management period the enhanced or created habitats may meet the criteria for a nature conservation designation; and
- Tax implications – Independent tax advice is recommended prior to entering into a scheme due to the large financial sums potentially involved.
Landowners interested in exploring the opportunities surrounding biodiversity unit banking are encouraged to contact the FPCR team to discuss the potential of their land.
Sam Arthur – Biodiversity Net Gain Specialist
Sam is a Chartered Environmentalist with nine years’ experience working in the environmental sector; specialising in all aspects of Biodiversity Net Gain.
Sam Leads FPCR’s work on Biodiversity Net Gain and supports clients in the public and private sectors in meeting their targets for development together with protecting and enhancing local wildlife and ecosystems. As a recognised expert on this emerging sector Sam is also a member of the Natural England & DEFRA Biodiversity Offsetting Metric Sounding Board where he brings a wealth of commercial experience to the team. Sam is currently working to deliver several Biodiversity Bank schemes and has worked on over 100+ site assessments for development schemes.
Nick Law – Botanist, Habitat Specialist & Landowner
Nick has enjoyed a varied career. He farmed in his own right for over fourteen years, and this farming connection is maintained via Nick’s wife who farms in partnership with her family. Nick then moved into agri-environment work, securing Countryside Stewardship Schemes for landowners in the Midlands. This led to a position with Derbyshire Wildlife Trust for seven years as a Local Wildlife Sites Officer, which involved habitat surveys and providing land management advice to owners of sites of high biodiversity value, along with providing ecological advice to LPAs regarding planning applications.
For the past seven years Nick has brought his wealth of knowledge and experience into play at FPCR. His knowledge of habitats, agricultural and land management and the planning system, enable Nick to provide informed and practical advice to landowners considering biodiversity banking. Nick is also able to undertake the survey work and preparation of management plans required to secure biodiversity.