Nature restoration is a primary objective of many LINK members and we are pleased that in general the imperative of restoring Scotland’s biodiversity is increasingly recognised and that the Scottish government has committed to action. We are of course deeply concerned about the recent announcements regarding short term cuts to the local authority Nature Restoration Funds.
Scotland’s nature is in a poor and declining state. The State of Nature report (2023) finds one in nine species at threat from extinction. Centuries of habitat loss, over-exploitation, intensification of farming, development, invasive species and persecution of wildlife means Scotland ranks 28th from bottom out of more than 240 countries/territories in terms of biodiversity.
Scotland has committed to the Montreal-Kunming Global Biodiversity Framework and Scotland’s (draft) Biodiversity Strategy sets out a clear ambition: for Scotland to be nature positive – to have halted and reversed nature decline by 2030, and to have restored and regenerated biodiversity across the country by 2045. A key target is ‘30 by 30’ – to protect 30% of our land, freshwater and sea by 2030.
These are exciting commitments and aspirations, but we are well aware that delivery is going to be thorny; not least the issue of how it is funded. In our paper, How to finance nature, we discuss this and set out a number of recommendations.
What is it going to cost? The nature finance gap (the gap between the cost of nature restoration and current levels of funding) was considered to be in the region of £20 billion over 10 years by The Green Finance Institute in 2021. The inclusion of land purchase costs in the calculations has been questioned and smaller figures proposed as being more realistic. LINK members are keen not to get bogged down in discussing the exact size of this gap but, as described in our paper How to finance nature, it is clear that costs considerably outweigh current funds. What’s more, and importantly, these costs will change over time with early action and complimentary policy reducing the long-term financial burden.
With costs vastly exceeding current levels of funding, alternative ways to pay for nature restoration are being considered. The cost of delivering global biodiversity goals was highlighted in the Global Biodiversity Framework which refers to the need to increase funding from all sources including the leverage of private finance; and a growing number of organisations and initiatives have been putting their minds to how this might work. Scottish government published its Interim principles for responsible investment in natural capital and established the FIRNS programme which funds projects to ‘shape and grow the use of private investment and market-based mechanisms to finance the restoration of Scotland’s nature’.
LINK members, along with others, have been somewhat alarmed by the apparent assumption that private investment, particularly markets in biodiversity, will solve the nature finance gap. A proposed model has been shown to be costly to the public purse due to the need for public finance to de-risk investments. The initial enthusiasm from potential investors appears to have dampened according to this Scottish Land Commission report.
There are several inherent characteristics of biodiversity that confound its suitability for investment seeking a return, principally it generally doesn’t generate an income and it takes many years to establish. Not all private finance is looking for a return and there are also options for private investment from organisations wanting to make up for their impact on biodiversity. For these organisations, measuring the amount of biodiversity enhancement is important – another thing that is difficult.
All in all, although LINK members believe there is an absolute need for additional funding including from the private sector, there is also a realisation that private sector investment at scale is likely to be a long time coming and its desirability is dependent on the development of a framework and supporting policies and standards to ensure the investment contributes to long-term ecological restoration, and benefits local communities.
We therefore need to think more widely about how to pay for nature restoration. Some general principles: landowners should be expected to look after land in the public interest, including by protecting and restoring nature. That said, where vital public policy objectives, like climate change mitigation and nature restoration, require concerted action for which it isn’t reasonable to expect landowners to pay, these are best pursued by public programmes and funding. Although this is preferable, the urgency and scale of the nature crisis means that a pragmatic approach needs to be taken and different financing mechanisms need to be pursued concurrently.
The Scottish government should continue to significantly increase the overall level of public investment in nature and, importantly, ensure that existing funding is used more effectively by ending subsidies for activities which degrade biodiversity. The most obvious, and probably most effective, intervention would be to reform agricultural subsidies; but all public budgets should be scrutinised to ensure they are compatible with nature restoration aims and this should extend to grants and loans.
Other fiscal measures like tax policy and charges can be used to both raise money and incentivise the necessary actions – see LINK’s new paper, Paying for nature: Options for fiscal reform.
Although, as mentioned, there are complications with private money (aside from philanthropic support), the possibility of investment in ‘biodiversity enhanced carbon units’ is probably one of the front-runners. The IUCN is developing a procedure for biodiversity crediting alongside the Peatland Code and Woodland Carbon Code programmes, aiming for completion in March next year. Governments need to ensure that the operation of carbon offset credits in Scotland enhances biodiversity; and that they comply with strict additionality and integrity conditions.
An additional source of private finance is through Planning related biodiversity enhancement. The introduction of the requirement for development to deliver biodiversity enhancement, through NPF4 Policy 3, is potentially game-changing in ensuring that development contributes to leaving nature in a better state, rather than to its decline. With a robust system of enhancement design, targeting and enforcement, biodiversity enhancement could significantly bolster Scotland’s ability to meet its priority nature conservation objectives. See this RSPB paper.
The Scottish government is currently drafting a Biodiversity Investment Plan which should give due consideration to the advantages and disadvantages of different mechanisms to finance nature and the various roles that they might have.
This Investment Plan must set out a strategic approach to financing nature, making the best use of the various mechanisms available and matching them to ecological priorities. Such priorities should be laid out in a spatial plan of restoration needs and priorities. This plan of restoration needs and priorities and supporting data is a fundamental precursor to the Investment Plan.
LINK members look forward to working with Scottish government and others on ensuring that we make the best possible use of all options available to pay for nature protection and restoration. We emphasise that this needs to be led by a spatial plan of ecological needs and priorities and coordinated by Scottish government and regional bodies.
Blog by Phoebe Cochrane, Sustainable Economics Officer at Scottish Environment LINK
Top image: Calum McLennan