The green revolution

This article examines what increasing interest in green investment means for CLA members, what the CLA is doing and where we need government to act.

Anyone who owns or manages land is the proud possessor of natural capital – but what does this actually mean for you or your business? It is easy to see traces of overexcitement in some of the discussions about natural capital and environmental markets. Is this just using academic and corporate jargon to describe common sense ideas land managers already apply to their businesses? There is an element of truth to this. Most farmers are only too aware of the value of their soils for example, and they know that the way they steward the land produces a lot more benefits than just the food, fibre or timber that they sell.

Moreover, we should be wary of seeing natural capital as a panacea or a way to make a quick buck. At its core, a natural capital approach is often about running a business more sustainably, efficiently, and profitably by understanding more about its impacts and reliance on the environment. But thinking about the environment in economic terms does capture an important point – that the environment, and the benefits it provides, has often been undervalued in the past. For farmers this may have been masked until now by the largesse extended to the sector via CAP payments, often with few strings attached.

Designing our own post-Brexit policies brings a renewed focus on objectives, results and value, with the taxpayer paying closer attention to the return on their investment in farming and the countryside. This attention on the benefits of land management is an opportunity for greater recognition of the value of the rural economy.

And in time it should bring more than just recognition. We know that the new Environmental Land Management (ELM) scheme will pay land managers for these public goods. In Wales, future policy will also reward land managers for public goods, while the Welsh Environment Act and Future Generations Act are already driving innovations in how to encourage and incentivise sustainability. At the heart of government thinking is the idea that a wider range of people, businesses and institutions will also be prepared to invest in the environment. This will allow for more diversified income streams and more choice for land managers.

Feedback from CLA members shows an appetite to engage but also some apprehension towards this strange new landscape, which blends the worlds of finance and accounting with those of nature and land management. The CLA aims to act as a guide, starting by engaging in some myth-busting and presenting concepts in clear language. We also need to highlight the practical implications of what it means to individual businesses.

Some members are already making their way down the natural capital path, measuring their natural capital or seeking green investment from the private sector. But the CLA wants to ensure that all members can reap whatever benefits come from these new markets, not just the largest or those with the most resources already at their disposal. The role for aggregators or brokers will be important, allowing groups of land managers to work together or allocating large investments to multiple smaller projects on the ground.

We are showcasing the contribution (both current and potential) of private land management. Nature reserves are not the only places natural capital is found and, while conservation organisations may have experience delivering for the environment, so do many private landowners. New funding streams need to work for land managers, including ensuring environmental contracts fit into a profitable farming or land-based business.

Some members are already being approached with offers, especially in the more developed carbon markets. The CLA has been analysing some of these offers and getting to know the organisations making them. We hope to be a trusted guide and to help members ensure that a deal that seems too good to be true doesn’t turn out to be a source of regret.

To ensure consistency, a forthcoming guidance note will ensure competence and reliability for everyone involved and includes a checklist for CLA members entering private environmental contracts.

Finally, we believe there is a role for government to support and develop new markets, though not at the expense of continued public investment via the new ELMs. Having identified the potential for significant private investment, the details need to be worked out, including in the following three areas:

• The government should help catalyse the market by investing in its development. That is why the CLA, with the Broadway Initiative (an alliance of business groups), has presented a proposal to Treasury to pilot some private environmental market initiatives as part of the green recovery from Covid-19.
• To avoid the emergence of a chaotic ‘wild west’ environment, the government must ensure good governance and regulation of new markets.
• For a market to function there needs to be trust and credibility in what is being bought and sold and how to measure and value it. We need to agree on common standards for measuring and valuing carbon and other natural capital.

Even with widespread commitment to move in this direction, it will take time to achieve a wholesale re-wiring of the economy to give the environment more weight within it. While an admirable ambition, this is no small task and not one that land managers can achieve on their own. But we can ensure this new landscape develops so as to benefit land managers and that CLA members are well positioned to take advantage of change.

The CLA’s Rural Asset Management Plan guidance and template offers a starting point.