For landowners and managers, natural capital appraisals will be an essential tool for the future, enabling businesses to harness the best opportunities for their land.
Managing land for a whole range of purposes encompassing farming, forestry and a slew of environmental initiatives is about to hit a new level of complexity, bringing with it both opportunities and risks. Setting a benchmark now will help navigate a robust plan going forward.
Duncan Glen, natural capital specialist and Director at Davidson & Robertson says, “There are ways to manage land sustainably and profitably, the skill moving forward will be in harnessing the right initiatives for your property – and that starts with getting the right advice.”
Farming used to be a relatively straightforward business principally concerned with getting crops planted, harvested and into the shed or keeping livestock in good enough ‘fettle’ to make a fair trade at the mart.
Since the introduction of IACS forms and maps in the 1990s, the demands and stresses of paperwork have continued to grow. Successive generations of farmers and land managers have seen their lives transformed from long hours of physical tasks to one with the added burden of administration, rules and regulations.
Duncan comments, “For an industry used to government support and funding for decades, the hard realisation is dawning that a new kind of thinking is required.
“Landowners and managers need to understand and evaluate the various initiatives because they will be key to farm livelihoods, the wider rural economy and the social fabric of communities on both sides of the border.
“Whilst the idea of natural capital appraisals is new, it is the most natural and obvious way to set a benchmark for the future and outline potential opportunities. Appraisals will need to cover numerous disciplines, so it’s important to get advice from agents that have expertise across a number of sectors. Once pulled together, it should provide you with an overarching and cohesive natural capital audit.”
There is still so much uncertainty over carbon codes, environmental schemes and grants on the journey to net-zero, however, there is an opportunity to benchmark your natural capital assets, giving you a baseline to work from and plan for your future.
Managing land to benefit the environment alongside productive farming, commercial forestry and diversified enterprises like game shooting, is nothing new and most businesses have embraced this in one form or another often via agri-environment schemes.
Productive farming business and good environmental management are not mutually exclusive, but it is equally correct to suggest that this balancing act has not always been successful. Some agri-environment mechanisms put in place to maintain this equilibrium have not worked.
For example, millions of pounds have been spent to boost populations of farmland birds such as the yellowhammer, yet between 1970 and 2018 the population has fallen by an alarming 60%. Wild bird field margins may have helped slow what would have been an even worse decline, but there are other factors at play. There is little point in leaving over-winter stubbles when so much less grain goes over the back of modern combines than their predecessors from back in the day.
Agri-environment schemes are here to stay for now, but there is a frustrating lack of detail on how they will work on both sides of the border. It is also clear that however these schemes are configured, the level of funding will not replace the impending loss of the Basic Payment Subsidy.
Fortunately, agri-environment schemes are no longer the only option. They have been joined by a bewildering set of choices funded by the public purse and, increasingly, private money as investors and large corporations scramble to demonstrate their journey to net-zero.
Farms and estates with significant areas of peatland may qualify for Peatland Carbon Credits but these cannot be verified and utilised for five years after the capital works are complete. The capital works are funded through Peatland Action in Scotland, but this largesse is not replicated south of the border.
Similarly, capital grants are available for the establishment of woodland, and these may attract Woodland Carbon Credits – but there are rules and procedures to be followed that enable you to unlock this potential – and the Woodland Carbon Code (WCC) has its issues – as discussed in a previous article HERE.
At least the Peatland and Woodland Carbon Codes benefit from a formal regulation structure and are endorsed by the respective governments which provides a level of comfort and security. This level of regulation does not exist elsewhere in the carbon markets, and although stories regularly circulate about the money-making potential of Soil Carbon, it would take considerable courage to sell on an unregulated market. It is particularly the case when downstream supply chains such as supermarkets, are likely to insist their farm suppliers can demonstrate their own journey to net-zero.
“Where food supply chains are involved, it might be wise to hold on to your carbon credits to offset your own businesses’ irreducible emissions.”
In England, the concept of Biodiversity Net Gain (BNG) will come into force in November 2023. It puts a responsibility on developers to ensure that biodiversity has been enhanced by at least 10% compared to the position on the land before it is being developed.
The BNG concept is also already operating in a de facto way in Scotland with some councils insisting on the same requirements as their English counterparts.
This represents an opportunity to link developers and landowners who may be able to provide this BNG requirement and it may lead to a significant income stream, but beware – the land will have to go under a thirty-year covenant. You must consider if a significant payment now will offset the restrictions on how the land might be used in the future.
To compound matters HMRC are only just consulting on how such income should be taxed.
The issues outlined are only the tip of the iceberg and nobody, not even the most confident of advisors, can provide certainty let alone accurate financial predictions. The strategic and regulatory landscape is only emerging slowly and with a frustrating lack of detail for everyone within land-based industries.
This article has not even touched on the concepts of Biodiversity Credits, Rewilding, Nature-Based Solutions or even Regenerative Farming – all of which will play a major role in our collective decision-making processes in the not-too-distant future.
There is no doubt that these, and other environmental initiatives, are here to stay. They will play an increasing role in farm incomes and how the very fabric of our countryside, communities and rural economy changes and develops.
Working through these possibilities with the idea of integrating them into more familiar farming pursuits like producing food, is a challenge that all landowners and managers face.
Navigating this minefield successfully will require accurate, timely and trusted advice from your advisors to help you ensure future generations of land managers and the wider rural economy will prosper.
Land management today is very different from that in the 1970s and 80s when the focus of decisions rested on getting crops and cattle to the pinnacle of production. The future will be about managing land with both profit and sustainability in mind. The journey has a starting point – and that should be your natural carbon audit.
Heading the Natural Capital team at Davidson & Robertson, Duncan Glen is supporting clients across a wide range of farms, estates, and property portfolio holders to make the most of their natural capital assets.
For more information contact Duncan on 07584 468 786 or DG@drrural.co.uk.
