Private finance to drive nature’s recovery

It is widely accepted that the UK is facing a nature and climate emergency with significant habitat and species loss. It is estimated that the UK requires between £44-97 billion in additional investment over the next decade to achieve the necessary ambitious goals to restore and protect nature – this is known as the ‘nature recovery financing gap’. This gap exists because current public funding, while important, is insufficient to meet the scale of the challenge, requiring significant private investment to bridge the gap. 

As part of the government’s 2023 Green Finance Strategy, Defra published the Nature Markets Framework. The Framework sets out the government’s approach for scaling up private investment into nature’s recovery and sustainable farming. In the Framework, Defra set a goal for at least £500million of private investment to flow into nature recovery every year by 2027, rising to more than £1 billion by 2030.  Mandatory and voluntary targets to improve the environment have the potential to drive demand and, well designed, high integrity nature markets have the potential to use this demand to increase funding for activities that restore and enhance nature – read more here on the role of nature markets from UK Nature Markets Dialogue.

Biodiversity Net Gain forms one of many nascent markets which could help drive this private finance towards meaningful impact on the ground; other policies driving demand in nature markets include Nutrient Neutrality driving demand for Nutrient Mitigation projects. The growth of the UK Woodland Carbon Code and UK Peatland Code illustrate the growing interest in the role of nature based solutions in voluntary carbon markets.  

Biodiversity Net Gain overview

Biodiversity Net Gain (BNG) is an approach to building homes, businesses and infrastructure which ensures habitats are left in a measurably better state than they were pre-development. This means that applicable developments in England must restore any biodiversity lost during the building phase and deliver a 10% minimum net gain, unless they are exempt. 

BNG became a mandatory requirement for major developments from 12 February 2024 and small sites from 2 April 2024 under the Environment Act 2021. It requires developers to submit and deliver a BNG plan that demonstrates how a minimum 10% increase in biodiversity value will be achieved, either onsite or in combination with securing offsite units. If relevant habitat units cannot be generated onsite or purchased offsite, statutory credits are available via a central government platform as a last resort. The BNG plan must be agreed with a relevant body, usually the Local Planning Authority, before the development begins. 

Where developers cannot achieve the necessary 10% uplift onsite, they will be required to secure units offsite, presenting a market opportunity where landholders across England could benefit from a new income stream to deliver nature-based projects. You can read more about BNG here. 

How is the BNG market looking?

A nascent marketplace 

Although mandated in February 2024, the BNG marketplace has been slow to develop with any planning applications submitted pre- this date remaining exempt from the new requirements. As with any new legislation or scheme, it often takes some time before the necessary processes and procedures are embedded and optimised and this is likely also the case with developers and Local Planning Authorities. Developers will also have been seeking to achieve their entire 10% requirement onsite, as this often comes with significantly reduced costs, timescales and greater ease with ongoing monitoring requirements.  

It is being widely reported that much of the offsite unit requirements being driven by development are for mere fractional units, not the larger scale unit requirements originally hoped for to drive significant finance into these marketplaces. Although fractional units can present a meaningful contribution when aggregated with the needs of many buyers (developers), government investment into the development of standardised trade routes or nature markets has also been lacking, leading to the development of a ‘wild west’ style approach by the many stakeholders who seek to benefit. This has resulted in a confusing marketplace for both offsite unit providers (landholders) and buyers, with a multitude of brokerages, habitat banks and ‘shop window’ style search engines having established over the past 18 months. With both sides of the market seeking certainty and integrity but also simplicity and managed risk, it’s clear to see how the marketplace has become a difficult landscape to navigate and BNG funding is being deployed in a fragmented way reducing its potential impact and increasing costs for developers

Political uncertainty

2024 was a year of two prime ministers (Rishi Sunak and Keir Starmer); it brought the UK an earlier than predicted general election and a change of ruling party for the first time in 14 years.  With so much change came uncertainty for relatively new legislation such as BNG. Environmental organisations and other businesses working to supply offsite units reported a significant drop in engagement from developers, as the marketplace slowed in anticipation of change. 

With the new government committed to encouraging economic growth through new development, and a contentious inference that nature is blocking development and growth via the newly published Planning and Infrastructure Bill, confidence within the wider environmental sector and developing nature markets was further impacted. You can read the Wildlife Trusts response to the Planning and Infrastructure Bill here. 

Although slowly increasing since the beginning of 2025, offsite unit demand is still small and fractional from the regulatory market and could be further impacted by the outcomes of the latest BNG consultation being held by DEFRA. The consultation includes the application of BNG to Nationally Significant Infrastructure Projects (NSIPs) and reviewing BNG requirements for Small and Medium Enterprises (SMEs). Options include loosening requirements for small scale developers, expanding BNG exemptions for low-impact developments and delaying the implementation date for NSIP’s from November 2025 to May 2026. 

Suggestions to increase the net gain requirement from 10% to 20% have been ignored and in combination with the likely relaxation of requirements and ongoing uncertainty, the potential for private finance to play a significant role in nature’s recovery and the development of these all-important nature markets seems to be under threat. 

And what about the voluntary BNG market? 

The compliance market shouldn’t be the only demand driver for Biodiversity Gain; voluntary investment could present another vital lifeline to deliver nature’s recovery. Many businesses are seeking ways to report and act on their nature-related dependencies following the adoption of the The Kunming-Montreal Global Biodiversity Framework (GBF) in 2022. Efforts have since been made to establish standardised frameworks for businesses to report, evidence and secure impacts against:

“The Taskforce on Nature-related Financial Disclosures (TNFD) has created a framework of recommendations and guidance designed to help businesses and financial institutions assess, report, and manage their nature-related dependencies, impacts, risks, and opportunities. These guidelines aim to integrate nature into decision-making processes, encouraging a shift in global financial flows from nature-negative to nature-positive outcomes.

Since January 2023 in the EU, all large companies and all listed companies must comply with the Corporate Sustainability Reporting Directive (CSRD) and share information about the risks and opportunities they perceive in social and environmental issues, as well as the effects of their activities on people and the environment. Under certain conditions, the CSRD also applies to UK companies operating in the EU.” - Voluntary Biodiversity Credits | The Wildlife Trusts

Evidencing a business’s carbon footprint and environmental impact has been the longest standing form of Environmental and Social Governance (ESG) but it is becoming increasingly apparent that large business needs to do more to address the climate and nature crises and build resilience. This is where voluntary biodiversity and other emerging markets could play a key role. However, without a clear framework or methodology of how to quantify, verify or purchase such ‘credits’, where they likely differ from the more bureaucratic and regulated compliance markets, businesses are still exploring how they should evidence, justify or meet their requirements. So, for now, one to watch but not currently presenting an easily accessible market for landholders to deliver into.

How can high integrity nature markets support BNG delivery? 

Provision of a high integrity, well governed, easily accessible and low risk route to trade is necessary to give confidence in the developing biodiversity marketplace, even more so when considering the complex issues being faced by political uncertainty and bureaucracy. EnTrade have been working on the development and delivery of several unique online marketplaces across England which seek to solve many of the challenges faced by both buyers and suppliers of biodiversity gain and other environmental services. EnTrade has established itself as one of the leading nature recovery marketplace operators, teaming up with global engineering and sustainability consultancy Arup and backed by its parent company, YTL-UK Group. 

Their market mechanism aggregates supply and demand meaning those fractional unit requirements from developers need not present a barrier to trade and projects supplied by offsite landholders are still able to be funded. A unique matching process has been developed by the University of Exeter and based on the Shapley Value, a Nobel Prize-winning economic concept, ensuring any financial surplus is shared fairly between businesses and landholders. 

Legal firm, Osborne Clarke, have designed up-front legal agreements reducing costs for and protecting landholders supplying projects to the market. By working with local experts like Wiltshire Wildlife Trust the market can  support the design of offsite projects for landholders and EnTrade supports voluntary and regulatory buyers to understand their unit requirements. 

Possibly most importantly, and fairly novel in this current space, EnTrade markets are all overseen by the Environmental Markets Board, who set a robust governance framework, ensuring environmental services from certified projects are traded transparently, fairly and efficiently. This simplifies the process and reduces the risk for businesses, landholders and local planning authorities.  

Click here to find out more about EnTrade.

Our work with EnTrade

Wiltshire Wildlife Trust (WWT) collaborated with EnTrade and Avon Wildlife Trust on the development of the Bristol Avon Catchment Market between 2021-2024 as part of a successful £1.7million Green Recovery Challenge Fund made available by DEFRA. WWT continue to support the ongoing development of the supply side of their markets, ensuring landholders (offsite unit providers) are able to readily access private finance opportunities and deliver for nature’s recovery. 

Restoring nature’s abundance in a farming county like Wiltshire will only happen if farmers are supported to diversify their farm businesses alongside profitable, resilient food production that works for both nature and the climate. This necessitates a marketplace which is easily accessible to the small farmer as well as the big estates and reduces or eliminates upfront costs, legals fees and risks. EnTrade’s high integrity model provides these assurances as well as giving confidence to buyers and local planning authorities on the standards set within their markets. 

The collaboration between Wiltshire Wildlife Trust and EnTrade has enabled a successful demonstration of the potential for well-designed nature markets to drive private funding in local projects delivering nature restoration and enhancement and enable small to medium developments to make a meaningful contribution.