Building in biodiversity

When the Environment Act became law in 2021, it included a provision requiring new developments (unless exempt) to provide a 10% biodiversity net gain.

From late 2023, securing planning permission for development in England will require approval of a biodiversity gain plan for a 10% uplift on the site’s pre-development biodiversity value. The new requirement will mean significant change for developers, and could open up a potential new income stream for landowners in the provision of off-site biodiversity improvement.

Professor David Hill has been instrumental in devising the concept of biodiversity net gain. A former Deputy Chairman of Natural England, Professor Hill founded The Environment Bank in 2007 to develop ideas and infrastructure to fund natural environment enhancements from development.

For Professor Hill, the inclusion of the biodiversity net gain provision in the Environment Act is a major milestone for environmental improvement: “Up until now it’s all been voluntary, and voluntary biodiversity net gain doesn’t work. “It is fundamental that biodiversity net gain is a legislative requirement. We now have a requirement placed on the planning authorities to discharge the duty for biodiversity, and therefore a requirement on the developer to measure impacts properly and then to ensure their developments deliver at least the 10% uplift through a combination of on-site and off-site measures.”

However, reaching this has been a lengthy process. “The way that ecology was being done concerning development was almost a waste of time because development was getting permitted based on promises of what they would do within the development site boundary, and the big problem is that is compromised by the development itself. For the last 14 years, I’ve lobbied the government and many ministers and secretaries of state before the Environment Biodiversity Net Gain model came into the Environment Bill.”

Landowners will be key to delivering the new model, explains Professor Hill. “Ultimately, we’re going to see that the biggest chunk of biodiversity net gain delivery will be off-site. The requirement for developers to fund on-site biodiversity net gain for 30 years will be a major turn-off, and what you put within the site boundary takes up land from the development, reducing the net developable area.

“We know that handing over responsibility to a residents’ association fails because proper biodiversity – woodland scrub, wetland, species-rich meadows left to grow tall – is untidy. Residents’ associations quite rightly want good and tidy landscaping and planting, but also amenity grass where people can walk their dogs or children can play.

“I think when the reality of the biodiversity gain plan and the transparency it provides kicks in, the majority will be off-site, where biodiversity can be delivered at scale while also putting finance into the natural environment. The government’s ambition for 500,000 hectares of nature recovery isn’t likely to come from the public purse. Th e nature recovery network will only be delivered with private investment into private landholding, and one of those streams of income will be through biodiversity net gain.” While demand will be limited for land to deliver the gains required for development, Professor Hill believes a more extensive market is coming soon: “A Defra report puts demand for land from developers in the order of 1,300ha a year. We think it will be up to 4,500ha a year but even that is still relatively small scale. So, there won’t be a market for all landowners to get involved in biodiversity net gain from development. However, a bigger corporate sector market is probably going to take off within two years. Corporates already want to buy into biodiversity projects, and we plan to set up habitat banks to supply the corporate sector with ‘nature credits’, which can make the corporates much more investable. I estimate the corporate market could be in excess of £3bn per year; it could be six times the size of the market for biodiversity net gain from development.”

Professor Hill says that landowners who can bring forward fairly degraded arable farmland, particularly in proximity to other areas of semi-natural habitat, can capitalise on this. “Creating large-scale species-rich meadows, wood meadows and woodland scrub on those types of sites can give the biggest uplift in biodiversity.” The Environment Bank is working with landowners to create Habitat Banks across England, prioritising the planning authorities where there is the highest demand.

On the crucial question of whether the opportunity is financially attractive for landowners, Professor Hill says that while the model means taking arable land out of food production, habitat banks can be created on challenging soils, and the current rates compare favourably with Countryside Stewardship. The Environment Bank, for example, leases the land from the landowner and also pays them to manage it, a guaranteed payment for 30 years at a current rate that is greater than current Countryside Stewardship rates.

The company covers the upfront habitat creation costs and takes on the risk of selling the credits. Interested landowners should plan ahead. While the requirement to have everything in place is not until November 2023, planning authorities are already starting to build the biodiversity net gain requirement into their systems to avoid delays, and developers are already looking to secure credits ready for when they need them, so there may be opportunities for landowners to explore well ahead of 2023.