Biodiversity replacement ‘is not enough’

Wildlife habitat is extending further into public policy with the arrival of a new requirement on biodiversity conservation in England.

From next year, most planning applications will be subject to the rule, which demands a biodiversity net gain (BNG) nationally. That will require companies requesting planning consent for development, such as for infrastructure and real estate, to replace plant and wildlife habitats destroyed from construction on both brownfield and greenfield sites.

But the site biodiversity will also need to be enhanced by 10 percent compared to its previous state, rather than just maintained, in order to achieve more than merely offsetting the loss of habitat. The land and plants growing on it have to be managed and maintained for 30 years.

Asset owners have been preparing carefully for compliance. The landowner is required to take responsibility for the outcomes of mitigating biodiversity impacts and improving or adding habitat.

Of course, developers have had to consider biodiversity for many years and include this concern in environmental impact statements, for example. But for many developers, BNG could mean reorganizing project development and management.

This is because it increases the project development cost, meaning biodiversity rises up the developer’s priorities. Some asset managers and owners have said it is becoming a more critical factor in site selection, and is considered earlier in the site planning and development process than previously.

“We are having to do more now to understand biodiversity on a potential new site in more depth than we would have had to do before, so that it can be optimized. So, then it might influence site selection more significantly,” says Georgie Nelson, head of environmental, social and governance at Abrdn’s real estate arm. The company provides forward funding for developments and works with developers on new sites and on refurbishments.

Of course, there may be ways to explore bypassing BNG requirements. In some cases, a landowner may have rights under permitted development. Written into statute, these mean the company does not have to apply for planning permission. That avoids the need to comply with BNG, a process that increases the planning term as well as creating extra cost.

Net gain on site makes the most sense financially, as well as in terms of ecosystem integrity. This is partly because it is important to retain green corridors between different towns and rural areas through which wildlife can connect and breed. Erasing those habitats means these corridors can disappear.

Onsite BNG may mean taking a different approach to land purchase, and perhaps buying a parcel of land that contains a wider margin than would otherwise have been necessary, says Nelson. “I think BNG might mean that we consider sites that have got more land around them where we can develop more biodiversity projects.”

If that land is not available, developers can consider incorporating more wildlife habitat into the infrastructure or buildings themselves – such as green roofs. “We can integrate that into the design, which is more complicated than what we might have had to do before,” she says.

In many other cases, the developer will need to consider purchasing sites from neighboring landowners, or working out contracts for that landowner to develop the site as a BNG unit. Some NGOs fear that this may amount to a form of ‘land grab’ in which developers buy up more and more land. Certainly, some developers are already buying land to run their own biodiversity schemes, says David Alborough, a natural capital consultant at real estate agency Carter Jonas.

His research also shows that many developers are devising arrangements with a landowner such as a farmer nearby to create the biodiversity units. However, owning the land for the credit may not be the best arrangement, he suggests. “I think the pricing models for buying land outright to create biodiversity units doesn’t totally stack up. Most people are looking at a rented model.”

At the end of the 30-year contract, the biodiversity enrichment has taken root. The lease drawn up at the start then terminates when the obligation ends.

Whether the site is purchased or leased, the land may be taken out of food production if the arrangement is made with a farmer, which will provoke controversies. However, many farmers are considering such options and the potential use of less productive land for biodiversity units. Some land owned by farmers is not directly used for farming, of course, but may still work as potential habitat due to its rural location.

Nature-based investing

Among the most innovative – but also the most sensitive – aspects of the BNG policy is its connection with government plans to increase private sector investment in biodiversity. These plans partly depend on biodiversity credits created not just by BNG but a variety of different environmental policies and regulations initiated by the UK government. A biodiversity credit market would grow and, it is hoped, eventually flourish. The aim is to encourage nature-based investing, a movement developing worldwide.

Many environmentalists are worried that the biodiversity improvements may not always count as additional to infrastructure and real estate habitat loss but are actually offsets. This is partly due to some of the scientific uncertainties surrounding the assessment of biodiversity. Nonetheless, ecologists have devised a specific metric provided by the government for developers to evaluate the biodiversity score of a particular site.

Alborough has doubts that the market will get off the ground despite the fact many developers will need to buy units. Limiting factors in land availability, and the stringency of the rules, may create bottlenecks in the market, he suggests. This is partly because the greater the distance from the development, the lower the deemed value of the habitat.

If a BNG credit site is within the same planning authority, no penalty for buying a unit is applied. But if it is in a neighboring authority, a 25 percent deduction in biodiversity score is made, rising to 50 percent if beyond that. If the developer cannot find units in its own planning authority, relatively more biodiversity needs to be developed beyond that planning authority boundary.

This increases the number of biodiversity credits that the developer will need to obtain to satisfy the BNG objective. In each planning authority, developers would therefore be more likely to prefer buying units locally, leading to excessive competition. Infrastructure and property firms are already affected by this constraint, says Alborough. “A couple of developers we have been working with need a lot of units quickly, but they just aren’t available, so they have a problem. It could become a national issue.”

Many such considerations are rising up the agenda, perhaps especially for larger developments, which now have to include BNG in strategic decision-making to a greater extent than previously. In some cases, developers may need to buy BNG units from the government. However, these are the most expensive.

The price of biodiversity credits from the government will be set higher than prices for equivalent biodiversity gain on the market to encourage developers to prioritize net gain onsite. Indicative prices published by the Department for the Environment, Food & Rural Affairs (DEFRA) in July 2023 show statutory credits could cost developers up to £650,000 ($791,000; €751,000) depending on the distinctiveness of the habitat.

Views on the availability of net gain in brownfield sites vary. Experience at Abrdn suggests it may sometimes be more difficult. This is because some brownfield sites contain unique species, which raises their biodiversity score. As a result of the scoring methodology, this means redeveloping the site has a greater impact on biodiversity. This may require more innovative planning relating to net gain, or the purchase of offsite units.

Alternatively, it may be more likely to put developers off buying the site. However, many brownfield sites have a low biodiversity score, which means they are more attractive to buyers as it is easier to improve the site’s habitats.

One key player in the market is the Environment Bank, which is working in close collaboration with government ministries. The bank has been set up to cultivate recovery sites, currently amounting to 2,400 hectares, and states that it has enough biodiversity units ready for the BNG rollout. The bank forms part of a sustainable fund run by specialist asset manager Gresham House and benefits from an initial capitalization of £240 million.

Landowners lease parcels of land to the bank that typically cover more than 20 hectares. The bank takes on the responsibility for all creation and infrastructure costs, including administrative and legal fees where applicable. It pays the landowner a rent for 33 years and sells the units for the landowner. “There is no risk at all because they underwrite everything and the landowner then gets the land back at the end of the agreement,” says Alborough.

Although there has been a delay in the policy as announced by the government in September, DEFRA stated in October that all guidance, and the regulations, would be published by the end of November. BNG is due to go live for major developments in January 2024, when the register for offsite mitigation will also become available.

What is Biodiversity Net Gain?

The BNG rule applies to most major developments that have to comply with the UK’s Town and Country Planning Act 1990

It is expected that nationally significant infrastructure projects will be included in 2025, and more time will be given for small sites. According to the Department for the Environment, Food & Rural Affairs, the aim is to secure positive outcomes for biodiversity, create better places for local communities, and support a more consistent, streamlined and transparent planning process.

The government says its proposals will ensure that all new developments deliver a net benefit for nature and help reach a national target to halt species decline by 2030. Net gain can be delivered onsite, offsite or via a new statutory biodiversity credits scheme. A national register for statutory net gain delivery sites is being established and will be run by Natural England, a public body.