Milestone 03


Spains Hall Estate


Baselining and Estimating Ecosystem Services


Project Summary

Spains Hall Estate is a 2,000-acre estate in Essex which has been integrating environmental land management under its current Estate Manager, Archie Ruggles-Brise. In 2022 the Estate embarked on a 50+ year habitat creation programme and has been generating Biodiversity Net Gain (BNG) units for sale to local developers. The Estate plans to generate over 500 BNG units over 100 hectares.

The Estate was part of Natural England’s Biodiversity Net Gain pilot, which gave access to funding and project support including an ecologist to help develop a farm management plan and an external valuer to help with financial planning. The Estate is implementing a variety of interventions to create a diversity of habitat types including ponds, orchards, grasslands and wetlands.

Milestone 1: Initial Project Scoping

Often the initial task is to understand the site(s) you want to use and the land use change needed for nature restoration or creation. This includes considering the goals of the land managers involved, the vision within the wider catchment or neighbouring area, and whether there are permits or planning consent needed for any proposed changes.

At this stage, you can also conduct a high-level assessment to determine which revenue streams can be generated from ecosystem services , e.g. carbon credits, flood reduction cost savings, or biodiversity units, which will be crucial for identifying buyer interest.

Finally, it is useful to have an idea of the costs of the project and potential grant funding that may be available to support initial development.

Milestone 2: Identify and Work with Sellers

Initial ownership of the ecosystem services will belong to the landowners or, in some cases, the tenants of the sites that the project is using. However, these can be passed onto others, such as third-party project developers, with appropriate legal arrangements and compensation. In some cases, there may be a sole seller of the ecosystem services, where the site or landholding is large enough that it delivers the volume of ecosystem services needed to cover the costs of the project and attract buyers.

However, in order to achieve scale and impact, a project will likely involve multiple sellers, such as neighbouring farmers and estate managers. Scale of land is often needed to deliver significant environmental outcomes, and also to attract private finance. Project developers must plan how they initially contact and engage with these sellers going forward, building their wants and needs into the project.

Milestone 3: Baseline and Estimate Ecosystem Services

At this point, you will have understood the vision for the project and identified a particular ecosystem service or set of services to be sold. The next step will be to carry out detailed analysis – baselining each ecosystem service and quantifying what will be able to be delivered from the interventions, as well as planning how to monitor and maintain these interventions. You will need to rely heavily on ecological expertise for this more scientific Milestone.

At this step, standards, verification and accreditation methods will be considered in more depth.

Milestone 4: Identify and Work with Buyers

Based on your earlier market analysis in initial project scoping, you will have identified one or more groups of beneficiaries who may be willing to ‘buy’ or pay for the ecosystem service(s) to be created, restored or maintained. Buyers vary – as do their requirements – but at this step, greater buyer engagement is now needed to develop a deal that channels money towards the nature-positive outcomes that your project wants to deliver.

 

 

Milestone 5: Develop Business Case and Financial Model

You’ll have started building your business case and financial model in earlier steps – laying out your project’s vision, the market proposition and estimating costs and income. This step offers a review, in addition to providing details needed to build out the financial model and business case more fully. Both of these key documents will be iterated throughout project development, and will likely be altered during project delivery as new information emerges. These documents are interlinked and, if developed correctly, will ensure your project’s viability and help you with discussions with stakeholders – including sellers, buyers and future investors.

The financial model will also enable you to better understand the type of structure your project may take to attract investment (i.e.a loan, an equity investment, a bond) and what sort of returns you can afford to pay/offer.

Milestone 6: Develop a Governance Structure

A governance structure will inform the way in which the project is run when fully operational and for what purpose. It identifies appropriate decision making processes, who is responsible for what actions, and what controls are in place to make sure that the project is meeting its stated goals, all while abiding by the risk appetite of its engaged stakeholders. The legal entity to host the project will be a key driver in this, and the appropriate choice of entity will be dependent on several factors that are outlined below.

Your governance structure should align with and underpin your business case, as a necessary component of how the project will deliver its environmental outcomes and other strategic targets.

Milestone 7: Identify and Work with Investors

It is important to note that not all projects will need up-front investment, but for those that do, this section provides a framework for thinking around the development of the investment model. This does not constitute financial advice – as the GFI is not licensed to do so. However these considerations are based on the insight offered by project developers and other market stakeholders.

An investor will be a new core stakeholder in your project, and it’s just as important to think of what you require from investors, as much as what they require from you – so that you can build a positive and collaborative relationship with them.

This entails defining the investment ask (in line with the financial model), the strategy for approaching the right investors, and the negotiation of terms that can then be formalised in contract development (Milestone 8).

 

Milestone 8: Establish Legal Contracts and Closing

When all relevant stakeholders have been engaged and their terms of engagement are clarified as much as possible, this is the time to develop the legal contracts and close the deal. This stage is last because legal fees are expensive, and it is generally advised to determine as much as possible in previous stages before starting to draw up contracts in earnest.

Note: The information in this Milestone does not constitute any form of legal advice but instead serves as practical advice on how to manage engagement with lawyers and the process of contract development.

The Green Finance Institute is not a firm of solicitors or connected in any way with the courts. The information and opinions we provide in this section and across the Toolkit do not address your individual requirements and are for informational purposes only. They do not constitute any form of legal advice. We recommend that appropriate legal advice should be taken from a qualified solicitor before taking or refraining from taking any action.

Community Engagement

Community engagement is highly advisable for any project that aims to sell ecosystem services, to ensure fair outcomes for local communities and the long-term success of the project. Project developers can build connections with local stakeholder groups early on to spot both risks and opportunities.

Policy and Regulation

Project developers and enterprises will need to keep a continuous check on how current and future policy may affect the project, and also opportunities for the project to inform policy. The role of private finance for nature across the UK is being encouraged by the UK government and its devolved administrations, and new rules, standards and markets are being developed.

 

Acknowledgements 

With many thanks for their time and insight on this case study:

Archie Ruggles-Brise Farmer, Estate Manager

Published 10/04/2024

 

Next Milestone

How did Spains Hall Estate measure its Biodiversity Net Gain potential?

After conducting an initial assessment of the habitat creation potential across the estate, Spains Hall needed to generate a robust, ground-truthed baseline of the estate’s natural capital to inform the design of its BNG projects. The estate had been chosen to be one of five BNG pilot sites to inform the design of the UK’s BNG legislation. Being a part of this pilot gave the estate access to an external ecologist of their choice to conduct its baselining. The ecologist they chose specialised in working with the farmland environment which was important to Ruggles-Brise. This helped them develop a plan that would benefit the overall farm business and mitigate wider environmental risks to the farm.

The ecologist initially identified ecologically important sites across the estate. These were then overlaid with sites that were unproductive or no longer being farmed. These sites were also analysed using the initial assessment done by Atkins including soil typology and land use history to identify any risks to potential projects. See more about the initial assessment in Spains Hall Estate’s Milestone 1 case study.

The Estate’s BNG baselining cost £25,000 across the whole estate and was conducted using Defra’s Biodiversity Metric 2.1. The initial baseline was paid for through a Natural England BNG Credits pilot grant. As the metric has been updated, the estate has needed to conduct additional measurements for versions 3.1. and 4.0. and has paid for this itself but also secured further funding through the Credits pilot. Updating their measurements cost between £5 – £10k and took 100-200 hours of labour time. The estate was able to use the data collected to conduct their Countryside Stewardship assessment. Further information about Countryside Stewardship and the upcoming round three of the NEIRF which will be directed at farmers can be found in the Policy and Regulation section of the toolkit.

 

 

What sort of habitat or environmental change did the Estate want to create through BNG?

The aims of Spains Hall estate were to establish increased biodiversity on the farm to combat pests and disease, reduce the need for fertiliser and improve hydrology. The specific interventions taken can be seen in the table below:

 

How will Spains Hall Estate manage the new habitats, once works are done?

Nature markets projects need to be maintained throughout the length of the contracts. The responsibility of maintenance and monitoring of the BNG sites will fall to the Estate Manager. Much of the maintenance will be done through agricultural practices such as grazing but Ruggles-Brise expects some cutting and tree replacement to be required. To develop a monitoring plan, the estate is using a template plan which Natural England is testing ahead of BNG becoming mandatory in January 2024. The estate is following measurement and monitoring guidelines developed by CIEMM which they view as robust and credible. The estate’s financial planning indicated that 41% of project costs are in initial capital investment with the remaining 59% composed of ongoing management and monitoring costs.