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Introduction toNature Markets Assessing landopportunities Working withother farmers Baselining,planning andmeasuring Workingwith buyers Farm businessplanning Liability & riskmanagement Using repayablefinance Signing legalcontracts Public sectorfunding & policy Tenancy &ownership
  1. Groundwork
  2. Market Engagement
Introduction toNature Markets Assessing landopportunities Working withother farmers Baselining,planning andmeasuring Workingwith buyers Farm businessplanning Liability & riskmanagement Using repayablefinance Signing legalcontracts Public sectorfunding & policy Tenancy &ownership
  1. Groundwork
  2. Market Engagement

Summary of Environmental Farmers Group

Environmental Farmers Group (EFG) is a farmer-led organisation focused on delivering environmental improvements financed through nature markets. The farmers work together to identify where natural capital improvements would best be made, and where opportunities exist for nature markets. The EFG shares knowledge and processes across its members to strengthen their position as owners and managers of natural capital. The EFG was launched in May 2022 in the Hampshire Avon river catchment and completed its first trade in March 2023. As of October 2023, it comprises of 257 farmers and 140,000 hectares, with a mix of owner occupiers and tenant farmers, and has since expanded its model elsewhere in England.


Farm Profile:

  • Location: Hampshire, Wiltshire, Dorset, Northern Lincs, Northants
  • Size of Farms: 20 hectares – 3000 hectares
  • Size of Land: 140,000 hectares
  • Land Ownership: Mix of tenants and owner occupiers
  • Nature Market Primary Focus: Biodiversity Net Gain, Nutrient Neutrality, Water Quality
  • Interventions: various
  • Project Partners: Game and Wildlife Conservation Trust (GWCT), Natural Capital Advisory



What do I need to know about nature markets to begin with?


This section of the Toolkit provides a brief overview of nature markets in England and how they relate to farmers. It is designed to answer some of the early questions that farmers may have around nature markets. All Toolkit content, including this Introductory section, will be updated regularly.


What market opportunities are available to me based on my land and goals?


This milestone will guide you through an initial assessment of your land as you determine what your broad vision is in relation to nature and help you to identify what opportunities might be available to you to attract private sector finance.

The actions taken at this stage can be taken before you’ve made the firm decision to engage in nature markets. The considerations presented in this milestone will help you determine whether nature market participation makes sense for your goals, the condition of your natural capital and your farming business.

You can also apply many of these considerations to develop a broader vision around your natural capital and other potential funding sources – such as government grant schemes or philanthropic funding.


Will I need to partner with other farmers, and if so, how?


Once you have a vision for your farm, the environmental enhancements or changes you want to make and a sense of the related income opportunities, you may want to consider joining up with other farmers in your area to implement your outcomes at scale to attract buyers.

Aggregation models, often started among farmer clusters or as farmer cooperatives, bring together multiple farmers or landowners to collectively participate in nature markets. These models aim to harness the combined efforts and resources of farmers to maximise environmental benefits and economic opportunities. This section will introduce the factors that may influence your decision to join up with other farmers and some of the key considerations to keep in mind when setting up and participating in such a group.


How do I measure the environmental outcomes that I can produce in a robust way?


At this stage you will have developed an overarching vision for your land and a rough plan for what you want to improve. You will now want to make robust baseline measurements of the condition of your land and develop a detailed plan for interventions and intended outcomes. Plans will also include how you intend to maintain your interventions, measure the impact you are having and verify your outcomes in order to sell them.


How should I identify and approach buyers for my outcomes?


During your initial project scoping, you may have identified potential buyers of the environmental outcomes you are planning to deliver. Now that you have a project plan and a robust baseline, you will be ready to approach and engage buyers more formally.

Buyers will vary in their expectations and requirements. This milestone will help you prepare for initial conversations with potential buyers to ensure you are empowered to ask the right questions and present a project that will attract a fair price. Your buyers may be within your own supply chain such as retailers and businesses, or organisations who benefit directly from your ecosystem services such as water companies or firms who seek to offset their own environmental impacts.


How would this project fit in with my current farming business model?


Nature market projects are often just one part of a farmer’s wider business. Some people compare building nature market projects to developing ‘micro businesses’ for the farm. As such, much of the content you see here will be familiar to you.

However, these projects also have key features that separate them from the businesses that farmers usually engage in. For example, the longer timeframes associated and the current uncertainties relating to how nature market projects (and the deals that result) can be blended with government schemes.

Below is a list of questions that will help you think through how to incorporate these projects into your current farm business plan. This includes considerations on building a cashflow or partial budget, but also the less quantifiable factors, such as the potential drawbacks and opportunities to your wider farm that nature markets present.


What kind of risks should I be aware of and how can I manage them?


Like with any aspect of a farm business, risk management is critical – especially for nature market projects that can run over several years. As the landholder, you may be leading the development of the project, be part of a wider group of farmers, or be working with a third-party project developer that is taking the majority of the risk.

In any case, it’s advisable to have a clear understanding of the likelihood of the risks involved, what will happen if the risk materialises, what you as the landholder might be liable for, and how the risk is being managed to prevent this liability.

This Milestone sets out the different types of risks that nature market projects (and the deals that result from them) often carry. The last section covers the types of legal entities that farmers might form, as these can help to manage certain risks and benefit the overall operations of the project.


Is it possible to use repayable finance upfront to meet any of the costs?


Repayable finance from investors – typically debt or equity – is not always necessary in nature markets if upfront costs can be met by the buyer or through grants.

It’s also important to note that, even when repayable finance is needed, farmers do not necessarily have to secure this themselves.

In the UK, there are very few examples of individual farmers taking out loans and no examples of farmers issuing shares to use specifically to finance a nature market project. Typically, the upfront capital required is organised by a third party – for example, a third-party project developer, a broker etc.

However, as nature markets develop further, and in the case of larger farms, there is potential for farmers to secure repayable finance and meet up-front costs, as with other parts of their business.

The below therefore sets out some questions that farmers (and, more likely, third party project developers) could ask themselves to secure repayable finance from lenders and investors, whether that’s taking on finance independently, or as part of a larger group or partnership.


What do I need to be aware of when signing contracts?


This Milestone is about the legal contracts you will use and sign to officially commit to the project and transition it to a fully fledged deal. As business owners, farmers are familiar with contracts and understand the need to carefully review the details before signing any such agreements.

Any nature market deal is likely to involve legal agreements that will be tailored to each set of circumstances. However, for ease this Milestone sets out what contract set-ups are used in this space, common contract types, and other key considerations to ask yourself at this stage.

Disclaimer: The information in this Milestone does not constitute any form of legal advice but instead serves as practical advice that has been written by speaking with lawyers, farmers and other practitioners. We recommend that appropriate legal advice should be taken from a qualified solicitor before taking or refraining from any action relating to your contracts and projects.


Can I participate on tenanted land?


The tenancy and ownership structure of land can have significant implications for farmers engaging in nature markets in the UK. The rights of tenants in relation to nature markets is still not entirely clear in the UK and may differ on a case by case basis. Below are some key considerations which can help both tenants and landlords in asking the right questions when considering engaging in nature markets as policy and legal frameworks develop. Further guidance prepared by the Tenant Farmers Association and the Country, Land and Business Association can be found here. 


How do public sector funding and policy align with nature markets?


In England, the role of public funding and support to farmers is undergoing change on a scale not seen in decades. The government hopes to strengthen the link between environmental and farming practices to meet its climate and nature restoration targets, while maintaining food security and the viability of farm businesses across the country.

This section offers a summary of how government is working with farmers to access nature markets, and provides guidance on:


  • How nature markets might work with public subsidy schemes,
  • What development funding is available for farmers to explore their opportunities,
  • What ‘market infrastructure’ the government is supporting – including Standards and Codes.



We have separated out these Milestones into ‘Groundwork’ and ‘Market Engagement’ to indicate which Milestones you will want to read as you consider and/or prepare for nature markets (Groundwork) and those you will move through if and when you decide to become a seller of environmental outcomes (Market Engagement).  

We recommend all farmers read through the Groundwork Milestones in addition to the Introduction to Nature Markets in order to understand better whether nature markets are for them, and how they can, at the very least, explore and baseline their farms so they are ready for any opportunities that may arise later.  

Market Engagement


We have separated out these Milestones into ‘Groundwork’ and ‘Market Engagement’ to indicate which Milestones you will want to read as you consider and/or prepare for nature markets (Groundwork) and those you will move through if and when you decide to become a seller of environmental outcomes (Market Engagement).  

We recommend all farmers read through the Groundwork Milestones in addition to the Introduction to Nature Markets in order to understand better whether nature markets are for them, and how they can, at the very least, explore and baseline their farms so they are ready for any opportunities that may arise later.  


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


Robert Shepherd, Farmer and Board Member, Environmental Farmers Group

Ed Shuldham, Farmer and Scoping Group Member, Environmental Farmers Group


Digby Sowerby, Operations Officer, Natural Capital Advisory

Rachel Ridd, Business Officer, Natural Capital Advisory


Date published: 16/11/2023

Next Milestone

Key Takeaways

  • However, the farmers that pursue full nature market trades sign direct contracts with their buyers, and so contractual liability sits with them.
  • EFG contracts its executive function to Natural Capital Advisory (NCA), which provides professional advice and support to farmers that are considering nature market deals.
  • EFG is set up as a private limited company (as opposed to a charity or CIC) so that any windfalls from trading can be redistributed amongst its members.


You can hear more about the EFG’s model below:


How is the EFG led by farmers and maintaining the farmers’ best interests?

EFG was founded by farmers and its governance is designed to prioritise the interests of its farmer members. EFG has four main entities within its structure to help with this:

  • EFG Board – To ensure EFG remains farmer led and independent, there is a Board made up of the founding farmers who provide decision making and direction. The Board meets monthly and agrees on the strategies and activities that will support its Members.
  • Executive – EFG contracts Natural Capital Advisory (NCA – a subsidiary of GWCT) to complete all day-to-day management of the business. The executive reports to the Board.
  • Steering Groups – As EFG has expanded to different catchments, it has created Steering Groups that are made of the farmers that worked to replicate the EFG model in their area, or ‘cell’. Although each cell adopts EFG’s model, Steering Groups provide local focus on key priorities and opportunities. To date, EFG has four running Steering Groups in Dorset, Test & Itchen, Northern Lincs and Northants.
  • Members – Every farmer who wants to become a Member signs a Membership Agreement which gives them rights and obligations as part of the cooperative. The farmer members themselves are kept updated regularly through the EFG’s online portal, virtual meetings and in-person meetings every three months. When farmers choose to pursue nature market deals, EFG works with them directly to help achieve the best terms.



How does EFG help farmers address risks and liabilities in nature market deals?

When a farmer member wants to pursue a nature market opportunity, for example for the sale of BNG units to a local developer, EFG advises the farmer on the details and practicalities to help make sure they are achieving fair terms.

However, the farmers ultimately sign a contract directly with their buyer that means they are responsible for delivery of the ecological uplift. EFG does not accept any contractual liability as an intermediary. Digby Sowerby, Operations Officer at NCA, says that while some farmers may prefer to have this risk transferred away, EFG’s model also allows them to maintain their independence, which many of its members consider to be a strong advantage.

EFG’s model can help farmers to address risks in the following way:


Physical risk – how are the habitats being designed to be resilient?

To help identify where ecological changes are most suited, EFG is developing a Catchment Scale Conservation Plan (see Milestone 1 for more detail on the ‘Plan’) across the areas it operates. The Plan is being developed with several ecologists looking at factors like soil type, hydrology and habitat connectivity. This helps to identify where new or restored habitats, such as riparian planting or enhanced grasslands, have the greatest chance of resilience and permanence.

Farmers do not have to adhere to the Plan when considering deals and trades. For example, if a farmer member is separately approached by a buyer for a particular type of habitat on their land, then they have first rights of refusal, in line with EFG’s trade allocation policy. However, EFG can help to determine the physical risk of a habitat in a particular area, whether this is in line with the farmer’s risk appetite, and what other mitigating factors (such as maintenance liability caps) may be negotiated.



Market risk – what if things like prices or inflation rates move adversely?

As part of its core function, EFG gathers market intelligence on behalf of its farmer members to ensure that the prices it negotiates, and the costs that go into its calculations, are at a fair value.

To keep this intelligence up to date, EFG has built a network with other project developers, accountants, buyers, solicitors and other market actors across England. Sowerby comments that this service is a huge draw for EFG’s farmers, who do not have time to develop such a network and keep abreast of nature markets. EFG gives market updates as part of its members meetings.

EFG also uses its seller collective advantage to negotiate better prices for its farmers – with its membership now representing 1.6% of farmed land in England.

Reputational risk – what if the project is accused of bad practices?
EFG is farmer-led and assesses all potential activities and service providers with farmer needs and priorities in mind. For example, in 2023 EFG assessed several soil carbon measurement companies for a potential pilot with some of its farmers. It assessed, among other things, the credibility of their underlying methodologies, and the input that would be required from the participating farmers.
EFG also uses an open-book methodology to negotiate prices in discussions with prospective buyers. This helps to increase trust on the demand side and demonstrate what it considers to be a fair price for its farmers, while having conversations on what buyers can reasonably afford.
Political risk – what if changes in legislation, regulation or public schemes take place?
EFG has developed relationships with central government, local government and other policy actors to stay updated on political developments. Sowerby comments that while political risk is always hard to manage, active conversations can help to set confidence in future plans.
For example, EFG is feeding into the work of Defra and the British Standards Institution (BSI)’s Nature Investment Standards Programme, which is creating an overarching framework for nature markets in the UK, and covering topics such as buyer integrity, additionality, robust methodologies and seller requirements.



What legal structure does EFG take, and how does this work with the farmers?

While EFG acts more as a cooperative with no intention to retain profits itself, it has set up a limited private company (Ltd) for its operations.

While other legal entities were considered, such as a Community Interest Company, EFG chose a Ltd because this will allow re-distribution of any excess profits. Sowerby says that in the future the EFG may have excess funds, and it wants to retain the option of re-distributing these profits back to EFG’s farmer members. The Ltd structure was also the simplest structure to use, in terms of both set-up and ongoing administration.



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