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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

 

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. 

 

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 sales of 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.

Groundwork

 

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.  

 

The Tenancy and Ownership section is arranged around five ‘themes’. Click on each of these to the right to learn more. 

You can also read case studies of farmers that have addressed the activities set out in this Milestone, along with other useful resources and a checklist summary of the considerations covered for ease.

Checklist

Useful Links

Next Milestone
Control over land use & data

Control over land use & data

 

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Do I have the legal ability to make changes to the land?

Land ownership or tenancy determines the level of control a farmer has over their land and its use. Landowners generally have more autonomy in decision-making regarding land use change and participation in environmental markets. In contrast, tenant farmers may be subject to certain restrictions or requirements imposed by the landowner or lease agreement, which can affect their ability to make changes to the land or engage in environmental markets. Tenant farmers should review their tenancy agreements carefully to determine what activities they are legally able to engage in and what changes they are able to make. Landlords should also be aware of how their tenancy agreements impact their tenants ability to engage in nature markets. 

 

Does this project change the use of the land to something other than agricultural production?

Most tenancy agreements will restrict the use of the holding to agricultural purposes only and so any environmental project will have to be achieved within the definition of agricultural operations. In terms of carbon sequestration, this can include reducing or eliminating tilling, introducing cover crops and varying crop rotations. This could also mean maintaining a biodiversity-rich habitat through grazing. Long-term land use changes such as planting trees to sequester carbon may not be allowed in the context of a farm tenancy agreement and such a project would require the landowner’s agreement to continue to manage the trees following the end of the tenancy. 

Landowners will have more autonomy over choosing to change their land use, however there may be tax implications resulting from a change from agricultural land management to other uses such as woodland. See Milestone 1 for more information on tax implications. 

 

If I conduct baselining and measurement on my leased holding, who owns the data once my tenancy ends?

The data collected on farm will belong to the party which paid for it unless a lease agreement specifically states that baselining data remains with the landowner. When signing a tenancy agreement, this could be an area of negotiation between tenant and landlord if either party are interested in making environmental improvements or engaging in nature markets.

 

Long-term planning and investment

Long-term planning and investment

 

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What is the length of the contract versus the length of my tenancy?

With tenants typically on annual leases, it may be difficult for them to enter into long-term agreements with a third party. For instance, biodiversity net gain agreements require a 30-year minimum commitment, which would exclude tenants on short contracts from participating. Soil carbon markets, in contrast, vary significantly in the length of their contracts and may offer a better route to market for tenants. Water companies may also pay farmers on an annual basis to improve water quality or be landlords themselves and expect a certain level of environmental stewardship as part of a tenancy agreement. Tenants can also work with their landlords to enter into agreements that are longer term and negotiate on sharing responsibilities and benefits. 

Tenants should look over their tenancy agreement in detail to determine whether their lease allows for them to engage in environmental markets, what sorts of land changes they can make and what they need to get permission from their landlord for. It will be important for tenants to engage with their land owners early on in order to ensure alignment in priorities and gain written consent to both make change to land use or management practices and to engage in environmental markets. An example of tenants entering into nature market agreements alongside landowners can be found in the Wyre Catchment Natural Flood Management Project.

 

 

Does my intended project require long-term investment or permanent changes?

Land ownership typically provides more long-term security and stability for farmers. Landowners can make substantial investments in environmentally-friendly practices or infrastructure, such as agroforestry systems or renewable energy installations, which may require a long-term perspective. Tenant farmers, on the other hand, may be hesitant to invest in such initiatives if they lack security of tenure or if the tenancy agreement does not allow for long-term planning. Additionally, some lease agreements may stipulate that tenants need to restore the land to its original state following the end of their tenancy. This can discourage farmers from making larger-scale changes, such as tree planting and limit their ability to engage in environmental markets which require permanent land use change. The typical contract lengths for different markets are outlined below: 

 

Carbon  30-100 years for woodland and peatland 

 

1-10 years for soil carbon 

Biodiversity Net Gain  30+ years 
Water Quality  1-10 years 
Nutrient Neutrality  80-120 years 
Natural Flood Management  10+ years 

 

Working with other Tenants and your Landlord

Working with other Tenants and your Landlord

 

Expand/Collapse All
Are there other tenants on this land who I could work with?

If your piece of leased land is one of several over a large estate, you may want to consider engaging with tenants on adjacent land holdings to enter into environmental markets together and come together to negotiate terms with your landlord. Just like in other forms of farmer clusters or aggregation models, having multiple farmers working together can improve your access to markets and increase your bargaining power with your landlord, with service providers and with buyers of your ecosystem services.  

 

What is your landlord’s appetite for engaging in nature markets?

Tenant farmers will need to engage with their landlords before entering into nature markets but there may be opportunities for landlords and tenants to work together to construct nature market deals. Tenants may wish to discuss nature market opportunities with their landlords to gauge their interest in participating and to identify opportunities for collaboration. Landlords may be willing to share in project costs if they are able to share in profits from the sale of nature credits or if they view the changes as having beneficial impacts across the landholding.  

 

Is the land already involved in any schemes?

It is important that tenants and landlords are clear about which party is entering into agreements and what is being paid for to ensure there is no double counting or incompatibility between agreements. Both parties will also need to be aware of any existing schemes the land is involved in such as Countryside Stewardship or if it has a specific designation such as a Site of Special Scientific Interest (SSSI). Existing agreements can limit changes that can be made on the land or already be funding environmental outcomes. 

 

Who can I go to for Advice?

Who can I go to for Advice?

 

Other Tenants

Tenant farmers can approach other tenants in their network who have engaged in nature markets to get support and advice on engaging with their landlord and accessing markets. 

 

Lawyers

Tenants may want to get legal advice through lawyers with agricultural expertise such as Birketts, Michelmores or Lux Nova

 

Land Agents

Land agents can also help tenants and landlords work together to renegotiate tenancy agreements or provide further information on accessing appropriate nature markets.  

 

Tenant Farmers Association

The Tenant Farmers Association can also be a good resource for tenants and provides guidance and support in all aspects of agricultural tenancy. Guidance prepared by the TFA in collaboration with the CLA can be found here.

 

Country, Land and Business Association

The Country, Land and Business Association (CLA), provides advice and support to Landowners and rural businesses in England and Wales. Guidance on nature market participation prepared by the CLA in collaboration with the TFA can be found here.

 

 

 

Checklist

 

You can download a Word copy of the Tenancy and Ownership Considerations as a checklist here, to help with your own project planning.

Alternatively, you can find a simple list of the Considerations below:

 

 

Introduction 

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. 

Control over land use & data 

Do I have the legal ability to make changes to the land? 

Land ownership or tenancy determines the level of control a farmer has over their land and its use. Landowners generally have more autonomy in decision-making regarding land use change and participation in environmental markets. In contrast, tenant farmers may be subject to certain restrictions or requirements imposed by the landowner or lease agreement, which can affect their ability to make changes to the land or engage in environmental markets. Tenant farmers should review their tenancy agreements carefully to determine what activities they are legally able to engage in and what changes they are able to make. Landlords should also be aware of how their tenancy agreements impact their tenants’ ability to engage in nature markets. 

Does this project change the use of the land to something other than agricultural production? 

Most tenancy agreements will restrict the use of the holding to agricultural purposes only and so any environmental project will have to be achieved within the definition of agricultural operations. In terms of carbon sequestration, this can include reducing or eliminating tilling, introducing cover crops and varying crop rotations. This could also mean maintaining a biodiversity-rich habitat through grazing. Long-term land use changes such as planting trees to sequester carbon may not be allowed in the context of a farm tenancy agreement and such a project would require the landowner’s agreement to continue to manage the trees following the end of the tenancy. 

Landowners will have more autonomy over choosing to change their land use, however there may be tax implications resulting from a change from agricultural land management to other uses such as woodland. See Milestone 1 for more information on tax implications. 

If I conduct baselining and measurement on my leased holding, who owns the data once my tenancy ends? 

The data collected on farm will belong to the party which paid for it unless a lease agreement specifically states that baselining data remains with the landowner.   

Entering into agreements 

What is the length of the contract versus the length of my tenancy? 

With tenants typically on annual leases, it may be difficult for them to enter into long-term agreements with a third party. For instance, biodiversity net gain agreements require a 30-year minimum commitment, which would exclude tenants on short contracts from participating. Soil carbon markets, in contrast, vary significantly in the length of their contracts and may offer a better route to market for tenants. Water companies may also pay farmers on an annual basis to improve water quality or be landlords themselves and expect a certain level of environmental stewardship as part of a tenancy agreement. Tenants can also work with their landlords to enter into agreements that are longer term and negotiate on sharing responsibilities and benefits. 

Tenants should look over their tenancy agreement in detail to determine whether their lease allows for them to engage in environmental markets, what sorts of land changes they can make and what they need to get permission from their landlord for. It will be important for tenants to engage with their land owners early on in order to ensure alignment in priorities and gain written consent to both make change to land use or management practices and to engage in environmental markets.  

 

Long-term planning and investment 

Does my intended project require long-term investment or permanent changes? 

Land ownership typically provides more long-term security and stability for farmers. Landowners can make substantial investments in environmentally-friendly practices or infrastructure, such as agroforestry systems or renewable energy installations, which may require a long-term perspective. Tenant farmers, on the other hand, may be hesitant to invest in such initiatives if they lack security of tenure or if the tenancy agreement does not allow for long-term planning. Additionally, some lease agreements may stipulate that tenants need to restore the land to its original state following the end of their tenancy. This can discourage farmers from making larger-scale changes, such as tree planting and limit their ability to engage in environmental markets which require permanent land use change. The typical contract lengths for different markets are outlined below: 

Carbon  30-100 years for woodland and peatland 

 

1-10 years for soil carbon 

Biodiversity Net Gain  30+ years 
Water Quality  1-10 years 
Nutrient Neutrality  80-120 years 
Natural Flood Management  10+ years 

 

 

Working with other tenants 

Are there other tenants on this land who I could work with? 

If your piece of leased land is one of several over a large estate, you may want to consider engaging with tenants on adjacent land holdings to enter into environmental markets together and come together to negotiate terms with your landlord. Just like in other forms of farmer clusters or aggregation models, having multiple farmers working together can improve your access to markets and increase your bargaining power with your landlord, with service providers and with buyers of your ecosystem services.  

Working with your landlord 

What is your landlord’s appetite for engaging in nature markets? 

Tenant farmers will need to engage with their landlords before entering into nature markets but there may be opportunities for landlords and tenants to work together to construct nature market deals. Tenants may wish to discuss nature market opportunities with their landlords to gauge their interest in participating and to identify opportunities for collaboration. Landlords may be willing to share in project costs if they are able to share in profits from the sale of nature credits or if they view the changes as having beneficial impacts across the landholding.  

Is the land already involved in any schemes? 

It is important that tenants and landlords are clear about which party is entering into agreements and what is being paid for to ensure there is no double counting or incompatibility between agreements. Both parties will also need to be aware of any existing schemes the land is involved in such as Countryside Stewardship or if it has a specific designation such as a Site of Special Scientific Interest (SSSI). Existing agreements can limit changes that can be made on the land or already be funding environmental outcomes. 

Who can I go to for advice? 

There are a variety of avenues for tenant farmers to receive advice on engaging in nature markets.  

Other Tenants: Tenant farmers can approach other tenants in their network who have engaged in nature markets to get support and advice on engaging with their landlord and accessing markets.  

Lawyers: Tenants may want to get legal advice through lawyers with agricultural expertise such as Birketts, Michelmores or Lux Nova.  

Land Agents: Land agents can also help tenants and landlords work together to renegotiate tenancy agreements or provide further information on accessing appropriate nature markets.  

Tenant Farmers Association: The Tenant Farmers Association can also be a good resource for tenants and provides guidance and support in all aspects of agricultural tenancy. Guidance prepared by the TFA in collaboration with the CLA can be found here. 

Country, Land and Business Association: The Country, Land and Business Association (CLA), provides advice and support to Landowners and rural businesses in England and Wales. Guidance on nature market participation prepared by the CLA in collaboration with the TFA can be found here. 

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