Milestone 03


Wendling Beck Exemplar Project


Baselining and Estimating Ecosystem Services


Overview

The Wendling Beck Exemplar Project is a habitat creation, nature restoration and regenerative farming project, spanning almost 2,000 acres of land north of the market town of Dereham in Norfolk.

The project is a collaboration between private landowners, local authorities, environmental NGOs, and Anglian Water. It aims to transform land use for environmental benefit, whilst also building community and environmental resilience and is looking to sell multiple ecosystem services; biodiversity net gain (BNG), nutrient neutrality (NN) and natural flood management (NFM), in addition to longer-term revenue streams from above and below ground carbon.

There will also be a significant reduction in carbon due to the change of farming systems and the reduction in fossil fuels, agro-chemicals and synthetic fertilisers.

A range of habitats are already being created including around 65 acres of lowland heath, 15 acres of parkland, 80 acres of species-rich lowland meadow, 6 acres of floodplain wetland mosaic, 2 acres of wet woodland, 600 metres of rare chalk stream creation. Some 7km of new fencing and 2km of new water infrastructure have been installed – to enable livestock to manage the new habitats.

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 vision, the market proposition and estimating costs and income. This step offers a review, in addition to providing details on information needed to build out the financial model and business case more fully. Both of these key documents will be iterated throughout project development, and may be altered during project delivery as new information emerges. These documents are interlinked and, if developed correctly, will ensure your project’s viability and also 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., an environmental bond, a loan, an equity investment) 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

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 thanks for giving their time and insight to this case study:

Glenn Anderson, Project Lead, Wendling Beck Exemplar Project

 

Date Published: 08/12/2022

Next Milestone

Assessing Ecosystem Services

The Wendling Beck Exemplar Project is looking to sell multiple ecosystem services (ESS) and Glenn Anderson, project lead, says it has been important to baseline each individually.

Two natural capital baseline assessments were completed (using different approaches) by eftec and NatCap Research although Anderson says, whilst these are really useful and provide tonnes of important information, they do not give you all of the answers to assess ESS.

As of October 2022, the project had baselined above and below ground carbon, and biodiversity net gain. For nutrient neutrality, the project has quantified the nutrient requirements for the district, taking into account allocated and proposed development sites and is looking at possible intervention solutions within the project area that can help deliver against those requirements.

For natural flood management, the project has carried out a hydrological assessment of the flooding issues and proposed a set of solutions.  “You must do the baselining before spades go in the ground,” says Anderson.

For above ground carbon, the project has used novel techniques such as drone-based LIDAR and machine learning to quantify the actual carbon sequestered in different habitat types, employing Treeconomy and working with Rewilding Britain. The University of East Anglia has assessed part of the below ground carbon, and over 8,000 soil samples have been taken (although the project does not plan to sell soil carbon until there is greater certainty around permanence and currently advises other farmers against it given the uncertainty around the need to inset as well as expected increases in soil carbon prices in the years ahead).

For Biodiversity Net Gain, the project has used UK Hab and Defra’s Biodiversity Metric.  It is one of Natural England’s BNG Credit Scheme pilots.  For nutrient neutrality the project has worked with Ricardo Energy & Environment, and for natural flood management the services of consultancy, JBA, have been used.

“You won’t find anyone who can baseline everything, so you have to work with specialists,” says Anderson. However, he adds: “We have been very thorough, but a challenge is that you can ask two ecologists to carry out a baseline and you can get two different answers.”

The University of East Anglia (UEA) also has students working on sampling water quality in the Wending Beck river, along with multiple workstreams looking at soil carbon and soil biodiversity.

Other essential partners around data provision have been eCountability, LandApp, Viridian Logic, SOYL and Biodiversity Capital.

 

Costs and Timing

It has not been cheap. Anderson says the individual ESS baselining and natural capital accounting has cost around £250,000, for which Wendling Beck has had philanthropic and public grant support. He says the team is working on a project ground-truthing remote sensing technology which could help lower the cost of baselining. Anderson points to companies such as AiDash and CSX as potentially enabling baselining to become more cost effective in the future. “Ultimately, we need good remote sensing technology so that there is a reduced need to baseline manually which is very expensive, is often constrained to a certain time of the year and gets less accurate over very large areas”.

In addition to considerations around cost, Anderson says that timing is important. “Between May and August is best for baselining biodiversity and above ground carbon, as out of season the data can be useless. Remote sensing struggles to distinguish trees without a full canopy and for BNG you also need species to be in full bloom.”

 

Challenges with Current Metrics and Standards

The project does not plan to use the Woodland Carbon Code (WCC) for sales of carbon.  Instead, it is counting every single tree species and the circumference of the trunk in order to more accurately quantify the actual carbon sequestered. “There are gaps in the WCC at the moment that we feel don’t accurately reflect the amount of carbon being sequestered in the landscape, particularly in more marginal habitat types such as shrub and scrub. The question then becomes, however, what mechanism do we use to get the project accredited for carbon sales? There are new platforms emerging within the voluntary carbon market and we are hoping the detailed measurement work will help with the accreditation – and indeed we have a carbon buyer interested,” say Anderson.

He adds that there are also challenges with the Defra metric for BNG. A conversion of arable land to lowland heath, for example, can result in a very long process to get the land in the right condition to revert to heath, and the metric struggles to recognise this. It also fails to drive diversity of habitat types and, to some extent, the best ecological outcome across larger landscapes. The rules of the metric at present mean that, in the heathland example, the habitat type must meet poor condition status after 2 years, but it could take 5 years just to prepare the land. Explains Anderson: “That means I have to take on the financial risk in the first few years. I’ve taken arable land out of production and lost the income, but I may not be able to sell biodiversity units until year four or five”.

 

Developing a Landscape Masterplan

The culmination of much of the data collected on the project, particularly around soils, water and ecology has resulted in the development of a project masterplan. This has been critical in creating a single document that illustrates the vision and ambition of the project and allows everyone to buy into the project, landowners, partners and investors alike. WBEP appointed landscape architects and ecologists Digg + Co to design and develop the masterplan and it remains one of the most important and probably the most used document to date. Anderson says: “The landscape masterplan is my go-to document for nearly every conversation about the project. I had it printed on a large board and I use it to explain the scale and detail of the project and convey the story and the journey we have come on, I would be utterly lost without it. It is looking quite battered and tired now as it has had so much use!”.

 

Developing a Habitat Management Plan

Finally, The Wendling Beck Project has developed a detailed habitat management plan – for all of the habitat types across the project, working with ecologists eCountability and Digg + Co and supported by Norfolk Wildlife Trust.  Anderson says: “It’s two hundred pages and everything is in there including how to manage drought risk, species diversity for climate change and the estimated times of phasing and delivery. We are now trying to simplify it and develop a user-guide.”