Milestone 07

Wildlife Trusts Habitat Banking Investment Model

Identify and Work with Investors

 Project Overview

A group of Wildlife Trusts and Finance Earth have created an investment model to deliver Biodiversity Net Gain (BNG) units with the use of upfront private finance, accelerating the pipeline of habitat creation.  The partnership includes four Wildlife Trusts – Berks Bucks and Oxon, Warwickshire, Cheshire and Surrey – that will create and restore habitats across three pilot sites. By using private investment to create the habitats in advance of BNG sales, the Wildlife Trusts will have a higher volume of ‘post-enhancement’ units that will support the financial viability of the project. This approach can also remove the time delay between nature loss from development and off-site habitat creation.

The project sought repayable finance for the acquisition of one of its pilot sites, but did not complete the sale due to the vendor’s decision to sell to another party. However, Heads of Terms for a patient loan were secured.

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.



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


Prue Addison, Conservation Strategy Director, Berkshire, Buckinghamshire and Oxfordshire Wildlife Trust

Home | Berks, Bucks & Oxon Wildlife Trust


Charlotte Harris, Chief Executive Officer, Cheshire Wildlife Trust

Martin Varley, Director Nature Recovery, Cheshire Wildlife TrustHome


Alicia Gibson, Senior Associate Director, Finance Earth

Allan Benhamou, Associate, Finance Earth

Finance Earth



Date published: 23/06/2023

Next Milestone

Defining the investment ask

The model was designed to attract upfront investment to cover land acquisition (if required) and early restoration and maintenance costs to enable the project to sell biodiversity units over time.

Equity investment or a patient, flexible loan were identified as the preferred forms of finance. This was due to the uncertainty of annual biodiversity unit demand, unpredictability of BNG cash flows and long-term project timeframe. The financing options considered are demonstrated in the following diagram:



Site specific investment asks

The financing needed across each project is expected to vary depending on project-specific characteristics. In some cases, repayable finance may not be needed where biodiversity units can be sold in advance of restoration or where upfront costs are low.

For example, in the case of the three pilot sites:

  • Oxfordshire site: there is no requirement for third-party finance as the project adopts a rewilding approach, requiring limited upfront capital expenditures. The sales of biodiversity units in advance of delivery are expected to cover costs before additional units are sold.
  • Warwickshire site: £1.6m of upfront financing would be required to cover habitat creation costs with returns generated as biodiversity units are sold over a 10 year+ period. Financing for this site is dependent on securing a lease agreement with the landowner.
  • Cheshire site: £1.15m of upfront financing would have been required to cover land acquisition and restoration costs, before grants and BNG unit sales could recoup these costs. There was an opportunity to fund the site through securing an unsecured loan from a patient loan provider, aiming to achieve a minimal return, with a payback period of five to seven years. Cheshire Wildlife Trust (CWT) decided that debt was a more suitable option that equity, given that it had more experience with debt-based transactions and was not inclined to set up a separate legal entity to issue equity.

The project team identified the need for financing to be adapted to the features of the habitat banking model to minimize risks. Key investment considerations are included below:


Habitat banking model features Investment considerations
Upfront cost and funding gap
  • Secure bridging investment to cover land acquisition (where needed) and initial early restoration and maintenance costs to enable project delivery
High level of market uncertainty over demand and unit sale profile
  • In the near term, consider short-term investment or prioritise early unit sales to gain credibility and track record in the market.
  • Overtime, consider medium to long-term investment to reach habitat maturity, and enable additional biodiversity unit income generation for long-term management.
30-year habitat maintenance liability
  • Allocation of biodiversity unit revenue proportion to cover lifetime maintenance liability before investment is repaid and design of a clear cashflow waterfall.
Volatile income streams
  • Patient, flexible capital investment with repayment profile adapted to the project expected cashflow
  • Consider opportunity for equity investment to transfer risk to investors



Approaching the investor

CWT worked with the Wildlife Trusts’ Philanthropic Loans team to approach potential investors. This led to initial conversations with a few individuals, and the project team prepared a further 1-2 page expression of interest document on the business case of the model. One of the interested investors including a local high-net-worth individual who runs a philanthropic foundation and was drawn to the project in part due to their proximity to the site.

At this stage, Martin Varley, Head of Nature Recovery of the CWT, says that demonstrating the ‘nature-based return’ of the project was key. Further conversations with this investor focused on the need for nature recovery within the local area, the potential environmental gains (such as species that would be supported by the habitat), and the project’s community connections. The innovation of the model also appealed to the investor, who was interested in investing in the new BNG market.


Negotiating terms

In total, it took three months of negotiations to agree the Heads of Terms for the loan. However, this was at an early stage of The Wildlife Trusts’ philanthropic lender programme. As the scheme has developed, lending can be agreed much more quickly.  At this stage, the project team also provided the full business case to the investor and organised several meetings and site visits.

Varley comments that the investor was happy to accept a 0-2% return. However, they did not want to tie their funds up for the lengthy periods of time associated with BNG. The project team originally aimed for a repayment period of 10 years, but after negotiations it agreed to a five to seven year period in total, with repayments triggered by BNG sales to amortise the loan over time.

CWT decided to set up a local community steering group for the pilot site, to include the investor and other interested community members. This group would be updated on the project’s progress, provide suggestions to the CWT team and input into certain decisions.

After three months, the investor and CWT were ready to form a Memorandum of Understanding before engaging with lawyers. However, at this stage, the landowner of the site decided to sell the site to a different buyer. The investment therefore did not proceed.


Lessons learned

From working with the investor on this project, the project team says it is important to:

  • Have a clear idea as to how much money you want and what you’re going to use it for. Varley comments that the team had a rough figure for the land acquisition to begin with, but exploring the hybrid BNG sales approach through the financial model (see Milestone 5) made a big difference on the number with which they first approached investors.
  • Foster a good relationship with your investor, make them feel part of what you’re doing by emphasising the environmental benefits of the project and being open to ideas they have about the project and its execution.
  • Be transparent and communicative about how the project is progressing and challenges or risks that could stop the project. Investors do not like to be kept in the dark, and when the landowner decided to sell the site to another buyer, Varley says that the investor was understanding and not upset as to the loss of the investment opportunity. Instead, CWT has retained the relationship amicably and feels it can approach the same investor with other opportunities relating to the model in the future.