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.
This Milestone contains five subsets of considerations or themes that project developers may want to explore at this stage. Click on each of these themes to read more.
You can also read case studies of projects that have successfully completed this Milestone of development, watch relevant webinars and view a checklist of the common activities undertaken at this stage below.
Assessing the current state of the land
A more general understanding of the site’s current quality and extent of its natural habitats is needed to assess the eligibility and potential of any project. This may require professional advice from an ecologist or an eNGO.
Typically, larger tracts of land are required to generate the volume of ecosystem services that would attract private finance. This is because buyers of ecosystem services prefer to buy at a scale commensurate with the impact they are seeking (such as offsetting their carbon footprint).
From a project developer perspective, the larger the site or aggregation of multiple sites, the more potential revenue can be used to meet project development costs, transaction costs, and financing costs.
That said, small areas of land can still attract buyers for ecosystem services. There are woodland creation sites selling carbon, for example, that are less than five hectares in size, and wetlands of one to three hectares delivering nitrate reductions. These typically rely heavily on public grants to pay for their upfront project costs, rather than being offered upfront finance from a buyer or lender.
Understanding the current land use will be essential for many reasons. For example, a farmer may need to be compensated for a loss of agricultural income if transitioning to woodland.
You may also consider what ecosystem services the land currently provides and whether your project would have negative impacts on existing natural capital, for example with the conversion of a species-rich meadow to a woodland, would there be a loss of certain species that depend on this existing habitat?
You can identify map existing habitats using publicly available datasets and tools, such as UKHab, or engage a professional ecologist or environmental surveyor to do so.
The site’s history may reveal key insights that inform your project’s design, as well as potential risks. For instance, a site through which a river previously flowed may best benefit from a project with hydrological impact, such as wetland creation or river renaturalisation. A good example of this is the Eddleston Water Project.
Another example is working with brownfield sites. If a site was previously used for industrial purposes then it may be contaminated and therefore less financially viable due to remediation costs.
The amenity value of nature to community members and visitors can sometimes be a driver for nature-based projects. Project developers should consider how the public currently values the site or any social activities taking place that are culturally or historically significant.
For example, community members may feel strongly that walking access should be maintained through a restored woodland, though access routes may need to be altered to make sure newly-established areas aren’t damaged. Many project developers and their stakeholders wish to embed a social focus in their project in order to maximise impact.
Increasing the social value of a site may also be a key financial motivator, bringing in potential revenue streams through eco-tourism, educational partnerships and attract buyers who are looking to support social impact. An example of this is in the Wendling Beck project, which built cycle paths and an educational centre in the landscape.
More information on this topic can also be found in the Community Engagement section of the Toolkit.
Natural capital accounting is where stocks of natural capital and the resulting flows of ecosystem services are estimated and valued. This typically involves an in-depth ecological survey and additional desk-based research. This can be very helpful if considering a large expanse of land to obtain a full picture of the ecological assets – and therefore the opportunities.
For example, a natural capital account or ecological survey may reveal the carbon emissions reduction value of an existing peatland and how this could be improved, or the biodiversity abundance of the site, as well as any protected or endangered species that are dependent on it. Companies that provide natural capital accounting services are highlighted in the case studies for this Milestone and Milestone 3.
A full natural capital account is not strictly necessary to start selling ecosystem services. You may not need one if you know with certainty what ecosystem services you want to sell, or if initial project funds are limited.
However, the greater the ecological data about the site, the easier it will be to see if there are multiple ecosystem services that could be sold – as well as providing a view on co-benefits. The Esk Valley Project is an example of where a natural capital account has been used.
As an example, the sale of carbon credits from a native woodland may attract a buyer more readily when that project also has a story around biodiversity uplift. When projects deliver co-benefits it is sometimes referred to as a ‘bundling’ of ecosystem services (see Policy and Regulation for more information).
Note: though natural capital accounting covers a wider range of ecosystem services, some project developers also associate this process with much of the baselining work of the ecosystem services they intend to sell. You can read more about baselining in Milestone 3.
There are software programmes designed to help project developers map sites, their conditions and key features. These programmes range in their underlying datasets and functionality.
For example, some offer the ability to design a habitat restoration or creation plan while identifying potential revenue streams, including the sale of carbon and biodiversity credits. Others offer access to groups of potential buyers themselves, with monitoring protocols built in for these buyers once initial work is complete. Companies that offer such programmes are highlighted in the case studies for this Milestone and Milestone 3.
Several software programmes offer a free selection of their services, and these should be utilised to the project’s benefit as much as possible. However, if a project developer is considering paying for a certain software package, thought should be given to the commercial potential of the target outputs that this software would deliver. At this stage, keeping costs down is always helpful!
Determining appropriate land use
Having understood the current state of the land, project developers can consider the appropriate change in land use. You will want to uncover which outcomes best suit all the stakeholders involved, be those financial, environmental, social – or most likely a combination of all three.
The decision to restore existing habitats or create new ones will carry different financial and ecological implications. For example, it may be preferable to remove woodland plantations from degraded peatland and restore that peatland in order to improve carbon and biodiversity benefits.
Conversely, a new wetland created next to a river may be a more financially viable solution for delivering nitrogen reduction benefits compared to riparian restoration.
Project developers will want to consider the environmental issues in the wider catchment area, their root causes, and how the site can play a part in broader local and regional plans for nature recovery.
Local Authorities, Wildlife Trusts, Rivers Trusts, partnerships and eNGOs may have strategies, plans and projects in place already that the project can take learnings from, and also complement.
Remember that landscape scale change can create greater impact than isolated projects, and it is worth contacting these stakeholders as you begin to design your project. In particular, it may tell you about organisations with ecological expertise and ample local knowledge that would act as a suitable delivery partner.
Nature-based initiatives that are across the UK include partnerships under the Catchment Based Approach (CaBA), Local Nature Recovery Strategies (England) and Local Biodiversity Partnerships (Scotland).
Finally, it is generally suggested that local communities are engaged early on to get their support, prevent misinformation and to address potential sensitivities around land use change.
The land managers of the site(s) you intend to use (including tenant farmers, owner-occupiers, estate managers) will have their own goals relating to the site and the wider landholding. It is imperative that these are valued by the project developer.
For example, land managers may be primarily motivated by the delivery of a financial return, a specific environmental improvement, or minimising conflicts with agricultural activity. While helpful to know these underlying motives of the land manager, nature-based projects often deliver a range of these benefit types, and developers might seek the land use type that minimises any trade off, or even creates a plan that complements different
Early conversations with land managers (if you are not the land manager) will be useful in order to find out what their goals are (see Milestone 2 for more information). However, first you may want to carry out some high-level research on land manager discussions and activities in the local area. There are a variety of local land manager forums and initiatives that can be found via online search, including farmer clusters, catchment partnerships, and Local Nature Partnerships.
There may be potential synergies with nearby sites that can deliver greater improvements to natural capital, rather than considering your site in isolation. The Lawton Review, which calls for “bigger, better, more joined up” natural habitats, is often referenced in conversations about this principle.
As well as greater ecological benefits, this approach could have greater financial potential as well. For example, a project developer can create a biodiversity corridor by connecting two neighbouring woodlands, which could deliver a higher number of Biodiversity Units (under Biodiversity Net Gain) for sale due to the connectivity multiplier in the biodiversity metric.
Working with Sites of Special Scientific Interest (SSSIs) and Areas of Outstanding Natural beauty (AONBs) may also open up access to grant funding to support the early stages of your partnership.
To help identify these potential synergies, many mapping technologies include scientific analysis on where best to place interventions in relation to neighbouring sites. You may also consider discussing your project with local catchment partnerships, local councils, local planning authorities and eNGOs to identify further synergies.
After asking yourself the above questions, you will have a clearer idea of what the ideal land use change is and the outcomes you want to target. Examples include woodland creation for carbon sequestration and public access, or a species-rich meadow for biodiversity improvements. It is also possible that the delivery of ecosystem services can be achieved through smaller interventions rather than entire site changes. Examples where more minor interventions can be used include in natural flood management and sustainable urban drainage schemes.
Once you’ve decided on these high-level goals, you’ll need to get more specific on what are the exact interventions that will deliver those goals, and whether the interventions are possible. For example, for natural flood management projects, leaky dams and hedgerow planting are two separate types of interventions that will have different impacts depending on where they are used. Likewise, if you are considering planting a new woodland then you will need to consider the species mix and planting technique that would best support your environmental goals.
If you are unsure about what interventions to use, seek out those with ecological training and expertise, ideally with local knowledge. Often you can find free advice from eNGOs, public bodies and local partnerships (see above), or from learning from other projects. You can also pay an ecological surveyor or consultancy, which you might have already used to assess the current state of your site.
Legal ability to change land use and tax implications
It is important that project developers assess the legal ability to make changes to the site(s). This often depends on what change in land use is proposed and the length of time that this change should be maintained. Permits can take a long time to be issued, so it is good to know at the beginning so you can factor the timing into your project’s overall development.
If the site is under pre-existing legal obligations, this can affect the ability of the project to use the site, such as through legal restrictions on land use changes.
Examples of legal obligations include protected site classifications and subsidy agreements. Landowners and managers may have already entered into legal agreements to deliver certain interventions in exchange for subsidies or other benefits. A common example is Countryside Stewardship Agreements (CSAs).
As well as legal restrictions on land use changes, pre-existing agreements can affect the additionality of any environmental outcomes that the project is claiming it will deliver.
Additionality means that the environmental improvements would not have taken place in the ‘business as usual’ scenario without the project. Sometimes different types of additionality are considered to understand these business as usual scenarios, such as legal additionality, or financial additionality.
If such environmental outcomes are expected under an existing agreement, then the project will not be delivering additional environmental outcomes and will not be credible to buyers, investors and other financiers.
Note: existing legal obligations on a site do not automatically exclude nature-based projects or the use of private finance to deliver them. However, the full scope of the project should be discussed with all parties of both the existing legal obligation and the new project to confirm additionality and maintain integrity. If still uncertain, you may seek legal advice on these topics from advisors with experience in this sector, such as law firms or land agents.
Land managers and landowners may be separate parties – for example, estate owners and tenant farmers. More complex scenarios may also involve those with rights to use the land as a common asset, such as crofting property rights that are found in Scotland.
When this is the case, project developers should seek permission from all relevant parties and agree how costs and benefits from the project (including financial returns) will be divided. It is also imperative to check underlying legal agreements – such as farmers’ tenancy agreements – that might affect or be affected by the tenant entering into your project. You can read more about this topic in a GFI blog post here.
In general, the greater the number of landowners and managers that need to be aggregated, the greater the transaction costs and the more challenging it will be to reach an agreement. This should be weighed against the potential economies of scale and greater revenues you achieve through aggregating sites.
You can seek advice from certain financial advisory firms, land agents or law firms on land ownership and tenancy structures in relation to natural capital projects, including how to lead negotiations and what agreements have been reached before. Examples of such firms are given in this Milestone’s case studies, or in Milestone 8 (Establish Legal Contracts).
Some nature-based projects will require environmental permits or planning permission. For example, to build a treatment wetland that removes nutrients from a waterway, a particular permit is needed from the Local Planning Authority. Anecdotally, these can take up to 18 months to deliver, which can delay your project’s development if not started early enough.
Other planning considerations could be cycle paths, gate designs and the planting of trees. In the case of some projects, such as the Wendling Beck Exemplar Project, an Environmental Impact Assessment was needed.
If unsure, project developers should check with the site’s Local Planning Authority or local Environment Agency office if in England, or SEPA in Scotland.
The concept of permanence is important in nature restoration or recovery. It refers to the continuity of a habitat or its health, and therefore the continuation of ecosystem services. For example, a newly created habitat for Biodiversity Net Gain needs to be maintained for at least 30 years, because the biodiversity benefits are only significant if a habitat is established for a length of time.
In the context of nature finance, permanence is important because buyers and investors do not want to pay for long-term benefits if these habitats are likely to deteriorate or be destroyed. They will often ask for some sort of legal binding of the land, to protect the habitat from this.
The most common ways to legally ensure that habitats remain in place over a number of years are:
- S106 agreements – these are legal contracts between Local Planning Authorities and the underlying landowner on which a habitat is being created or restored. This type of agreement has been used for several years now. Section 106 Agreements are often (but not always) linked to planning permissions for new property developments and can also be known as planning obligations.
- Conservation covenants – used to ensure current and future landowners of a site maintain a specific land use or intervention. They are a type of voluntary legal contract between a landowner and another party that is usually attached to the deed of that site and lasts for at least 30 years, sometimes indefinitely. They came into force in England and Wales on 22nd of September 2022, as part of the 2021 Environment Bill, and were mainly intended for use in BNG agreements.
- Conservation burdens – Conservation burdens have been used in Scotland since 2004. They are title conditions set out in the title deeds of property that ensure the preservation or protection of environmental. architectural, historical or other special characteristics of any land for the benefit of the public. A conservation body is entitled to enforce conservation burdens created in its favour.
Legal advisors can support project developers in negotiating legal agreements for binding the land. Examples of legal firms who have experience in this space are included in this Milestone’s case studies, or in Milestone 8 (Establish Legal Contracts).
There are different tax treatments for land use types, which may affect the financials of your project or the incentives of the land manager. These can relate to:
- the income generated
- the costs incurred
- the underlying land itself.
These are covered in more detail in Milestone 5 (Develop Business Case and Financial Model). However Tax advisors with experience in the land management sector can advise you on particular tax implications and any uncertainties.
On 6 April 2025, the Government announced in its Spring Budget a series of updates to taxation and legislation, following HMRC’s 2023 consultation on environmental land management This included changes to the use of Agricultural Property Relief and tenant landholders’ access to nature markets. Some useful summaries include:
- ‘Budget boost for farmers and environment with extension to Agricultural Property Relief’, Defra, March 2024
- ‘2024 Spring Budget Explained’, CLA, March 2024
- ‘What does the Spring budget mean for Agricultural Property Relief?’, Birketts, March 2024
- ‘Spring Budget 2024: what does the Budget mean for landowners and rural businesses?’, Evelyn Partners, March 2024
Feasibility of creating revenue streams
While gathering knowledge of the site, the wider area and the potential ecological benefits from land use change, you will also want to assess whether the project or enterprise will be able to attract private buyers to pay for the ecosystem services – creating revenue streams – and whether that expected revenue could attract upfront investment – noting here the difference between revenue and investment (repayable finance). This can be tricky to do when you are still defining your project, but early engagement with buyers can give an indication of how feasible and reliable the revenue streams are.
There are several revenue models that can be derived from nature restoration. For example, woodland creation can deliver the sale of woodland carbon units that companies will buy to offset their carbon footprint. Under the Woodland Carbon Code, this carbon can also be sold alongside timber and other forestry based products.
In the UK, carbon can be sold from woodland creation, peatland restoration and other native habitat restoration, but there are additional Codes in development for hedgerow carbon, saltmarsh carbon and others.
Biodiversity Net Gain in England has enabled the sale of biodiversity units resulting in the rise of habitat bank development. And finally, cost reductions, such as those derived from flood management interventions are also creating revenue streams that result in ‘investment ready’ projects.
Nutrient neutrality is allowing for the sale of phosphate reduction, and some water companies pay for nutrient reduction more broadly.
Biodiversity credits (that can be used for offsetting corporate biodiversity footprints) are also under development.
Project developers should consider early on the potential buyers and their willingness to pay. Their expectations and drivers may be different from what you expect.
Buyers will typically be beneficiaries of the land use change (e.g. natural flood management), or those seeking to mitigate their environmental impact (e.g. carbon, Biodiversity Net Gain). A beneficiary analysis could entail a simple online desktop research, conversations with potential buyers and brokers, or more in-depth interviewing.
An example of early beneficiary analysis in project scoping is the Cornwall AONB Landscape Recovery Framework and Wendling Beck in the case of BNG units.
If you would like a more general introduction to the concept of buyers (and investors) in nature markets, you can watch Helen Avery’s presentation on “The Perspectives of Buyers and Investors” as part of the British Standard Institution’s Nature Investment Standards Programme (start at 34:50 for Avery’s segment):
When scoping for a project, it is good to learn from similar ventures and share best practices. There are several resources, including the case studies within this Toolkit, which provide examples of nature-based projects and their key learnings.
You can also look through the UK Nature Finance Project Directory, which has a list of projects in the UK that are testing nature finance models. Note: this is not a comprehensive list of all projects in the UK that leverage private finance but instead serves as a useful overview of where financial innovation is being tested. If you would like your project added to this Directory, please email us at hive@gfi.green.
Developers of nature-based projects are generally collaborative and open to sharing learnings. Networks such as Ecosystems Knowledge Network (EKN) also provide support, including through its UK Nature Finance Review 2023, which gives an overview of the UK’s supply pipeline.
Within the UK, the NEIRF has a Community of Practice of more than 80 projects in England that regularly converse and hold knowledge sharing sessions. Likewise, the FIRNS launched its Community of Practice in February 2024 with over 20 projects.
The Scottish Nature Finance Pioneers is also a community of project developers and other key stakeholders that aim to scale up the pipeline of projects in Scotland.
Developers can also look at projects beyond the UK for further learnings, although these may be less replicable in the UK. The GFI Hive hosts a useful set of case studies that give an overview of international projects that have successfully attracted private finance. An example of where project developers took key learnings from international projects is the Poole Harbour Nutrient Management Scheme.
Market infrastructure is still under development across the UK and can greatly improve the confidence of buyers and investors, as well as of sellers.
Examples of market infrastructure that supports the use of private finance include:
- Standards and codes – e.g. the Peatland Code
- Project registries and platforms – e.g. the UK Land Carbon Registry and Kana.
- Tools and templates – e.g., the Land App, standard legal templates for offtake agreements
Where such market infrastructure doesn’t exist, project developers should consider how to overcome the gaps. For example, if a single mandated registry doesn’t exist for your project, how do you assure buyers that you will not “double sell” the ecosystem services to a separate buyer? A lack of market infrastructure may prompt you to approach buyers and other financiers early on, in order to establish what would make them comfortable.
Also, it is important to keep abreast of policy and regulatory updates, such as on the British Standard’s Institution’s UK Nature Investment Standards Programme. See Policy and Regulation for more information.
Some projects will not need to engage buyers until a later stage when the design of the project and full modelling of benefits is near completion. For example, the sale of carbon credits via the Woodland Carbon Code is an established process and many developers approach buyers when they have a confirmed number of credits they can deliver.
However, it’s a good idea to open conversations with your potential buyers early on.
Those with greater complexity and/or less precedent may consider engaging buyers to build in considerations around their needs and demands into the project’s design. For instance, water companies must prove to their regulators that any capital or operational spending is helping to deliver fairer outcomes to their own customers and is not wasteful. Therefore, buyer engagement with water companies may have to start early in order to model the value and flow of the benefits together. An example of where this took place was the Wyre River Natural Flood Management Project.
It’s helpful to build an accurate picture of the entire project’s costs as early as possible and iterate these estimates as the project develops.
You may find the below diagram useful for identifying the types of costs of the project, and the different stages they are incurred at:
As early as possible, project developers should identify whether the total costs look like they will exceed the potential income generated from the revenue models identified and therefore make the project untenable, or in need of substantial grant funding. As these costs are incurred at points further into the future, conservative estimates around inflation should be factored in.
You may want to speak with an advisor or third-party project developer to help scope the lifetime costs of your project. Companies that offer advisory and project development services in this field across several different project types include Finance Earth, Palladium and Triodos Bank UK. Some guidance on early costs is given here, and also within Milestone 5.
For more established nature-based project types, you may find a subset of companies that offer various advisory and direct project development services. You can find lists of such third party project developers for woodland carbon and peatland carbon projects, here and here respectively.
Funding project development
Project development costs are separate to and precede implementation costs or the costs while the project is operational. Development costs involve planning, gathering data and building the project’s business case and financial model. Grants and philanthropic funding often can be helpful for this development phase.
As your initial project scoping progresses, consider what individuals will be driving the development and how this is reflective of the aims and desired structure of the project.
For example, if you want to embed community benefits in the project, does it have someone who specialises in community engagement and social impact? If one of the project’s aims is to channel private finance at a certain scale, are there institutional investor groups involved from an early stage?
Your team’s composition may not stay fixed for the entire development phase, but establishing a core team will help to give your project identity as it engages with more stakeholders. It will also help to establish what resources each team member and organisation is able to give, such as a specialist skillset, funding, or time in kind.
Early costs will likely include significant staffing hours from the core project development team. You may also need to pay for services, such as natural capital accounting and ecological surveying, consultancy fees or paid advice from Local Planning Authorities. There may be costs for community, buyer and seller engagement, including the development of a website.
At an additional cost, you can employ a grant writer or financial advisor to structure an effective pitch or bid to organisations that are willing to fund these early costs.
Philanthropic or impact investors often have a defined scope that includes financing the development of projects that deliver environmental or social outcomes. A source list of such organisations is the Environmental Funders Network, including the Esmee Fairbairn Foundation that has funded a number of projects featured as case studies in this Toolkit.
Larger private companies that have a connection with the project’s specific goals are also a possible funder, for instance to meet their Corporate Social Responsibility targets. They may also be interested in acting as a buyer or investor for the project in the future. Examples of this include water companies, food and beverage companies, insurers, technology providers or banks.
Finally, government funding may be available for your project development. Examples of government funding that is specifically aimed at project development include the NEIRF and the Landscape Recovery scheme, and the Woodland Creation Planning grant scheme in England, and the FIRNS in Scotland.
Wendling Beck provides a good example of the amount of funding required for large and complex projects and where government and philanthropic funding might be available.
LandApp offers details on potential grants for farmers.
Obviously ask for what you need, but it helps to be realistic. Local funders will likely only donate £1,000 or so, whereas corporate funders will want to put more to work.
Funders typically want to fund a defined piece of work (a research piece, baselining etc) rather than core costs also – which can be a challenge when marketing, legal and staff costs are needed. Consider pro-bono support where funding is not possible.
Informally, you can often approach representatives of funders to discuss what information they would like to see and what questions they might ask of the project.
Formal presentations will need to be tailored to the funder you are approaching. For example, mention how the project fits in with the funder’s mission statement or business plan.
However, in any case you will want to present the information you have gathered to date as a clear narrative, including the rationale of starting the project and what environmental problems you are trying to address, through to the immediate next steps of the project’s development and what you are seeking the funding for.
Any quantitative headline figures, such as carbon sequestration potential, estimates on reducing peak flood flow, or price figures that buyers might be willing to pay, will help make your project appear more attractive – showing that a funder’s capital has the potential to crowd in more in finance. However, project developers must be honest with funders on the degree of uncertainty within the project, any assumptions they are using and major risks.
Occasionally funders may offer repayable finance, essentially becoming financial investors.
This can be on concessionary terms, i.e., a lower interest rate than what is offered. If this is the case, you should be presenting the early scopings of your financial model and its key features, such as what revenue streams you’ve identified and the potential for demand, cost estimates and the period of time over which you expect your project to be in a position to repay this investment.
You could structure the repayment based on a ‘success percentage’ where a portion is taken from any profits that the project ends up making each year, or a fixed repayment schedule that you will need to build into your financial model with buyers.
More information on how to engage with potential investors and structure a repayable finance transaction is available in Milestone 7 (Identify and Work with Investors).
Development funders may likely have non-financial motives for supporting your project. For example, to meet targets on ‘ESG’ philanthropic funding amounts that are linked to environmental outcomes.
They may be interested in the chance to develop a replicable blueprint from your project so that they can replicate this elsewhere, synergies and collaborations you can offer with their other initiatives, or in specific scientific or market data you are gathering as part of the project.
