Sustainability is arguably at or near the top of the agenda for individuals and organisations now more than ever as net zero targets get closer. But the green landscape can be difficult to navigate given the number of buzzwords and phrases that abound.
A new edition of The Scotsman’s Sustainable Scotland podcast, in partnership with independent UK law firm Burges Salmon, delves into the topics of natural capital, sustainable land use and nature-based solutions to help listeners make sense of these concepts and their role in the push to net zero. Listen to the podcast here.
Taking part in the podcast from Burges Salmon are: Stuart McMillan, a banking and finance partner who advises lenders and borrowers on a range of projects, including those with elements of renewable, solar and wind power; Sarah Sackville Hamilton, a director in the firm’s environment team who helps clients to navigate environmental, regulatory and contractual issues and to bring forward net zero and sustainability projects; and Ross Simpson, a real estate partner who specialises in land and rural property and has advised on many nature capital and ecosystem services projects.
Simpson starts by explaining the meaning of the concepts being covered in the podcast. He says: “When we say nature-based solutions we're essentially talking about nature restoration projects. These are designed to create, enhance or protect various forms of natural capital. By natural capital we mean nature stocks, natural resources, and the likes of woodlands, peatlands, soils, hedgerows, rivers and waterways. Nature-based solutions can be used to generate ecosystem services that can then be monetised. For example, the nature-based solution could involve the sequestration of carbon that may generate carbon credits. Nature markets and nature-based solutions are packaged in a way in which ecosystem services can be valued and paid for by individuals, corporates and other types of organisations.”
According to Sackville Hamilton natural capital markets in the UK are relatively nascent, but growing rapidly. She adds: “There are both voluntary markets and compliance markets. Voluntary markets are ones where buyers have ecosystem services or natural capital credit without legal obligations to do so. They’re choosing to do so to support their net zero trajectories or their wider ESG strategies. Compliance markets are ones where buyers have legal obligations to secure credits.”
In terms of the role natural capital has to play in the sustainability journey, McMillan says: “We’re lucky in Scotland in that we have a landscape that sets us up quite well to get us to net zero, including offshore and onshore wind. But natural capital and natural capital markets also have a huge and growing part to play, and it’s very important we have that mix of different ways to get to net zero. And the market is realising that, we’re seeing more landowners being interested in this area, as well as investors and funders. Everyone is really converging on this market and it will increase over the next 10 or 15 years.”
Turning to the challenges and opportunities with natural capital, McMillan says: “Some of the blue chips in particular are under increasing pressure from their own investors and stakeholders to prove that they're doing more than greenwashing. These markets really help to demonstrate they’re on the road to net zero and they are developing all the time.”
On the landowner side, Simpson says that key opportunities include the ability of nature-based solutions to provide an additional income stream. He adds: “They might also allow the landowner to do something with marginal or unproductive land that might not have another viable use.”
Turning to possible challenges, Simpson warns that a change in land use by the landowner could result in different tax treatment and he says there is a need for additional HMRC guidance in this area.
There are also opportunities for corporate buyers and investors who want to get involved in genuinely ESG-led projects that “walk the walk”, explains Sackville Hamilton. “It’s not just stakeholder expectation, there are also hard-edged legal obligations that are going to be driving their investment in these projects. There are more organisations, that through various legal mechanisms, are coming within the scope of having to make mandatory disclosures and report around carbon emissions.”
In the podcast, Burges Salmon gives some examples of relevant projects it has been working on. For example, Simpson refers to acting for Oxygen Conservation, an organisation that tackles the climate emergency and biodiversity collapse through the purchase and management of land, and in doing so protects and restores natural processes. Over the course of the last 24 months, Burges Salmon has helped them acquire 10 estates across Scotland, England and Wales, spanning nearly 30,000 acres. The firm also advised Oxygen Conservation on a landmark multi-million-pound loan facility made by Triodos Bank, believed to be the largest conservation-focused commercial debt package in the UK to date.
Ross concludes: “It’s a really exciting time to be part of these new, emerging markets, and to see land as an opportunity to provide a lot of the solutions to the biggest problems that we face around nature, biodiversity crisis and climate change. In this era of global boiling, as the UN describes it, environmental credits are going to have a part to play, and these markets are here to stay.”
Burges Salmon, which celebrates its fifth anniversary in Edinburgh this year, has a range of programmes aimed at delivering on its ESG priorities and the firm was amongst the first in the UK legal profession to announce its commitment to being a net zero business by 2026. The firm is well on track to deliver on its promise through a combination of continued energy reductions, efficiency gains and investment in high-quality carbon offsetting projects. The firm’s commitment to ESG was recognised last year with Burges Salmon named Overall Leader in the Lamp House Strategy Responsible Business Annual Report, the only firm to rank in the top 5% across the three leaderboards – people, planet and governance.
This article was first published in the print edition of The Scotsman.