Scotland's nature agency, NatureScot, has collaborated on a pilot for private finance investment, aiming to generate £2 billion for large-scale native woodland restoration, job creation, and rural community support throughout Scotland.

NatureScot has signed a Memorandum of Understanding with financial partners to start a pilot project that, if it works, could lead to private investment in natural capital to reduce emissions and restore biodiversity through landscape-scale nature projects.

The project could get $2 billion invested in forests, which would lead to the creation of about 185,000 hectares of native woodland and the storage of 28 million metric tons of carbon dioxide equivalents over the next 30 years.

The partnership between NatureScot and UK private bank Hampden & Co., Lombard Odier Investment Managers, and global impact firm Palladium is the first of its kind in ambition and scale, positioning Scotland as a world leader in nature restoration through natural capital investment.

Although the Scottish Government has increased public investment in nature through initiatives like the Nature Restoration Fund, private funding is also required to address the nature and climate crises. The first pilot project, starting in spring 2023, will focus on the upper catchment of the River Tweed in Southern Scotland and is built upon the momentum created by the Wild Heart Borders Forest Trust project.

The initial assessment identified the potential for approximately 30,000 hectares of new native woodland, with the possibility of between £200 and £300 million of private investment and 6 million tonnes of carbon sequestration. The next phase will involve developing the funding model and engaging with land managers and communities to explore the possible benefits.

All projects will align with the Scottish Government's Interim Principles for Responsible Investment in Natural Capital, published in March 2022, and aim to provide tangible benefits to local communities.

The team will collaborate with land managers and local partners to deliver responsible investment in new and productive woodlands that sequester carbon. The additional investment will enable a high-quality design that offers multiple benefits to communities and nature, striking a balance between maintaining existing land use and restoring nature.

Biodiversity Minister Lorna Slater said: “The finance gap for nature in Scotland for the next decade has been estimated to be £20 billion. Leveraging responsible private investment through valuable partnerships like this will be absolutely vital to meeting our climate targets and restoring our natural environment. Scotland is well placed to take a leading role by offering investors the opportunity to generate sustainable returns from the restoration and regeneration of our landscapes. This investment will generate multiple benefits: ending the loss of biodiversity, improving water quality, reducing the risk of flooding, regenerating local communities and creating green jobs.”

Robbie Kernahan, Director for Green Economy at NatureScot, said: “We’re delighted to be working with these businesses to deliver scalable investment in our natural capital in Scotland. To deliver the aims of the Climate Change Plan we need to bring private investment to Scotland, and this new partnership will allow us to test a new approach.”

Andrew Bell, Chief Commercial Officer at Hampden & Co, said: “Landowners bank with Hampden & Co for our ability to meet their often-complex needs with a personalised and tailored banking service. This initiative presents an opportunity to help them and others transition to new ways of developing their land to support the drive towards net-zero.”

Andrew Sutherland, Director of Nature-Based Solutions at Palladium, said: "Palladium works globally to restore nature with private finance in a way that leaves no-one behind. We’ve catalysed over US$1 Billion over the past 5 years and impacted 4 million hectares of landscapes in need, and now we’re transferring what we’ve learned to fight the twin crises of climate change and nature loss here in the UK. This is exactly the kind of ambitious partnership that’s needed.”

Lorenzo Bernasconi, Head of Climate and Environmental Solutions at Lombard Odier Investment Managers, said: “Scotland has shown international leadership in recognising the importance of investment in natural capital as part of its commitment to a just transition to net zero. The investment gap to deliver on these nature-related outcomes is estimated to be well above £15 billion for the current decade, requiring new public and private partnerships to mobilise capital at scale. We look forward to bringing our expertise and collaborating with these partners to deliver on this vision while supporting local communities and a high-integrity market for private investment in nature.”

The main focus will be on establishing new and, in some areas, productive woodlands, with carbon credits being sold exclusively to UK firms. The priority will be to measure the impact of the investment and track its success. Palladium, a global impact firm with significant experience in developing portfolio investment strategies, will customise the investment model for each project.

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Source: NatureScot