A UK-based land restoration company is counting on capital from an investment fund to help scale its model of buying up land for natural capital purposes.

Oxygen Conservation expects to receive “upwards of £250 million” from an asset manager in the near future to help it scale its land restoration model, which will capitalise on England’s burgeoning Biodiversity Net Gain (BNG) market, in addition to the voluntary carbon market (VCM), and other revenue drivers like ecotourism, regenerative farming and property lets.

The company, set up by private investors in June 2021, has so far deployed £85 mln to acquire 10 sites across the UK, from Cornwall up to Scotland, totalling around 30,000 acres.

This first portfolio should generate about 1 mln tonnes of CO2e reductions by way of the Woodland Carbon Code (WCC), Peatland Carbon Code (PCC), and BNG markets, depending on the validation process, said Chris White, the company’s director of natural capital.

It declined to provide the name of the investor or further detail to Carbon Pulse.

The next fund, expected to be built on the capital received from the unnamed asset manager, will “be a more traditional management portfolio where we’ve agreed a target and return and will deliver on that”, White told Carbon Pulse.

“Portfolio 1 investors also expect a return but are more flexible with how we go about it,” he explained.

The company portfolio stretches across land in Exmoor, Dartmoor, and Devon in southwest England, Cardigan Bay in Wales, the Yorkshire Dales, Norfolk, and Scotland.

At Leighon estate in Devon, plans include the removal of invasive species, return of native grazing animals, and regeneration of the Atlantic rainforest there, in addition to organic food production and property renovation.

BNG BACKGROUND

England’s BNG market requires new development projects to achieve a net biodiversity improvement of at least 10% as of Feb. 12, 2024.

Observers are keenly watching the progression of the law as it could set a global standard for government nature requirements, while creating a market for statutory biodiversity credits that developers have to buy off-site as a ‘last resort’.

Success for the ambitious first-of-its-kind policy could reap dividends for nature, with developers working much more harmoniously with the environment, while failure could result in greenwashing on a vast scale.

An unintended consequence of the new regulation could see smaller developers in England incur unnecessary costs as they fail to take full account of the scheme’s implications.

POSITIVE IMPACT

Oxygen Conservation aims to deliver positive environmental and social impact by restoring natural processes and supporting local communities on the land it acquires.

It avoids buying any high-quality, productive farmland, known as Grade 1 or 2 land, and instead looks to acquire degraded landscapes or overly managed uplands like grouse moors, to transition the land back to its natural state.

In Norfolk, a site previously intensively managed for agriculture, is being transitioned over to organic agriculture and biodiversity preservation to generate BNG credits.

Meanwhile, a former pheasant shoot and commercial cattle herd in Devon is being changed over to regenerative agriculture and conservation-focused grazing practices.

Oxygen Conservation has yet to generate or sell any environmental credits, but will plant its first woodland creation schemes this spring, which should generate the first batch of units, said White.

The UK’s finance gap to meet its nature-related outcomes is between £44 billion and £97 bln over the next 10 years, according to the Green Finance Institute.

This will require a huge burst of investment from the private sector for many nature-related outcomes that have historically been public funded, such as biodiversity restoration, flood prevention, and clean water.

The scale of funding required means there is space for a wide variety of businesses and investment models to come into UK nature, said White.

LAND ACQUISITION STRATEGY

The company buys a wide variety of land areas and assesses them independently when deciding the range of natural capital products and services to deliver.

The aim is to ultimately acquire 250,000 acres of land in the UK for natural capital regeneration purposes and also to expand internationally in time, White said.

“One of the factors that we look for when we’re doing site selection is areas that link up areas of existing habitat and create bigger, better, more connected spaces for nature,” he said.

“BNG is exciting in its potential to link up parcels of nature recovery land and create corridors through working with local authorities.”

“It makes it a lot easier for us from a land management perspective, if the people around us are doing nature recovery as well and you get more units if you’re delivering on strategic planning for biodiversity,” he explained.

Leighon Estate in Devon. Source: Oxygen Conservation

SCALING UP

Oxygen Conservation’s woodland creation schemes being planted this spring are expected to collectively generate around 100,000 carbon credits across four different sites in Exmoor (a farm partnership), Dartmoor (rainforest regeneration), Yorkshire (upland hill farm), and in Wales (woodland expansion).

The schemes will monetise the carbon via the government-backed UK Woodland Carbon Code (WCC), whereby developers are rewarded for planting and sustainably managing trees through the sale of independently verified carbon units.

The WCC is well regarded in the VCM for high standards of sustainable forest management and is endorsed by ICROA, the global umbrella body for carbon reduction and offset providers in the market.

There is high demand for these credits in the UK due to the perceived higher quality assurance, with credits sold under the WCC and PCC schemes found to be some of the most expensive in the VCM, according to Ecosystem Marketplace.

Data released in Oct. 2023, saw the average price of British woodland units increase to around £25 per tonne in the first half of 2023, from £15 in 2021, while peatland credits were around £24 in 2022.

Prices are similar to some of the other high-priced nature-based carbon removal credits around the world, such as the Delta Blue Mangrove project in Pakistan (VCS2250), where sellers are asking $29.10 for V19 and V20 credits, or the Green Trees project in Arkansas (ACR114) where sellers want $34 for V20 units.

BURSTING INTO BNG

Oxygen Conservation is also looking at two projects in the burgeoning BNG market, said White – one in Devon and another in Norfolk – each of which is 700-800 acres and a mix of scrub and open grassland.

“BNG is way more complicated than the carbon market as it is much more of an open brief of how can you improve a landscape for biodiversity. So, it’s really exciting because it means we can do much more complicated and variable projects,” he said.

The BNG market will likely become more spatially specific than the VCM and build up around demand for credits in certain areas from developers. Demand is more likely to arise in the country’s south, he added.

The market’s complexity will also likely extend to the contracting aspect between buyers and sellers of BNG units, as biodiversity is spatially diverse, with a scrubland unit in Devon different to a scrubland unit in Northumberland, “so it is difficult to know how it will pan out”, he said.

Oxygen Conservation is working with a contractor to help liaise with local authorities to generate the BNG units, and then sell the units to developers.

Local authorities are short of the ecologists and other resources needed to implement the BNG policy, according to the GFI, while market onlookers are concerned that the scheme could even incentivise developments in areas intended for nature recovery.

Demand for BNG units is strong, with the Iford Estate farm in the South Downs National Park almost sold out of its 211 BNG units over 32 ha of grass and scrubland.

The estate told Carbon Pulse last November that the price for each unit varies.

The prices for statutory biodiversity credits range from £42,000 for grassland activities up to £650,000 for lakes, though being a ‘last resort’ option for developers, they are more expensive than other units.

Credits can be bought by developers and counted towards their 10% gain as a backstop.

The price of each BNG credit, generated by developers such as Oxygen Conservation, is generally seen to be around £25,000 a unit, so substantially cheaper than the price of the statutory biodiversity equivalents.

SOCIAL IMPACT

Ensuring its projects deliver beneficial social impact is also high priority for Oxygen Conservation.

It works sensitively with the 60 or so people currently living on the land it owns, and tries to use local contractors wherever possible, said Elly Steers, marketing manager at the company.

“We get a mixed response to the land conversion we do – we have had some pushback to installing wind turbines in Scotland and some critique to moving away from traditional farming but generally, once people understand that we are mixing both regenerative agriculture with restoring rural buildings, ecotourism and land restoration, we get a much more positive response,” she said.

Over time, the team also aims to expand into building ‘net zero housing’, but will do so alongside nature recovery, said White.

By Bryony Collins – bryony@carbon-pulse.com