Are you ready to sell biodiversity units?

DEFRA guidance, which can be found here, Sell biodiversity units as a land manager - GOV.UK (www.gov.uk) sets out in broad terms what’s involved, which is summarised in this briefing note.

Who can you sell your biodiversity units to?

The market for biodiversity units is likely to include:

• Developers
• Partnerships with local authorities
• Habitat bank operators
• Brokers and trading platforms

There may be benefits to forming partnerships to work collaboratively with other land owners in your locality to create bigger areas on which more nature recovery work can be planned and delivered, so increasing the potential for biodiversity unit sales, and creating some efficiencies of scale.

However, you cannot sell biodiversity units if you are required already to create or enhance habitat for restocking trees, environmental impact assessment compensation or marine licensing.

How to get your site ready to sell biodiversity units

The first step is to find out what nature recovery is needed in your local area. In due course, all areas will have Local Nature Recovery Strategy Plans. In the meantime, you will be able to find initiatives being developed and run by local nature partnerships, wildlife trusts and local authority curated biodiversity actions plans and green infrastructure initiatives, as examples.

Secondly, you should also consider if it will be possible to combine biodiversity net gain with other environmental payments. This is the concept of stacking and bundling. DEFRA have published guidance on this which you can find here: Combining environmental payments: biodiversity net gain (BNG) and nutrient mitigation - GOV.UK (www.gov.uk).

Next, you will need to calculate how many biodiversity units you will have on your site. This needs to be done by a qualified ecologist, who will use a prescribed formula to undertake a calculation. The biodiversity metric is complicated and kept under review. As at March 2023, a new version 4.0 is expected to be published imminently. Follow this link for the DEFRA guidance: Biodiversity metric: calculate the biodiversity net gain of a project or development - GOV.UK (www.gov.uk).

You can create your biodiversity units before you sell them – this is what is known as habitat banking

When you sell your biodiversity units, you will have to enter into a legal agreement, under which you commit to managing the habitat for at least 30 years. This may take the form of a planning obligation entered into with a local planning authority (a section 106 agreement) or a conservation covenant, with a responsible body. Conservation covenants are new, having been introduced by the Environment Act 2021. This is the DEFRA guidance: Getting and using a conservation covenant agreement - GOV.UK (www.gov.uk), which sets out in detail how to enter into and use a conservation covenant and who can be a responsible body. At the time of writing (March 2023) details are awaited for the process of registration of an organisation or entity as a responsible body.

You will also need to prepare a habitat management and monitoring plan and have this approved by either the local planning authority or the responsible body.

Finally, you will need to price your units. The market is still emerging and it is unclear what the balance between supply and demand will look like and what premium you may be able to include in your price.  As a starting point, you will need to prepare a financial model and business plan that factors in all of the costs of:

• Management of the land for at least 30 years, including periodic remedial works
• Monitoring and reporting against the approved habitat management and monitoring plan
• Professional fees for an ecologist, land agent, legal advice
• Insurance costs

You may want to receive and annual income, or a one off lump sum at the outset of your commitment, or perhaps a combination of both. This will depend on your particular business needs and tax status.

Registration of your land

There is a requirement to register your site as a biodiversity gain site, as from November 2023. The register will be maintained by Natural England and currently they have their user platform in Beta.

The register will be publicly searchable, as a public service platform, enabling monitoring and transparency in biodiversity enhancement. The register is not designed as a tool for the market in biodiversity units nor is it a land bank.

The registration criteria is two-fold:

1. The site must be subject to a conservation covenant or s106 obligation requiring habitat enhancement works and their maintenance for a minimum of 30 years post completion.
2. The habitat enhancement must be available for allocation to developments for which planning permission is granted.

This means that a site will not appear on the register until the legal foundations for any sale of biodiversity units have been laid.

It will be possible to sell biodiversity units and allocate them to a development before or after registration.