What is “green finance” and what does it have to do with farming?

Last week at GO Falkland, Colleen McCulloch, our Scotland Farming Lead, chaired a discussion about green finance to get some insights into what it means for farmers now and how it might look in the future.

Perhaps you’ve heard of carbon credits, habitat banking or the Sustainable Farming Incentive, if so then you’ve heard about green finance. According to the United Nations Environment Programme, green finance is any form of funding, including public, private or not-for-profit sectors, that goes towards sustainable development. If we want to get to net zero, achieve the targets in the Sustainable Development Goals and mitigate climate change, we need more green financing.

We invited speakers at the regenerative farming event GO Falkland – the Scottish equivalent of Groundswell – last Wednesday to share some views around existing forms of green finance and the direction it might be heading.

A public body creating space for private finance

Billie Golden is the Woodland Carbon Code coordinator at Scottish Forestry. They introduced the code as a set of principles and standards for quantifying carbon sequestered by new woodland creation in the UK. Each carbon unit can be translated into a carbon credit (sometimes called carbon certificate), representing one ton of carbon dioxide removal from the atmosphere, which can be used to balance out the farm’s own emissions or sold to the government or private companies looking to offset their emissions. The price and number of carbon credits varies depending on the project, but a recent example shows that a 10 hectare project might generate 4,000 credits, which – at £20 a credit – could mean an additional income of £80,000.

Billie also mentioned a few things to look out for in advance, the most important being that each project involves a permanent, long-term land use change. Other aspects to consider include start dates for planting (project registration must occur prior to planting), project validation, minimum plot sizes and proving the project would not have been possible without carbon credits (additionality).

Look out for upcoming webinars on the Woodland Carbon Code on the Scottish Forestry website, or check out the eligibility criteria for landowners here.

Charitable assistance and funding

In some cases, it makes sense to work with someone who assists with the application and project design. The Woodland Trust is one of a number of project developers and lays its focus on small to medium sized woodland creation for the Woodland Carbon Code, mostly between 5-7 hectares but going up to 30 to 50 hectare projects.

Iain Moss is an Outreach Manager at Woodland Trust Scotland and spoke about the advantages of guidance from a project developer. This can include access to a free advisory service, fee absorption for validation and verification costs as well as a strong commitment to avoid greenwashing through a selection of carbon credit buyers who demonstrate high environmental, social and governance standards.

The Woodland Trust also supports other ways of getting more trees on farms and covers up to 75% of the costs for planting shelterbelts or new hedgerows. See available options here.

Emerging markets and the role of agencies

Why is it all about carbon? The simple reason is that carbon is the natural capital that is easiest to turn into a measurable, tradeable unit. But Eleanor Harris, Natural Capital and Carbon Leader at Galbraith, spoke about how corporates are starting to think beyond carbon. In England, Biodiversity Net Gain has been rolled out as a way of ensuring overall habitat improvement from new building projects, and the Scottish Government is looking at developing a similar standard.

While the cash component and image are important, she pointed out that this is not the only motivation of sellers and buyers: for authenticity and transparency, there is often a mutual story to be told about the land now and the investment being made to improve it, and agencies such as Galbraith’s aim to pair a landowner’s individual project together with a suitable buyer.

Some reflections

Natural capital, ecosystem services, sustainable finance, nature markets … a lot of these words are new on the scene but many farmers have been engaged with these topics for a long time. Here are some examples:

• Building soil fertility is building natural capital

• Reducing pesticide use increases pollinator numbers which is a service to the ecosystem

• Funding from an Agri-Environment Climate Scheme is a form of sustainable finance

• Nature markets are any arrangement between a buyer and a seller, where a buyer pays for an improvement to be made to the environment

Are you a farmer and unsure where to start? Getting some baseline data about your land, through an integrated or holistic assessment of your farming enterprise can give you valuable insights about where you stand now and how you want to see your business in the future. Tools such as LandApp, Rethink Carbon, LEAF’s Integrated Farm Management or the Soil Association Exchange are ready to use and made for land managers and farmers.

The Soil Association is leading a partnership including Woodland Trust, Finance Earth and Soil Association Certification to explore how small and medium size farms might benefit from green finance. Together with five small and medium size farms in Scotland, we are using a whole-farm approach to develop natural capital projects which can complement, or even improve, continued food production and potentially attract additional investment. This work is being funded through the Facility for Investment Ready Nature in Scotland (FIRNS), supported by NatureScot in collaboration with The Scottish Government and in partnership with the National Lottery Heritage Fund.