Rural View visited Gaynes Park Estate in Essex, where the team is looking to the future to identify new income streams through delivering environmental benefits.
Making natural capital pay
Natural capital is the new diversification.
It is set to become increasingly important everywhere, from the corridors of Whitehall to the estate manager’s office and the farmhouse kitchen table.
And, with payments in this sphere shaping up to be the best alternative to the Basic Payment Scheme, landowners may soon find that natural capital is just as important as the production of food.
Broadly, natural capital encompasses elements that directly or indirectly produce value to people – ecosystems, species, freshwater, land, minerals, the air and oceans. In the case of estates, these ‘assets’ include soil, crops and plants, woodland, hedgerows and other natural barriers, ditches, watercourses, lakes and ponds.
What is natural capital?
“natural capital encompasses elements that directly or indirectly produce value to people.”
But what is it, and what opportunities does it offer estates for income generation in a post-CAP world?
Finding and developing new income streams as subsidies are phased out is a key focus for farms and estates across the country.
Guy Chisenhale-Marsh is the owner of one such estate. At Gaynes Park in Essex, he has been working with Mark Russell, partner and natural capital lead at Carter Jonas, to identify the opportunities which could yield regular income and/or capital gains.
The key question is what each element of this asset is worth; and that is a question which is not always easy to answer.
The value is attributed when the natural asset is used for a service that provides benefits to the business and society.
Despite having a strong accountancy base to the calculation, the assets cannot always be realised in hard cash, nor appear on the balance sheet.
But their value can be realised in new income streams for the farm or estate, as Gaynes Park has found out.
Mark has identified nine potential natural capital opportunities on the estate. These will only be exercised if and when the right project comes along – one that meets the requirements to attract public funds (subsidies or grants) or private/market funds, and that fit with the overall strategy of the estate.
Placing a value on natural capital is one way to help landowners and managers decide how best to utilise assets. However, this is a complicated area and one where, as yet, there is no single recognised method of evaluation.
The ecologist approach attempts to measure all elements of natural capital present on the estate to produce value. However, the data collection process is lengthy and expensive.
The approach that Carter Jonas is taking focuses on two potential income streams: biodiversity net gain, which is closely linked to development opportunities, and carbon offsetting, where there is an existing market for corporate businesses.
Both revenue streams have the potential to build capital value into an estate through projects that could come forward in the next six to 24 months.
Understanding the context of the estate’s location is just as important as knowing what’s going on within the estate itself.
“To calculate biodiversity opportunities on the estate, we start by identifying the current land uses, and the public policy constraints and opportunities that apply to that land – such as the green belt and the public highways network. This information tells us about the environment within which the estate sits, and informs the next stage of the process,” explains Mark.
Natural capital valuation
“Using GIS data, we overlay our knowledge of land uses with existing income streams from the estate. This enables a better understanding of how the estate works and what opportunities there might be.
“For each piece of land there might be several opportunities. The natural capital calculation takes each one on a case-by-case basis, since each change has a compound effect.”
Defra’s Biodiversity Metric is used to assess the losses or gains in biodiversity that may happen as a result of each proposed change in land use or management. It provides a proxy biodiversity value based on different land use types.
“The Defra tool is a generalised approach, but we expect this to be the standard method that we will use for potential future payments based on biodiversity net gain,” says Mark.
Assessing carbon sequestration and offsetting gets a bit more complicated. There are a number of different schemes available but, as yet, no full verification scheme.
“To keep it simple, we assess the amount of carbon stored, and the income that could be generated for keeping it in the ground through various processes or schemes,” says Mark.
Every estate’s natural capital valuation will vary, and so will the extent and type
of opportunities available. However, the government has indicated that future subsidies will depend on the provision of public goods – increasing the value
of natural capital is likely to be part of that.
The biggest opportunity for estates in close proximity to urban areas may come from housing development and enhancing the public’s enjoyment of the countryside.
“For Gaynes Park, on the outskirts of Epping, the natural capital opportunities are going to be driven by the local planning authority area. The estate is in a good position to benefit from the biodiversity net gain offset from a proportion of the 12,000 new houses that
are required locally,” explains Mark.
Estates and farms in more rural areas of the country,
where housing pressures are lower, may find that the Government’s ELM (Environmental Land Management) scheme provides subsidy income for improving an estate’s natural capital. Here, the focus of projects may be more on carbon capture or offset, rather than biodiversity net gain.
It is worth considering how any private deals struck now
may interrelate with future Government schemes. In more
rural areas, Government subsidy may be far more attractive
and easier to implement than biodiversity improvement or carbon offsetting schemes through the private sector.
Timing is also crucial. Within the next five years, estates need to think about the structure of their businesses and their income sources post-CAP. The optimal timing and longevity of natural capital schemes will depend on the location and business opportunity.
In areas where development and biodiversity net gain projects are likely to provide the most attractive opportunity, estates might want to look at potential schemes now. Those ready for the market early are likely to get the best overall results. The planning and development environment is very dynamic, and land uses that seem certain now may be very different in 10 years’ time.
In rural areas, where there are fewer changing pressures on the landscape, businesses may be happy to lock up land for natural capital schemes for 30 years and provide a guaranteed income that offers stability for a generation.
In all cases, landowners and managers should start to look into options now so that, by 2025-26, farms and estates already know what natural capital opportunities are available and how they could benefit.
Localised opportunities
There are several schemes being put in place now by estates that have a natural capital enhancement element to them, linked to the concept of public goods for public money.
Estates may be entering into these schemes for their own public interest rather than for commercial reasons. High profile examples include The Crown Estate and National Trust, who have trialled schemes to enhance the value of their natural capital at estate or farm level.
“For Gaynes Park, on the outskirts of Epping, the natural capital opportunities are going to be driven by the local planning authority area. The estate is in a good position to benefit from the biodiversity net gain offset from a proportion of the 12,000 new houses that are required locally,” explains Mark.
These early adopters see the benefits from an environmental or conservation angle, and there is a potential public relations advantage to it as well.
“For other estates, we need to be careful to select those schemes that not only provide a public benefit, but also derive estate income too,” says Mark.
“Timing is key. We may advise estate managers to hold off on projects because in two to three years’ time, they could receive a subsidy, grant or other income for doing it. At the moment, we may implement a project for the right reasons, but the viability of the estate will be negatively impacted by not exploiting its full commercial potential.
“A lot of the policies that we’re hearing from the Government are based on ‘additionality’, where you will be paid for increasing the value of a natural asset – for example storing more carbon or improving the biodiversity. If you do the work now, you may not get paid later.”
However, estates that want to monetise their natural capital now can still do so.
“We would look at a range of options and take commercial deals as they come along. We need to be comfortable entering that deal now – a better one might come along tomorrow. But that risk analysis is part of the due diligence that we carry out at Carter Jonas,” says Mark.
Risk vs benefits
Mark Russell, along with colleagues in the Carter Jonas Rural team, has been managing Gaynes Park Estate for over 20 years. Recently, Mark has been assessing its natural capital assets and identifying potential projects for future income generation.
With a relatively small farming operation that covers its costs, and the expected reduction in future subsidies, the estate needs to look at alternative income and opportunities for the family to liquidise some capital.
“Revenue from natural capital projects could be a potential replacement for the farming activity we have done over the years, to make it more viable, while at the same time being quite an exciting project,” says Guy Chisenhale-Marsh, the estate’s owner.
“It’s early days. We don’t have all the information yet, but we have identified some interesting potential projects.”
Any links that can be made between natural capital projects and the estate’s other activities is an advantage.
“The wedding venue benefits directly from the environment in which it is set,” explains Guy. “Many of our clients come from central and north London, and they really appreciate the venue’s rural setting.
“The sheep grazing along the driveway, the woodland areas and lakes all add to their impression. Anything we can do with our natural capital that further enhances that experience for our wedding clients, while at the same time generating additional income, helps the wider estate in the longer term. We have recently added a woodland ceremony area, making use of woodland close to the wedding complex [marked as number 1 on the map below], and we have an established woodland burial site.
“The burial site [2] is an interesting project, and a good example of how we are already generating income from some of our natural capital. It’s a 20-hectare area on a 100-year lease to a private organisation, and we get a small commission from each plot sold. Everything used in the burial site is biodegradable and it makes good use of the wood’s resources.”
Case study: Gaynes Park estate
The site is at the far north of the estate, and one of the potential natural capital projects involves infilling the 40ha gap [3] between this woodland and a larger block of woodland to the south, in order to create one contiguous natural area. This is marginal arable land, and a mosaic of land uses including additional woodland has the potential for income from increasing biodiversity and carbon capture.
Gaynes Park borders the market town of Epping, where there is significant pressure for new housing. Arable land on the far west of the estate [4] is ideally located to relieve that pressure and could provide capital gains from the land value, as well as regular income from the biodiversity net gain required on the site by, for example, creating a public park.
“It’s been a very interesting process, understanding what natural capital can achieve here at Gaynes Park. We’re still learning, and I’m looking forward to seeing which of these opportunities materialise into income, and where we take this in the future,” says Guy.
Strengthening the woodland belts along the M11, potentially with a soil bund created from soil movements from local infrastructure projects [5]
Parkland regeneration, in particular on the pastureland around the wedding venue, where veteran trees will need to be replaced in the future [6]
Management of the River Roding catchment through the creation of wet woodland or reedbeds on tributary streams running through the south of the estate [7]
The creation of meadow grassland field margins on arable land, hedgerow tree planting and the rounding of field corners, utilising the corners for further biodiversity schemes.
Owned by the Chisenhale-Marsh family in Essex for several generations
Gaynes Park Estate: the facts
Successful wedding venue in converted barns
287 ha of arable (growing wheat, barley, oilseed rape and beans) and grassland, with Texel sheep forming the livestock enterprise
120 ha of woodland including a woodland burial site, leased to a private organisation
22 let residential units, commercial units and land let to third parties across local villages
“The optimal timing and longevity of natural capital schemes will depend on the location and business opportunity.”
“For each piece of land there might be several opportunities. The natural capital calculation takes each one on a case-by-case basis”
Burial Site
2
40ha gap
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Arable land
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Woodland belts along M11
5
Parkland regeneration
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River roding catchment
7
Woodland wedding venue
1
M11
M25
Burial site
Woodland wedding venue
40ha gap between woodland
Woodland belts along M11
Arable land
River roding catchment
Parkland regeneration
Epping is less than 20 miles from London.
The Gaynes Park wedding venue
Visit their website
Guy Chisenhale-Marsh (left) and Mark Russell
Other natural capital income opportunities the estate is considering include:
“ Anything we can do with our natural capital that further enhances that experience for our wedding clients, while at the same time generating additional income, helps the wider estate in the longer term. "
Natural capital
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