Ecosystem Restoration Code (ERC): A Competent Model for private investment in nature restoration in Scotland

5. Accounting for ecosystem condition and biodiversity

ERC projects shall follow best-practice in accounting for ecosystem condition and biodiversity baseline and gains.

5.1 Ecosystem condition / biodiversity baseline

5.1.1 Requirement

• ERC projects shall provide an evidence-based, quantitative description of the baseline condition of the supply area

NOTE 1 The baseline should also include an assessment of any cross-cutting indicators deemed necessary for monitoring broader aspects of project success, informing adaptive management etc (see sections 4.2, 4.3 and 4.5)

• The baseline status of the supply area shall be reported transparently, including whether all or part of the supply area is also a protected area

NOTE 2 Protected areas of relevance to the ERC are listed at section 3.7

• The baseline assessment shall include a description of an appropriately determined reference condition(s) for the supply area

NOTE 3 Reference conditions describe a desirable and attainable set of biodiversity outcomes for a supply area and are useful in ERC projects for setting management objectives / informing adaptive management (see section 4.2) and selecting an appropriate metric (see section 4.5). The ERC Field Protocol includes guidance on establishing a reference condition(s) for the supply area. The use of any alternative methods should be justified, including a clear description of the method

• All aspects of ERC baseline assessments shall be undertaken in accordance with relevant provisions from the ERC Field Protocol

NOTE 4 Where relevant, the ERC Field Protocol includes different methodological prescriptions for each ERC approved metric (see sections 1.6 and 4.5). This will determine the sampling strategy (i.e. what aspects of habitat, ecosystem condition, species etc are to be sampled) and data collection methods to be used. Projects should follow the baseline assessment methodology for the specific ERC approved metric being used

• ERC projects shall use the same quantification metric throughout the full project duration, including for the baseline and ongoing monitoring

NOTE 5 Any changes to the quantification method and metric for the ongoing monitoring of the ERC project shall be: (i) clearly justified; and (ii) provide comparable measurement results to the baseline scenario

• Significant and intentional degradation of the nature value of the supply area to artificially reduce the baseline and enable a greater biodiversity gain shall not be permitted (see section 3.5)
• Any material sources of uncertainty in determining the baseline shall be assessed, mitigated where possible and made transparent
• All survey work required to baseline the supply area shall be undertaken by a competent person(s) in line with the ERC Field Protocol

NOTE 6 The attributes of a competent person(s) are described at section 4.5.1

5.1.2 Means of validation

For the description of the supply area, the PDD shall include:

• Appropriate maps, ground-based photography and / or remotely sensed images to indicate previous land cover on the supply area
• The results of the field survey undertaken as per the requirements of the ERC approved metric being used and the ERC Field Protocol

NOTE 7 This should include baseline habitat maps in line with the habitat typology required by the ERC approved metric being used

For the baseline calculations for the supply area, the PDD shall include:

• The ecosystem condition or biodiversity baseline calculations for the supply area as per the ERC approved metric being used for the project

5.2 Management of leakage

5.2.1 Requirement

• Leakage shall be reduced as far as possible

NOTE 1 This should be achieved by: (i) spatial targeting of ERC project supply areas to locations where delivering biodiversity gain will cause limited displacement of existing production activities; (ii) ensuring that any irreplaceable biodiversity^[20] (ecosystems, habitats or species) within the supply area is not negatively affected by the ERC project; and (iii) ensuring that sites and locations important for biodiversity outside of the supply area but within the landowner / manager’s control are retained (i.e. to avoid the displacement of productive activity from the supply area to other areas of higher biodiversity value within the landholding)

• The landowner / manager shall confirm any intention to change or intensify the use of land elsewhere on the landholding as a consequence of the ERC project’s nature restoration activities within the supply area

NOTE 2 Projects should report the location (relative to the supply area) and amount of any foregone production as a result of the ERC project to identify the potential for leakage. This could include the area of land taken out of production (ha) and / or the amount (e.g. tonnes, litres) or value (£) of associated lost production or revenues

NOTE 3 Consideration of leakage shall include ERC project induced changes in land use or land use intensity across the entire landholding. For the purposes of the ERC a landholding can include non-adjacent land parcels within Scotland, no matter how spatially disparate they are

• If any leakage (land use change / intensification outside the supply area but within Scotland) is proposed or likely as a consequence of the ERC project, projects shall carry out an assessment to determine whether this will result in any loss of ecosystem condition or biodiversity

NOTE 4 Leakage should be reduced as far as possible. Where leakage is proposed this should be within Scotland only. Any leakage outside of Scotland should be justified

NOTE 5 Assessments of leakage can be qualitative or quantitative. Significant leakage risks should be assessed quantitatively where possible. A quantitative assessment may be stipulated by the third party VVB

NOTE 6 Quantitative assessment of the site(s) affected by the leakage should use the same quantification method and metric as that used for baselining and monitoring the supply area (see section 4.5). This should include an assessment of: (i) the baseline / pre-leakage scenario; and (ii) the forecasted loss of ecosystem condition or biodiversity after the leakage induced change in land use intensity

• Significant leakage induced losses of biodiversity shall be quantified for the project duration and accounted for in the ERC project’s net biodiversity gain

NOTE 7 Losses due to significant leakage should be subtracted from the ERC project’s forecasted or measured ecosystem condition or biodiversity gain to determine the net position. This assessment is “internal” to the project only – i.e. accounting for the biodiversity gain delivered by the ERC project in the supply area and any significant leakage induced biodiversity losses outside of the supply area. It does not relate to any biodiversity net gain assessment that could be required as part of a compensation (“offsetting”) use case of ERC credits (which would require loss and gain accounting between the impact causing activity / development and the ERC project issuing the compensatory credits)

NOTE 8 Ex-ante forecasts (see section 5.3), ex-post monitoring (see section 4.5) and quantitative assessments of leakage impacts on biodiversity should be undertaken using the same quantification method and metric (see section 4.5)

5.2.2 Means of validation

• Where relevant, a statement in the PDD of the measures taken to reduce leakage as far as possible
• Where relevant, a statement in the PDD of intention by the landowner / manager to replace the supply area’s previous land use or activity elsewhere
• A map of the supply area and its surrounding context with any actual or potential leakage risks identified

NOTE 9 Where changes in land use / intensity elsewhere in the landholding have been confirmed these should be indicated clearly on the map, showing the anticipated change (e.g. conversion of grassland to arable)

• Inclusion in the PDD of any qualitative or quantitative assessment of leakage
• Inclusion in the PDD of the calculations undertaken to determine the likely net position for the ERC project’s ecosystem condition / biodiversity gain after losses due to leakage have been subtracted from forecasted gains

5.3 Forecasting ecosystem condition / biodiversity gains

5.3.1 Requirement

• Project developers shall use the forecasting tool for the ERC approved metric being used for the project (see section 4.5) to predict the project’s anticipated ecosystem condition or biodiversity gains over the full project duration (see section 3.1)

NOTE 1 CreditNature’s Ecosystem Condition Index (ECI) metric supported by their Nature Asset Recovery Investment Analytics (NARIA) framework has a high likelihood of being approved for use as an ERC metric (see sections 1.6 and 4.5). NARIA includes the Ecosystem Management Rating (EMR) tool which can be used for forecasting ECI scores following implementation of planned restoration activity^[21]

NOTE 2 Forecasting results should be considered relative to the reference condition established for the ERC project (see section 5.1) to inform goal / target setting and plans for adaptive management and monitoring (see sections 4.2, 4.3 and 4.5)

• ERC projects shall disclose uncertainty levels associated with the use of ERC approved metric forecasting tools
• ERC projects shall not sell ex-ante ERC credits

NOTE 3 Only ex-post selling of verified ERC credits is permitted. Ex-ante selling of ERC credits is not permitted (see sections 4.5 and 4.6)

• At verification, if any changes to the ERC project mean that there is a 10% or more reduction to the forecasted ecosystem condition or biodiversity gain of your project over that time, the forecasting tool calculations shall be updated for the full project duration

NOTE 4 ERC projects may wish to update their forecasting tool calculations voluntarily (i.e. if there is a <10% reduction in the forecasted gains). This could be, for example, in the instance that gains are greater than expected

• Updated forecasting tool calculations shall include a comparison between the new and old calculation
• The current version of the ERC approved forecasting tool shall be used

5.3.2 Means of validation

• Use of an approved ERC forecasting tool
• As required, other evidence to justify the forecasted ecosystem condition or biodiversity gains

NOTE 5 This could include, for example, monitoring or evaluation data and evidence from similar restoration projects being delivered in similar biophysical / climate / land management contexts