Natural capital - market framework: engagement paper

This engagement paper summarises the key natural capital market framework co -development issues and questions that will be explored. The content will be used to help inform, guide and support all participants during the engagement and co-development process.

Section 5: Policy alignment

This Section lists the Scottish, UK, and international policies, practices and principles that shape Scotland’s natural capital markets and help to define what high-integrity natural capital markets mean.

Section summary:

Policies and practices shape Scotland’s natural capital markets and help to define high-integrity. Scotland’s natural capital markets could also benefit from specific changes in Scottish, UK and international policies and practices.

As we write the market framework it is worth considering the ways in which the policy landscape supports what we are trying to achieve in Scotland and how can this be taken forward. Please consider:

  • Which Scottish policy dependencies should be reflected in the market framework?
  • How do existing codes and standards support what we’re trying to achieve in Scotland? How should the market framework incorporate these?

Detailed discussion:

Existing principles for natural capital markets include:

  • Scotland’s Interim Principles for Responsible Investment in Natural Capital;
  • the Voluntary Carbon Market Initiative (VCMI) Claims Code of Practice;
  • the Integrity Council for Voluntary Carbon Markets (IC-VCM) Core Carbon Principles;
  • The International Carbon Reduction Offsetting Alliance (ICROA) Code;
  • The Taskforce for Nature-related Financial Disclosures (TNFD) Risk management and Disclosure Framework;
  • The Science-Based Targets Initiative (SBTI) net zero standard;
  • UN Principles for Responsible Investment (UNPRI);
  • UK Gov (2023) Nature markets: A framework for scaling up private investment in nature recovery and sustainable farming; and
  • BSI UK nature market standards.

National, UK, and International Policy Alignment considerations include:

Scottish Policy

Agricultural Reform Programme

Scotland's new Vision for Agriculture seeks sustainable food production, a Just Transition for farm businesses, reduced greenhouse gas emissions, and biodiversity recovery

Land Reform

Natural capital markets should align with Scotland’s ongoing process of Land Reform, including the measures within the forthcoming Land Reform Bill. N.B The Land Reform (Scotland) Act 2016 gave Scottish Ministers a duty to issue guidance about engaging communities in decisions

Regional Land Use partnerships

Five Regional Land Use Partnership pilots were set up in 2021 to enable natural capital-led consideration of how to maximise the contribution that our land can make to addressing the twin climate and biodiversity crises

Scottish Land Rights and Responsibilities Statement

Provides an overarching definition of responsible land ownership, use and management, which should underpin any strategy or policy relating to land. Includes reference to the importance of community engagement and collaboration; the need for transparent decision-making; references just transition and fairness; talks about balancing interests and benefits

Community Wealth Building consultation

In 2023, the Scottish Government published a consultation on Community Wealth Building (CWB). The responses from the consultation will be used to help inform the development of CWB legislation and policy.

UK Policy

The UK nature markets framework

The framework set’s out how the UK government will act to build trust, confidence, and scale of nature markets.

There's currently a degree of alignment between Scottish and Westminster Governments’ market visions. There will need to be some deviation to reflect the diversity of nature markets visions, for example Scotland’s market framework will have a stronger requirement for community benefit

The British Standard Institute’s (BSI) UK nature market standards

The BSI standards are intended to ensure that the quantification of ecosystem services delivered by nature-based projects is carried out rigorously, consistently, and that they deliver the claimed outcomes. The BSI has a three-year project plan. A further iteration of our market framework might be needed to accommodate future BSI publications

UK Emissions Trading Scheme (ETS)

The ETS Authority expanded the UK ETS scope last year, intending to include greenhouse gas removals (GGRs), including nature-based removals like afforestation alongside engineered ones

International Policy

Voluntary Carbon Market Initiative (VCMI)

VCMI aims to build buyer integrity in Voluntary Carbon Markets. Its voluntary claims code provides a rulebook for companies and non-state actors on proper usage of voluntary carbon credit in emissions reduction goals and net-zero commitments

Integrity Council for Voluntary Carbon Markets (IC-VCM):

IC-VCM, an international governance body, enforces high standards for ethics, sustainability, and transparency in global Voluntary Carbon Markets. It has established ten Core Carbon Principles for high-quality carbon credits on the supply side, defining valid programs and methodologies

International Carbon Reduction Offsetting Alliance

ICROA’s Code of Best Practice outlines international guidelines for offset-inclusive carbon management, accrediting organizations based on minimum requirements. The Woodland Carbon Code is ICROA accredited, and the Peatland Code seeks accreditation in 2024

Taskforce for Nature-related Financial Disclosures (TNFD)

TNFD provides recommendations and guidance for organisations to report and act on evolving nature-related dependencies, risks, and opportunities, promoting a shift towards nature-positive outcomes aligned with the Global Biodiversity Framework. It follows the 2017 Taskforce for Climate-related Financial Disclosures (TCFD). The UK Government has since mandated TCFD-aligned disclosures for large entities in the UK private sector

Science-Based Targets Initiative (SBTI):

SBTI, backed by the CDP, the UN Global Compact, WRI, and WWF, enables organisations to set science-based emissions reduction targets. It has recently proposed exclusion of emissions reductions, such as those achieved from peatland restoration, from their criteria. If this policy decision is confirmed

it will likely reduce the demand from private investors for carbon credits from peatland restoration

UN Principles for Responsible Investment (UNPRI):

UNPRI’s The six Principles for Responsible Investment offer possible actions for incorporating Environmental, Social and Governance (ESG) issues into investment practice

Please consider:

  • How else can Scotland’s Market Framework help to realise the opportunities of natural capital markets?



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