Mobilising private investment in natural capital: report

This report looks at how to encourage responsible private investment into peatland restoration, including how to overcome barriers to scaling voluntary carbon markets to restore peatland in Scotland.

Annex C: Interim Principles for Responsible Investment in Natural Capital

An overview of how the six Interim Principles for Responsible Investment in Natural Capital guided the design of the proposed SCF and PFG mechanisms.

Interim Principles for Responsible Investment in Natural Capital

Considerations for the proposed SCF and PFG

1. Investment that delivers integrated land use

  • As the primary focus of the SCF is on peatland restoration alongside the carbon benefits generated, the restoration of these environments will deliver wider ecosystem services including improving biodiversity, reducing flood risk and supporting amenity value
  • Given the ability to aggregate projects, it may be possible for the fund to support peatland projects which may not be financially viable on carbon revenue alone (e.g. due to inaccessibility of site), but deliver wider environmental, social and economic outcomes
  • It is possible to structure the PFG mechanism to incentivise projects which include targeted characteristics (e.g. demonstrated local community involvement) through implementing a higher reserve price for these projects. These targeted characteristics can be amended from auction to auction, providing flexibility to align with national priorities

2. Investment that delivers public, private and community benefit

  • The structure of the SCF should enable the benefits of peatland restoration in Scotland, both monetary and non-monetary, to be shared between market participants, local communities and the general public
  • There are an array of benefit sharing mechanisms which can be incorporated within the fund to support this benefit sharing, however a balance is required in order to ensure projects remain financially viable in order to crowd-in investment
  • In addition to funding upfront capital costs, the SCF could support the capacity building of contractors and other relevant jobs, boosting the economy of local communities

3. Investment that demonstrates engagement and collaboration

  • Important to consider how communities could have their voice heard in major investment decisions, e.g. a public interest test
  • Once up and running, engagement materials, including case-studies of success could be published to build awareness of the benefits of peatland restoration to public, private and community stakeholders and catalyse further interest in peatland restoration
  • The PFG could require projects to demonstrate sufficient community participation in order to be eligible for the guarantee or a higher reserve price

4. Investment that is ethical and values led

  • Investors in the SCF should meet the six principles for responsible investment

5. Investment that is of high environmental integrity

  • Strict eligibility criteria should be imposed for the purchase of carbon credits. E.g. buyers must be able to demonstrate progress against an emissions reduction target in line with SBTi's criteria and/or certain industries should be restricted from purchasing credits
  • Whilst out of scope for the SCF and PFG, improvements in the monitoring of peatland condition will be key in the delivery of a high integrity market.
  • Transparency is critical. All transactions should be made publicly available through the UK Carbon Registry

6. Investment that supports diverse and productive land ownership

  • The SCF should incentivise a leasehold model, rather than freehold, supporting collaboration with communities and reducing the negative impacts associated with "Green Lairds"
  • Where existing leases are in place, the fund should engage relevant parties (e.g. tenant farmers, crofters) early to consider opportunities for shared benefit



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