Biodiversity net gain rule moves up investors’ agenda

A biodiversity net gain rule in the UK, which is expected to come into effect in late 2023, is 'moving up investors’ agendas”, Aviva Investors says.

A biodiversity net gain rule in the UK, which is expected to come into effect in late 2023, is “moving up investors’ agendas”, Greta Talbot-Jones, associate director at Aviva Investors told New Private Markets on the sidelines of the Responsible Investment Forum 2022: Europe.

The new rule, which was introduced by the UK government as part of The Environment Act last year, means all planning permissions granted must achieve a biodiversity net gain of at least 10 percent and will need to be secured for at least 30 years. This can be achieved by establishing or enhancing wildlife habitats and vegetation areas through tree planting, new grasslands, wetlands or peatlands.

Aviva Investors, which currently manages $27 billion worth of real estate investments, has taken a “strong interest” in biodiversity; as such the recent net gain rule is of “growing interest” to the firm, Talbot-Jones explained.

While the biodiversity net gain rule is not expected to come into effect until the end of 2023, investors are starting to pay more attention to this and are are figuring out the best way to implement it into their investments, Talbot-Jones said.

“Its an exciting development… we are starting to think about this internally already. Before net-biodiversity came into play, we had some sites that were being pushed into that direction, but now we’re realising there is a lot of potential there and development teams are actively looking for opportunities.”

The net gain will be measured using a biodiversity calculator created by the Department for Environment, Food & Rural Affairs, which can be used to demonstrate the biodiversity unit value of an area and assess ecosystem disruptions caused by development or changes in land management. Credits can then be bought by developers as a last resort when onsite and local offsite provision of habitat fail to meet the net gain required.

“There is going to be a lot of reshuffling in terms of these biodiversity units and where they can be applied to other developments in the vicinity…I’m seeing an immediate mental shift there in terms of looking at opportunities in existing sites,” Talbot-Jones said.

Following the growing recognition among industry participants of the need to transition to sustainable business models that protect biodiversity and ecosystem services, the International finance Corporation (IFC) has released new guidance on the market.

Published last week, the Biodiversity Finance Reference Guide allows investors to identify opportunities to address the key drivers of biodiversity loss in their production practices, to integrate nature-based solutions into their operations and to develop nature conservation activities.