Funding natural capital – Applying for the Natural Environment Investment Readiness Fund (NEIRF)
Nature and biodiversity are at the heart of the government’s plans for the environment over the coming years. Local authorities have a key role in delivering these plans, through meeting new requirements on nature recovery contained in the Environment Act, alongside the many other commitments that local authorities already have to achieve. Attracting investment for nature recovery projects will be central to achieving these objectives. Principal consultant Yvonne Rees explains how local authorities can attract investment to support these projects, what funding is available from Defra, including from the Natural Environment Investment Readiness Fund (NEIRF), and how Eunomia can help.
Nature recovery requirements
The recently passed Environment Act requires the development of Local Nature Recovery Strategies (LNRS) at the county level, with approximately 50 needing to be written to cover the whole of England. This will add to the already extensive range of environmental goals local authorities are tasked with achieving, including their own commitments to reaching Net Zero.
LNRSs will set local priorities for nature by mapping existing areas requiring protection and making proposals for creating or improving habitat for nature or wider environmental goals. They are not a delivery mechanism, instead identifying opportunities for investment in environmental projects, and leveraging funds from financial mechanisms such as Biodiversity Net Gain – where new development schemes will be required to deliver a 10% increase in biodiversity – and other sources of finance.
The development of LNRSs will be a challenge for local authorities, as no new resources have been made available to support this work. However, they also present an opportunity to take a new strategic approach to nature recovery and address environmental challenges in a more holistic manner.
LNRSs are a chance to think about nature more broadly, targeting not just biodiversity enhancement but planning actions that benefit the environment and people as a whole. LNRSs can be used to develop plans that simultaneously address a range of environmental duties and concerns, such as mitigating flood risk and climate change impacts, improving local air quality, and achieving nutrient neutrality, as well as providing green spaces, and contributing to health and wellbeing.
An integrated approach may seem complex, but it would bring efficiencies and also offers the potential to attract a wider pool of investors and funders with related objectives to support individual projects that address multiple priorities. The bottom line is that by tapping into different budgets, it should allow more projects to go ahead to support delivery of the LNRS and other objectives.
What is NEIRF?
To help develop projects capable of attracting multiple sources of investment, Defra has launched the Natural Environment Investment Readiness Fund (NEIRF). It provides grants of between £10,000 and £100,000 to stimulate private investment in projects and the development of market-based mechanisms that improve and safeguard our domestic natural environment. 29 projects are underway thanks to the first round of funding.
Generally, the projects should:
- Help achieve one or more natural environmental outcomes from the 25 Year Environment Plan,
- Produce an investment model (for example, to deliver biodiversity net gain) that is capable of being scaled up and reproduced; or
- Have the ability to produce revenue from ecosystem services to attract and repay investment.
Ecosystem services that projects could sell to produce revenue include:
- Carbon credits from woodland creation or peatland restoration, using the Woodland Carbon Code or Peatland Code;
- Biodiversity units from a habitat bank, using the Natural England biodiversity offsetting metric; and
- ‘Catchment services’ (such as improved water quality and natural flood management benefits) resulting from natural environment improvements.
The NEIRF aims to fund a diversity of ecosystem service and investment models. It welcomes proposals that consider interactions between ecosystem services or focus on more specific or complex elements of existing codes or metrics. For example, some current projects involve transforming various sites (from kelp beds to grasslands) to improve environmental outcomes.
Grant funding from the NEIRF is also designed to support local authorities to obtain professional advice to help develop environmental projects, address barriers to investment and present an attractive case for potential investors, while developing a market for the ecosystem services they are selling.
The application window for NEIRF grants is now open, with a deadline of 3rd February 2022.
How can Eunomia help?
At Eunomia, we are well placed to support local authorities looking to apply for NEIRF funding in the 2nd round of applications. We are very familiar with the NEIRF programme, having supported clients delivering NEIRF-funded projects by providing:
- Technical support to identify, quantify and value ecosystem services;
- Commercial support to assess the local market/appetite to test potential for revenue generation approaches and approach potential investors to gain investment for your project;
- Governance advice to develop and appraise options for suitable legal and other structure to manage income generation, external investment, repayment processes and agreements; and
- Operational advice, to develop costed implementation plans, marketing and communication strategies, and help develop capacity through close partnership working.
We are passionate about supporting the development of local structures to facilitate better investment in the environment. We work closely with clients to provide truly independent advice on how best to develop investable propositions and explore local funding mechanisms that suit the local administration, people, place and market. We aren’t just focused on design; we also support clients with the implementation of our recommendations to ensure long-term impact.
Please get in contact with us if you would like to speak to our team about how we can help you.