What are nature markets?

A nature market is a mechanism in which investment into nature is funded through the sale of units of ecosystems services.  

Traditionally, flows of money into the natural landscape come from food, timber and recreation. Nature markets aim to unlock areas in which investment does not usually flow, such as carbon sequestration, biodiversity, water quality improvement and flood mitigation.  

We call these ecosystem services. Nature markets in the UK are defined by the type of ecosystem service they can facilitate. 

The four main ecosystem services

• Carbon – carbon sequestered or emissions avoided through improvements made to soil or habitats
• Biodiversity – improved biodiversity through restored or connected habitats
• Water quality – improved water quality, such as decreased risk to run-off
• Flood mitigation – reduced flood risk through natural flood management

Ecosystem services require natural capital (soil, air, living things – often a combination) as a facilitator – somewhere where ecosystem services take place. The value comes from the ecosystem services that are produced from the natural capital.  

On-farm examples of natural capital and the corresponding ecosystem services and nature markets 

An appropriate area for ecosystem services may be on marginal land where land can be removed from arable production and trees planted there instead.  

Carbon credits can then be sold to a business that needs to offset its carbon footprint.  

This provides financial reward for the farmer/landowner and allows the business to reduce its carbon footprint. 

If we break it down to the fundamentals, then we see a seller and a buyer: 

Seller – Individuals or entities that control land use and can implement changes to enhance ecosystem services. This includes farmers, estate owners, local authorities, charities and private companies. 

Buyer – Usually, businesses that can benefit from those ecosystem improvements or that are required to pay for improvements to compensate for their own activities. Buyers can be motivated on a voluntary basis or to meet a regulatory requirement.

Key principles of nature markets 

Additionality: The environmental improvement must be above and beyond what would have happened without the investment.

Permanence: Changes made (like woodland creation) should be maintained over the long term to ensure benefits persist.

Measurability and verification: Ecosystem services must be quantified, monitored and verified by accredited bodies to ensure credibility.

Transparency: Clear information on ownership, baselines and rights to ecosystem services is essential to maintain trust.

Ensuring high standards: The different actors within nature markets 

To ensure high integrity and standards. there are different actors within nature markets. 

Government: Sets the rules, creates incentives and makes sure markets are legal and fair. 

Standards and codes: Provide clear rules for measuring and proving environmental benefits so everyone plays by the same rules. 

Find out about the the British Standards Institution Flex standards on the page Which nature-based scheme is right for your business?

Certifiers and verifiers: Independent experts who check that projects are real and meet the standards. Below are some examples. 

• Verra (VCS – Verified Carbon Standard) 

• Gold Standard 

• Plan Vivo 

Registries: Keep official records of projects and credits, making sure no one cheats or double counts. The UK Land Carbon Registry is an example of a registry; it  stores and displays data about Woodland Carbon Code and Peatland Code projects as well as the ownership and use of carbon units.  

These stakeholders are working closely to maintain and improve the integrity of nature markets within the UK. 

A growing opportunity 

Nature markets represent a growing opportunity to channel private investment into environmental improvements by monetising ecosystem services.  

By linking natural capital to measurable outcomes like carbon sequestration, biodiversity gains, water quality improvements and flood mitigation, these markets can offer new income streams for land managers while aiding the business to meet sustainability targets. 

However, land managers need to ensure they support the needs of their business considering scheme requirements. The future success of nature markets depends on ensuring additionality, permanence, transparency and credible verification.  

Continue reading about nature markets 

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