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Natural capital checklist for farmers
Wednesday, 16 April 2025
Busting myths and making natural capital work for farmers have been the focus of a recent roadshow. Laura James outlines some key event takeaways, including a ten-point checklist of things to consider before committing to natural capital markets.
According to the Government’s natural capital accounts, the value of the UK’s ecosystem services was about £1.8 trillion in 2022.
Such eye-watering sums underpin the fervent interest in natural capital markets, which are developing at pace and are increasingly embedded in supply chains, government policy and finance.
As tempting as it might be to put your head in the sand and hope for the best, making the most out of these markets is about understanding the facts, keeping a cool head and making good business decisions.
However, natural capital can feel ‘slippery’, compared to conventional goods and services. For trade, it needs to be pinned down, so it can be defined and measured. Who owns it and who pays for it are also frequently debated.
The workshops identified many uncertainties, which I am exploring during my 2025 Nuffield Farming Scholarship, which looks at barriers to nature markets in agriculture.
In this blog, I discuss three key elements: natural capital language, barriers and action.
Natural capital language
The sheer number of natural capital terms (many used interchangeably) can easily alienate. Understanding those most used is a great place to start:
- Natural capital: Stock of natural resources (living and non-living), such as trees, water, soil and biodiversity
- Ecosystem services: Benefits delivered by natural capital, including food production, nutrient cycling and pest control
- Nature-based solutions: Harnessing natural capital/ecosystem services to address social, economic or environmental challenges (such as climate adaptation, soil, water and air quality improvement, and reversing biodiversity loss)
- Nature markets: Monetising natural capital/ecosystem services, such as payments for ecosystem services (PES) and trading/investment mechanisms based on selling units or credits (including carbon markets, biodiversity credits, nutrient neutrality and water trading)
- Voluntary markets: Where sellers (land managers) generate and buyers purchase units/credits voluntarily (to meet corporate net zero targets, for example)
- Compliance markets: Where sellers/buyers generate/purchase units/credits to meet regulatory requirements (such as to deliver biodiversity net gain)
Although our website outlines some of the key schemes, it can be difficult to track emerging opportunities, especially as what is on offer and what works for your business depend on where you are located and your specific situation. This can add to the natural capital barriers.
Natural capital barriers
The roadshow identified several key barriers associated with these fledgling markets:
- Complex and specialist language.
- Market uncertainty about the demand and supply of nature market credits.
- Numerous schemes, audits and market drivers (sometimes conflicting).
- Financial and time constraints to invest in baseline assessments, monitoring and auditing.
- Challenges in market access (especially for tenant farmers and small landowners).
- Lack of recognition and trust in market entities and the usage of farm data.
- Concerns over the long-term viability and requirements of schemes.
- Pressure from agri-environment schemes and multiple policy demands (sometimes competing).
- Ethical concerns about the commercialisation of nature.
- Concern over fair payment for ecosystem services and the multiple public goods provided.
Natural capital action (checklist)
One topic raised at nearly every event was UK food security. To quote one attendee: “I’m a food producer, not a tree producer!”
Of course, food is an ecosystem service and sustainable food systems need natural capital. Everything is connected.
The natural capital approach strikes a balance to deliver what society needs over the long term, including the ‘basics’: nutritious food, a stable climate, clean air and potable water.
This is why the focal point of the roadshow was natural capital’s role in food security and the sustainable agricultural transition, which needs financially and environmentally resilient farming businesses.
Based on the discussions, I have produced a ten-point checklist to guide your approach natural capital.
Set long-term goals and lay out what you want your farming business to achieve. Healthy and resilient ecosystems support productive and sustainable businesses.
Look to build your own natural capital and opportunities that strengthen your farm, your land and your production systems (such as soil health to reduce costs and increase adaptability).
For example, make changes that reduce costs and increase resilience. Only then consider external opportunities that align with your goals.
Gather data on your farm’s natural capital. What do you have? How much of it do you have and what condition is it in?
Knowing your numbers is the key to negotiating opportunities. Generally, the more data you have, the more power you have.
Generating baseline data will aid negotiations, which is being tackled in our Environmental Baselining Pilot.
This extensive network of farms will help redefine how farmers are recognised for delivering food and environmental goods.
The Country Land and Business Association (CLA) has a Natural Capital Directory to help you find specialist assessors to generate figures for your farm.
Be prepared to graft to find and negotiate the best deals. Consider all the public goods you provide, not just carbon (such as biodiversity restoration and water quality enhancement).
Explore avenues thoroughly (including local and national opportunities) before talking with potential buyers.
Opportunities could range from businesses offsetting their environmental impacts and a local infrastructure project looking for nature-based solutions to those looking to tell good farming stories to their customer.
A decision today could impact your land for many years (even decades), including how you manage it (and associated costs), how much it is worth and tax implications.
It is also important to consider how commitments could conflict with farm operations and obligations (current and future).
Finally, it usually best to prioritise long-term sustainability over short-term financial gains.
Ensure the benefits are clear and align with your farm’s goals.
As one size rarely fits all, be prepared to negotiate and refine each opportunity.
Only work with people or companies you trust to develop mutually beneficial agreements.
A good contract protects the interests of all parties.
It is critical that all expectations and commitments are understood and agreed before contracts are signed.
Contracts will often require you to contribute to measurement, reporting and verification (MRV) processes.
Some schemes will set specific metric and baseline requirements. Ensure requirements are objective (not subjective) and transparent.
Carefully plan how you will deliver your requirements. Some schemes will specify which tools and calculators to use.
When not specified, it is often best to pick one and stick with it (to ensure consistency).
The science and understanding that underpins natural capital markets is evolving, so contracts need to be sufficiently flexible.
Make sure you understand your obligations in meeting any changes during the term of the agreement and your ability to get out if unforeseen circumstances occur.
Seek out opportunities to talk with other farmers.
Explore local farm clusters or natural capital groups (such as the Environmental Farmers Group).
Natural capital is also discussed in our Farm Excellence network, which includes Monitor Farms and Arable Business Groups.
The green finance landscape has many opportunities for farmers.
When it comes to financial stability and environmental resilience, remember everyone is on a steep learning curve.
Ensuring the financial and environmental resilience of your business is the most important thing.
The Green Farming Institute Farming Toolkit provides a comprehensive overview of nature market opportunities (in England). It is worth checking out.
Finally, our Environment team is here to help you understand the potential of your land, the available financing and support options and the potential pitfalls of various schemes: ahdb.org.uk/environment
Further information
The final event in the natural capital roadshow took place today (16 April 2025). The series comprised 11 events across England and Scotland from November 2024 to April 2025.
Visit the natural capital roadshow page for event information
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