How business leaders and developers can understand Biodiversity Net Gain

As the global community grapples with the challenges of biodiversity decline and sustainable urban development, England has taken a significant step forward with the introduction of biodiversity net gain (BNG) legislation.

Effective from February 12, 2024, this groundbreaking policy mandates that new construction developments must offset their biodiversity impacts by paying for the creation of new habitats elsewhere. 

In this article, we delve into the intricacies of biodiversity net gain, with insights from experts at the University of Exeter and EnTrade. 

What does Biodiversity Net Gain (BNG) mean for developers? 

Dr Ben Balmford, a postdoctoral research fellow in environmental economics at the University of Exeter, explains how BNG aims to help restore the UK’s depleted biodiversity levels, which the 2023 State of Nature report found to be among the world’s lowest.  

“This new legislation actually requires developers to leave the natural environment, hopefully, in a better state than prior to development. It’s requiring them to create more habitat than has been lost.” This proactive approach aims to ensure that any habitat lost to development is not only replaced but enhanced, fostering a net positive impact on biodiversity. 

Creating a Market for Biodiversity Credits

A crucial aspect of implementing BNG rests on creating effective markets for biodiversity credits, through which property developers can pay for biodiversity credits, and landowners can sell spaces they will convert into biodiverse habitats, such as wetlands and woodlands. 

This is something that Ben Balmford and Amy Coulthard have been working together to establish through EnTrade – a marketplace platform that connects property developers and landowners. 

To optimise the marketplace, EnTrade now employs a technique known as the ‘Lindsay mechanism’ to facilitate transactions of biodiversity credits between these two groups. “Developers will come forward and say how much they’re willing to pay, and on the other side of the market, farmers can come forward and say how much money they would require to cover their costs for habitat creation.”  

“We then aggregate the amount, looking for the solution that generates the biggest gap, and allocate that value back to the participants, so that developers always pay less than they were willing to and suppliers are always paid more than they said they required.” This ensures fairness and efficiency within the market, making sure that landowners receive fair compensation while developers are not overburdened with excessive costs. 

This efficiency is key, Ben added, “in making sure that development can go ahead, especially in the context of the UK’s housing shortage, and [also] that this legislation stays in place, which is really important.” 

How can collaboration and innovation support Biodiversity Net Gain outcomes? 

Solving such a novel challenge highlights the importance, says Dan Bloomfield, of bringing partners together across academia, government, and the private sector. “Because the UK’s nature is struggling and biodiversity credits are so new, there is a lot of innovation happening in this space, but a lot of learning to be done as well. For the people and communities involved in nature conservation, the idea that they might benefit from trading credits is new – and brings questions.” 

 “As a university, we have a huge amount of expertise in this area, and dedicated teams working to facilitate partnerships and ensure that our research leads to real-world solutions. Partnerships, such as this one with EnTrade, bring to bear the solutions that are required to make biodiversity net gain happen.” 

Moreover, the academic rigour involved in this collaborative process can protect this, and future, biodiversity schemes from allegations of greenwashing. Coulthard notes, “It’s really important that we have frameworks and that marketplaces are properly designed and well organized, with appropriate legal frameworks and processes for verifying and monitoring biodiversity credits.” Ensuring transparency and accountability in these transactions is crucial to maintaining the integrity and effectiveness of BNG markets. 

What impact will Biodiversity Net Gain have on future developments and society? 

While some may worry that BNG could hinder development, Dr Balmford believes that the primary effect will be a positive shift rather than a reduction in development: “We might see [some] shifts in developments where more of them start taking place in areas with less impact on biodiversity, but broadly, no, I don’t think this is going to reduce the amount of development going ahead.”  

Amy Coulthard also emphasises the positive implications for sustainable development: “Not only is this an opportunity for nature, this is also clearly an opportunity for income generation and distribution.” By creating new markets for biodiversity credits, BNG can stimulate economic activity at the same time as fostering environmental stewardship.

A Step in the Right Direction

Ultimately, the introduction of biodiversity net gain legislation in England represents a significant step towards building developments that not only protect, but start to improve, the UK’s biodiversity. Through innovative market mechanisms, robust collaboration, and a commitment to transparency, BNG can help ensure that future developments enhance our natural environment and start to reverse the UK’s biodiversity decline.  

As Dr Balmford summarises: “We’re going to be seeing habitat being restored in places that otherwise it would not be, compared to a world in which this legislation doesn’t exist.”