Uncertainty around policy and payments are the biggest barriers to private cash being injected into environmental, according to a new report by the Ecosystems Knowledge Network.

Its inaugural report blamed the lack of clarity over future funding, governance and legal issues as challenges to the emerging sector. “There is no getting away from the fact that public funding and philanthropy won’t get us the environment that business and wider society sorely need,” said Dr Bruce Howard, its director.

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“Nature is no longer a charity case. The introduction of private finance for restoration of land, water and nature provides opportunity for land managers, corporates and the financial services sector. While the nature finance project pipeline is in its infancy, it is going to be crucial in the transition to net zero, in climate adaptation and in the reversal of biodiversity decline.”

The six-month review included 219 nature finance projects, analysed by 54 consultees. Biodiversity units were the most frequently sold environmental benefit, with 66% of projects. Carbon credits were a close second, with 61% and natural flood management services represented 42%. Following these were payments for nutrient reduction at 33% and ecotourism was a benefit for 19% of projects.

However, only 24% of projects were currently generating a revenue, of which 16% were seeking and 12% had secured repayable finance to cover the costs incurred before reaching income generation. That’s partly because of the infancy of the sector and stage of individual project development, said the report.

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Those receiving grant support were most likely to seek repayable finance and expect revenue generation, emphasising the importance of such support to the sector. Another 45% were not currently generating revenue but expect to within the next five years, while 31% had no revenue plans.

“While dominated by conservation charities, there is potential for finance benefits like carbon storage and biodiversity restoration to provide income for a wide range of landowners throughout the UK,” added Dr Howard. “But the low representation of private landowners is significant, because three-fifths of the land in England and Wales is owned by private individuals.”