Net Biodiversity Gain: Future Sales and Investment Trends | Hogan Lovells

The need for a mandatory net biodiversity gain will be addressed through the planning system, with the introduction of a new pre-start planning requirement that will require the approval of a biodiversity gain plan. It will be measured by means of “biodiversity units” which use a specified metric to calculate units by reference to the type, extent and condition of habitats.

While there are clearly benefits that will be associated with these proposals, developers may be concerned about the impact these requirements will have on their developments and how they can implement them. Importantly, the regulations will allow the net biodiversity gain to be achieved on-site, off-site or (as a last resort) through statutory biodiversity credits. This will give developers the ability to plan based on the proposed site and the suitability of that site’s environment.

On the site

While not every site will be suitable, the easiest way for developers to get the mandatory net gain increase will be to provide it on site. If a net gain can be realized onsite, developers will not need to consider offsite improvements. Early planning will be key in this regard, and developers need to think about how best to use their site in line with the new requirements.

For phased developments, we expect the government to require biodiversity gains to be “embedded” into earlier phases of a development to prevent subsequent phases from continuing or failing to achieve their objectives. . Anticipation will be essential for developers to ensure that they can satisfy local authorities in this regard.

Offsite

Although the preference is for developers to provide net gain on site, given the nature of some developments this may not always be achievable. Developers will be permitted to create or enhance off-site habitat, which will be managed through a conservation covenant or planning requirement and recorded on a proposed ‘Sites of Biodiversity Gain Registry’.

There will be different ways to achieve this, but we expect to see:

  • the development of a biodiversity unit market where landowners (including planning authorities) who can create or enhance habitats, sell biodiversity units to developers; and

  • developers offset biodiversity gains within their own broader portfolio (with the necessary land acquisitions to facilitate this), using one or more sites to offset a lower net biodiversity gain at another site.

Both of these options create an incentive to use land for conservation purposes, which was arguably lacking before. What impact will this have on the market for biodiversity units? Will it end up becoming a tiered system with different prices for different parts of England depending on demand? Or will it rely on market forces and remain a single system?

Being able to use sites on a portfolio basis can also be a great tool for developers. By allowing developers to offset a lower net biodiversity gain at another site, it can incentivize sites to be used for purposes that suit them best, rather than fostering development or conservation where this does not maximize the potential.

The requirements can also trigger a change in the way local authorities view land in their local authority area. Will land be earmarked for conservation and/or compensation in future local plans?

From a practical point of view, developers will need to consider:

  • dealing with multiple authorities when clearing between sites: although the government has indicated that it plans to prioritize offsetting net gains within the local area, it will be possible to offset outside areas where local opportunities for developers are insufficient; and

  • acquisition strategies and portfolio management: Off-site properties used for biodiversity offsetting will need to be maintained for a minimum of 30 years after completion of habitat creation or enhancement works. Proponents should consider carefully how best to acquire and manage these sites to ensure they do not violate associated conservation commitments or planning obligations.

Biodiversity statutory credits

As a last resort, the government plans to set up a process for the sale of statutory biodiversity credits. This is to avoid delays in the planning system if developers are unable to achieve a net gain onsite, offsite or by purchasing biodiversity units. We expect this option to be intentionally non-competitive with the market for biodiversity units and to be phased out as soon as possible.

Summary

It remains to be seen how the net biodiversity gain requirement will work in practice. To stay ahead of the market, developers should assess their internal or third-party resources to ensure they will have the knowledge and capabilities to meet these requirements and start considering the net biodiversity gain. in their future business strategies.