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Milestone 05


Norfolk Environmental Credits


Develop Business Case and Financial Model


Green Finance Institute / GFI Hive / Investment Readiness Toolkit / Develop Business Case and Financial Model / Norfolk Environmental Credits

Project Summary

Norfolk Environmental Credits (NEC) is a not-for-profit joint venture (JV) between five local councils in Norfolk – Breckland Council, Broadland District Council, North Norfolk District Council, Norwich City Council, and South Norfolk Council.

Established in 2023, NEC was developed to unlock the backlog of housing development in Norfolk caused by nutrient neutrality. NEC is an arm’s length company that enables the development of nutrient neutrality projects in Norfolk through funding, management and monitoring. It also acts as a sales platform by aggregating and selling credits to developers with off-site nutrient neutrality needs. As of November 2025, it has facilitated the sale of credits to developers worth £8.3m, unlocking 2,400 homes, with a focus on supporting small and medium sized developers.

Milestone 1: Initial Project Scoping

Often the initial task is to understand the site(s) you want to use and the land use change needed for nature restoration or creation. This includes considering the goals of the land managers involved, the vision within the wider catchment or neighbouring area, and whether there are permits or planning consent needed for any proposed changes.

At this stage, you can also conduct a high-level assessment to determine which revenue streams can be generated from ecosystem services , e.g. carbon credits, flood reduction cost savings, or biodiversity units, which will be crucial for identifying buyer interest.

Finally, it is useful to have an idea of the costs of the project and potential grant funding that may be available to support initial development.

Milestone 2: Identify and Work with Sellers

Initial ownership of the ecosystem services will belong to the landowners or, in some cases, the tenants of the sites that the project is using. However, these can be passed onto others, such as third-party project developers, with appropriate legal arrangements and compensation. In some cases, there may be a sole seller of the ecosystem services, where the site or landholding is large enough that it delivers the volume of ecosystem services needed to cover the costs of the project and attract buyers.

However, in order to achieve scale and impact, a project will likely involve multiple sellers, such as neighbouring farmers and estate managers. Scale of land is often needed to deliver significant environmental outcomes, and also to attract private finance.

Where they are not the land managers in question, project developers must plan how they initially contact and engage with these sellers going forward, building their wants and needs into the project.

Milestone 3: Baseline and Estimate Ecosystem Services

At this point, you will have understood the vision for the project and identified a particular ecosystem service or set of services to be sold. The next step will be to carry out detailed analysis – baselining each ecosystem service and quantifying what will be able to be delivered from the interventions, as well as planning how to monitor and maintain these interventions. You will need to rely heavily on ecological expertise for this more scientific Milestone.

At this step, standards, verification and accreditation methods will be considered in more depth.

Milestone 4: Identify and Work with Buyers

Based on your earlier market analysis in initial project scoping, you will have identified one or more groups of beneficiaries who may be willing to ‘buy’ or pay for the ecosystem service(s) to be created, restored or maintained. Buyers vary – as do their requirements – but at this step, greater buyer engagement is now needed to develop a deal that channels money towards the nature-positive outcomes that your project wants to deliver.

 

 

Milestone 5: Develop Business Case and Financial Model

You’ll have started building your business case and financial model in earlier steps – laying out your project’s vision, the market proposition and estimating costs and income. This step offers a review, in addition to providing details needed to build out the financial model and business case more fully. Both of these key documents will be iterated throughout project development, and will likely be altered during project delivery as new information emerges. These documents are interlinked and, if developed correctly, will ensure your project’s viability and help you with discussions with stakeholders – including sellers, buyers and future investors.

The financial model will also enable you to better understand the type of structure your project may take to attract investment (i.e.a loan, an equity investment, a bond) and what sort of returns you can afford to pay/offer.

Milestone 6: Develop a Governance Structure

A governance structure will inform the way in which the project is run when fully operational and for what purpose. It identifies appropriate decision making processes, who is responsible for what actions, and what controls are in place to make sure that the project is meeting its stated goals, all while abiding by the risk appetite of its engaged stakeholders. The legal entity to host the project will be a key driver in this, and the appropriate choice of entity will be dependent on several factors that are outlined below.

Your governance structure should align with and underpin your business case, as a necessary component of how the project will deliver its environmental outcomes and other strategic targets.

Milestone 7: Identify and Work with Investors

It is important to note that not all projects will need up-front investment, but for those that do, this section provides a framework for thinking around the development of the investment model. This does not constitute financial advice – as the GFI is not licensed to do so. However these considerations are based on the insight offered by project developers and other market stakeholders.

An investor will be a new core stakeholder in your project, and it’s just as important to think of what you require from investors, as much as what they require from you – so that you can build a positive and collaborative relationship with them.

This entails defining the investment ask (in line with the financial model), the strategy for approaching the right investors, and the negotiation of terms that can then be formalised in contract development (Milestone 8).

 

Milestone 8: Establish Legal Contracts and Closing

When all relevant stakeholders have been engaged and their terms of engagement are clarified as much as possible, this is the time to fully develop the legal contracts and close the deal. This stage is positioned with in the Toolkit as last because legal fees are expensive, and it is generally advised to determine as much as possible in previous stages before starting to draw up contracts in earnest. However, you may have engaged legal advisors ahead of contract design on issues like tax, permitting and effective governance structures, which are covered in previous Milestones.

Note: The information in this Milestone does not constitute any form of legal advice but instead serves as practical advice on how to manage engagement with lawyers and the process of contract development. The Green Finance Institute is not a firm of solicitors or connected in any way with the courts. The information and opinions we provide in this section and across the Toolkit do not address your individual requirements and are for informational purposes only. They do not constitute any form of legal advice. We recommend that appropriate legal advice should be taken from a qualified solicitor before taking or refraining from taking any action.

Community Engagement

Community engagement is highly advisable for any project that aims to sell ecosystem services, to ensure fair outcomes for local communities and the long-term success of the project. Project developers can build connections with local stakeholder groups early on to spot both risks and opportunities.

Policy and Regulation

Project developers and enterprises will need to keep a continuous check on how current and future policy may affect the project, and also opportunities for the project to inform policy. The role of private finance for nature across the UK is being encouraged by the UK government and its devolved administrations, and new rules, standards and markets are being developed.

 
Quick Stats
  • Location: Norfolk
  • Project area: 2,016 km2
  • Company structure: Not-for-profit JVC
  • Nature Market Focus: Nutrient Neutrality
  • Involved Councils: Breckland Council, Broadland District Council, North Norfolk District Council, Norwich City Council, and South Norfolk Council
  • Partners: Natural England, Norfolk Local Planning Authorities and Environment Agency.

 

Acknowledgements

With many thanks to the following individuals for their time and insight:

Tom Sayer, General Manager, Norfolk Environmental Credits

 

Robert White, Director, 31ten Consulting

Kit Panther, Financial Analyst, 31ten Consulting

 

 

Date published: 15/12/2025

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Key Points

  • Norfolk Environmental Credits (NEC) was founded on the idea that a unified, cross-council response to nutrient neutrality could be more effective at unlocking housing developments across the three affected water catchments in Norfolk.
  • As an arm’s-length, not-for-profit company, NEC provides the councils with financial protection, as well as a level of operational flexibility and independence to act as a market enabler outside the constraints of standard local authority structure.
  • NEC’s bespoke financial model underpins its credit pricing and long-term financial sustainability, incorporating up to 125-year monitoring obligations, credit portfolio management and cashflow buffers to manage market and delivery risks.
  • NEC invested time and resource in building relationships with local mitigation providers, using these partnerships to develop credible cost data, improve confidence in the market, and strengthen its project pipeline.
  • NEC sets a fixed credit price for property developers across its three catchments, and prioritises the sale of its credits to smaller developers that may be more at risk of financial insolvency.
  • NEC’s experience has positioned it as a reference point for other councils and as a potential platform for future environmental credit markets, including Biodiversity Net Gain and wider nature recovery initiatives.

 

Identifying the initial business case

Norfolk is projected to need many new homes with an expected population growth of 11% over the next two decades.[1] The building of homes has been constrained by nutrient (nitrate and phosphate) pollution linked to wastewater.

In 2022, Natural England introduced nutrient neutrality requirements across three river catchments in Norfolk affecting five councils. It mandated that new developments offset their nutrient pollution either on-site and/or by purchasing credits from mitigation providers delivering off-site mitigation projects. The change resulted in a backlog of approximately 16,000 homes awaiting planning approval.

This led Breckland, Broadland District, North Norfolk District, Norwich City and South Norfolk Councils to commission a report by Royal Haskoning to identify suitable off-site mitigation solutions. The scale of the nutrient neutrality impact was assessed across Norfolk, quantifying the levels of nutrient reduction required, against expected reductions the solutions would deliver.

 

Figure 1: Map of Local Planning Boundaries and affected catchments, ArcGIS

 

From the report’s findings, the Councils considered three options:

  1. Free market settlement – allowing local landowners and mitigation providers to create projects and match with developers freely.
  2. Siloed market management – Each council manages its nutrient neutrality requirements within its own boundary.
  3. United market management – a cross-catchment approach to incentivise off-site projects and match supply with demand.

The third option was chosen, as the nutrient solutions could be offered to developers within entire river catchments, rather than being limited to within local planning boundaries. Tom Sayer, General Manager at NEC, comments: “We needed a holistic approach to managing the issue as a single body…this effectively led us to setting up an arm’s length company.”

Norfolk Environmental Credits (NEC) was proposed as a not-for-profit, private limited company, with its finances separated from the Councils’ balance sheets, providing financial risk protection. NEC’s independent status offered flexibility in designing processes that could best reflect the dynamics of the nutrient neutrality market.

NEC was incorporated in January 2023 and each Council agreed to contribute £30,000 and staff time to a single team. Initially, Norwich City Council deferred participation, expressing interest but opting to observe developments before committing, formally joining in 2024.

 

Establishing the business model and core principles

NEC takes on three interlinked roles to unlock development and support the market:

  • Project development support – offering clarity to mitigation providers considering nutrient neutrality projects through its technical delivery frameworks. NEC also directs mitigation providers to upfront capital, including via the Norfolk Mitigation Fund (see below).
  • Credit aggregation – buying and selling credits across the three catchments and simplifying the process for developers trying to locate projects within their catchments.
  • Long-term monitoring – pricing long-term management and monitoring obligations into its credit price to ensure mitigation schemes continue to deliver environmental outcomes throughout their life cycle, whilst also ensuring robust tracking of credit sales against the planning applications they have unlocked.

 

While NEC depends on transactions with mitigation providers to make its business model work, it does not seek to monopolise all supply in the area. It therefore offers project development support to mitigation providers without an upfront requirement to enter into a deal.

Another core principle of NEC was financial self-sufficiency, with no ongoing contributions needed from the Councils. However, the partner Councils maintain oversight, with  five representatives of each of the partner Councils. The Board reviews decisions such as the prices set for developers periodically.

 

Figure 2: Structure of Norfolk Environmental Credits (NEC)

 

Identifying projects to support

Technical delivery frameworks, which standardise how mitigation providers can develop eligible projects, sit alongside the Norfolk Nutrient Budget Calculator, developed by the Councils and Royal Haskoning. The frameworks are used by developers to determine how much mitigation is needed for their proposed new housing.

Types of projects currently supported by NEC include:

  • Agricultural land reversion
  • Improvements to wastewater management systems, such as septic tanks.

 

Building a financial model

NEC commissioned 31Ten Consulting to create a bespoke financial model, delivering credit pricing outputs and value-for-money comparisons for projects brought to NEC. These calculations factored in future credit demand forecasts across the catchments to ensure future overheads were spread across expected credits in a prudent way. The approach is designed to cover NEC’s long-term obligations of up to 90 years and is reviewed regularly to make sure it is financially sustainable for both projects and developers.

This model is characterised by two key functionalities:

  1. Project level – Assessing the financial viability of projects, where a mitigation provider gives specific inputs about their project that allows NEC to determine an appropriate credit price. Or alternatively, to establish what NEC could afford to pay for credits it will sell at a set price.
  2. Portfolio level – Monitoring the portfolio of credits traded by NEC to ensure it is balancing its overall financial position. This considers changes in outturn assumptions, future demand across the three catchments, and the availability of credits.

 

Estimating costs

It took nearly 12 months to find the ranges for project costs faced by mitigation providers, such as capital works, legal advice, remediation costs, and long-term monitoring, reporting and verification (MRV). NEC built connections with mitigation providers and Local Planning Authorities to capture these cost estimates.

NEC also often offers the long-term, third-party monitoring that is required by nutrient neutrality regulations (between 80-125 years). The cost for NEC to fulfil this additional role is included, factoring in an allowance for long term staff time over 80 years based on the extent of work required for the types of projects being delivered.

NEC invested some of its development funds in creating templates for legal contracts, particularly the S106 agreement for securing off-site projects. These development costs are recovered through NEC’s business model, with the upfront investment improving efficiency and reducing long term costs. Minor due diligence costs of processing relevant legal contracts are also built into the credit prices offered to both land managers and developers.

For contingency planning, NEC’s model retains 10% of secured credits to act as a buffer, providing a level of precaution to guard against future non-compliance.

Overhead costs of NEC include its personnel costs, office accommodation, ad-hoc consulting services, marketing costs, subscriptions to its software programmes and other minor administrative costs. An additional 10% contingency is applied at a company-wide level to reflect general risks. NEC also maintains a £500,000 cash buffer to mitigate against any additional cashflow risk.

 

Estimating revenue

NEC sets a fixed credit price for developers across the catchments to support transparency and ease of market access. The sale of credits are offered for a minimum of 0.1kg/yr Total Phosphorus or Nitrogen, to capture fractional demand.

The price is reviewed by the Board each year.  31Ten provided key information from the financial model, such as the minimum levels of pricing to cover NEC’s operating costs, cost of mitigation and credit portfolio risks.

To capture volume of demand, the original Haskoning Report gave estimates of both current and future demand for credits across the catchments, with NEC and 31Ten taking a cautious approach and revising estimates on future demand with the Councils’ local plans.

A core principle of NEC is the prioritisation of selling credits to smaller developers, as smaller developers are typically more likely to be at risk of financial insolvency for relatively minimal nutrient requirements. The prioritisation of credit sales to smaller developers is built into NEC’s credit allocation policy.

The below diagram sets out the process for how developers purchase credits from NEC:

 

Figure 3. How credits are traded through NEC

 

NEC does not offer any additional incentives or pricing structures to attract developers, and publishes pricing and credit availability information on its website.

Any surplus cash from NEC’s credit sales beyond the £500k cash buffer is invested into a separate, long term fund that is intended to match inflation rates.

 

Access to Up-front Investment

As of November 2025,the Norfolk Mitigation Fund (NMF) is the main source of investment, which was launched in early 2024. NMF offers mitigation providers both feasibility grants for project development and capital loans that are repaid  – holding a total of £18.45m to distribute to projects across Norfolk. This funding was allocated from the Government’s Local Nutrient Mitigation Fund, providing £45m to affected Councils across England and Wales.

NEC has made successful bids into the NMF fund to secure loans to help cashflow nutrient mitigation schemes it has invested in.

 

Future Opportunities

The sharing of learnings with other councils that are developing their nutrient neutrality strategies provides NEC with opportunities for additional income and growth. Sayer comments that affected councils usually face an undersupply of nutrient credits, providing scope for other councils to adopt NEC’s business model. This advisory role has provided a modest but valuable revenue source for NEC.

NEC is exploring how its business model could be replicated for Biodiversity Net Gain (BNG), green infrastructure and recreational disturbance. NEC wants to provide the development sector with environmental mitigation solutions to help streamline house building.

As of November 2025, the English Government is considering the introduction of a Nature Restoration Fund that would introduce a developer levy as an alternative to the purchase of nutrient credit where an Environmental Delivery Plan has been created. NEC has confidence that any new government scheme will still need to be underpinned by local delivery mechanisms and private market solutions, meaning its model and learnings to date will be valuable going forward.

 

Sources:

  1. [1] https://www.norfolkinsight.org.uk/jsna/population/
  2. Government grant helps unlock Nutrient Neutrality, Broadland District Council and South Norfolk Council, 2024
  3. Environmental Credits Pricing Model – Nutrient Neutrality, 31Ten Consulting, 2024

 

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