Back to Toolkit Back to GFI Hive Back to GFI Home

Milestone 02


Resilient Glenderamackin


Identify and Work with Sellers


Green Finance Institute / GFI Hive / Investment Readiness Toolkit / Identify and Work with Sellers / Resilient Glenderamackin

Project Summary

The Resilient Glenderamackin project is a catchment based natural flood management project that is working with farmers to mitigate flood risk in West Cumbria. The catchment consists of upland beef and sheep farms across owned, tenanted and common land, and covering a catchment of 14,200ha. West Cumbria Rivers Trust (WCRT) received funding from the Natural Environment Investment Readiness Fund (NEIRF) to explore how to create revenue streams through Natural Flood Management, with support from the Rivers Trust and Nature Finance. The project has applied to transition to Landscape Recovery, which will allow the project to access public money to support project development including developing a business model that could attract private sector payments for flood risk reduction. WCRT have taken on the running of the Glenderamackin Farmer group, made up of 24 landholdings across catchment.

 

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. 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 develop the legal contracts and close the deal. This stage is 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.

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.

 

Acknowledgements 

With many thanks for their time and insight on this case study:

Clair Payne, Project Officer, West Cumbria Rivers Trust

 

 

 

Dan Turner, Technical Lead, Land Management and Market Creation, & Tom Gall, Ecosystem Service Data Analyst  The Rivers Trust

 

The Rivers Trust - Wildlife and Countryside Link

 

 

 

Dan Hird, Principle and Founder, Nature Finance

 

 

Date published: 10/04/2024

Next Milestone

How is the Resilient Glenderamackin project working with the Glenderamackin Farmer Group?

The Glenderamackin project highlights the benefits of working with or building from existing groups in the area rather than starting from scratch. Prior to the establishment of the Glenderamackin Farmer Group, an existing farmer facilitation group in the area, run by the Farmer Network and supported by West Cumbria Rivers Trust had been running for three years.

Working with WCRT, through Defra NFM pilot funding, members of the group had delivered some natural flood management (NFM) projects already, including pond creation, planting bunded hedges across surface flow pathways, planting riparian trees and building leaky dams. Monitoring of these projects helped fill national evidence gaps in NFM and helped to build interest in NFM in the catchment, as well as understanding what might work in this landscape. Supported by WCRT, both the farmer group, and individual farmers, are looking to explore how NFM could generate financial returns and work alongside the farm business.

Farmers who are approached by an external actor to start an aggregation model will need to ensure that the interests and objectives of the farmers and the external advisors are aligned. Having worked with the facilitation group in the past, the WCRT had built trust with member farmers and were well-placed to present the opportunities offered by engaging in nature markets and alleviate any concerns. The WCRT and the farmers share the view that the project should be “locally targeted, locally owned and address local priorities.”

 

Why did the Glenderamackin farmers want to work together?

The Glenderamackin farmers decided to work together for three primary reasons.

 

  1. Filling income gaps

As the group is composed of primarily upland farmers, they were concerned that agri-environment schemes would be insufficient to fill income gaps left by the removal of the BPS. They are exploring how nature markets could present an opportunity to bolster income and improve business resilience.

 

  1. Landscape Recovery

There was an opportunity for the farmers to support a catchment application to the Landscape Recovery Scheme as a pilot project which would give them access to funding and offer an opportunity to feed into policy development.

 

  1. Supporting nature friendly farming

The group are interested to understand how interventions on their land and changes to their land management practices can collectively improve landscape resilience to predicted future climate change whilst supporting nature friendly, sustainable farm businesses.

 

How is the Resilient Glenderamackin project organised?

The Glenderamackin group has taken the form of a Community Interest Company (CIC). Farmers decided on this model as it allows them to have involvement throughout the lifetime of the CIC’s projects and utilises an ‘asset lock’ that ensures no entity is profiting from the activities of the group but rather, the assets are retained or used for the further benefit of the community. You can read more about the different legal entity types that farmers can use in Milestone 6.

The Glenderamackin Farmer group, is currently funded through the Lake District National Park’s Farming in Protected Landscape scheme, it has a core sub-group of 15-24 farmers who attend regular meetings and engage more actively. The group feed into the Resilient Glenderamackin technical and project development work through WCRT. The group’s facilitator keeps members informed through regular meetings and communication.

 

How is the Resilient Glenderamackin project funded?

Prior to the project being ready to sell flood mitigation to buyers, the group had administrative and project development costs that were funded through the Natural Environment Investment Readiness Fund (NEIRF), and matched by Natural Course. This funding paid for the project manager and project officer from the WCRT and the group’s external project advisors. The group aims to transition to a Landscape Recovery agreement with the remainder of the project delivery costs expected to be covered by the sale of flood mitigation.

The project team approached the Glenderamackin farmer group to give them to opportunity to help set prices and types of projects they would be willing to deliver. The final prices are still to be agreed when the sale of flood mitigation is undertaken.

To model potential revenue, the group created a hypothetical ‘model farm’ that represented the average conditions of the member farms. A variety of interventions were assigned to the model farm and a baseline cost was calculated. The group then discussed each intervention in turn, voting on prices they would accept for the interventions until they reached agreement. Once consensus was reached, the group then calculated for the same model farm what the expected revenue would look like per farm. Each intervention attracts a different rate which was based on existing Countryside Stewardship payments, expected land use change and amount of maintenance required (with additional top-ups for biodiversity and permanent water storage). The group was invited to consider what this would mean for their farm business. WCRT will carry out one-to-one farm visits to work with the farmer to understand what they could deliver on their land to contribute to the project.

The group used average Basic Payment Scheme (BPS) payments to calculate whether the agreed prices would fill the income gap left by BPS – in many cases, it appears the rates will exceed the income loss.

 

 

Lessons Learned

    1. Timeline

The time it takes to implement and develop a business case and financial model is considerable. The NEIRF funded portion of the project took 15 months to complete, not including the time it took to plan for and apply to the programme.

 

  1. Working together

Setting up an aggregation group that brings together farmers and external organisations will take time, consistency, and compromise to build and maintain trust and to move the project forward. The Resilient Glenderamackin project takes an open book approach to communication to ensure that all parties are aware of how the project is progressing and have opportunities to make their voices heard.

 

  1. Balancing needs

The Resilient Glenderamackin project will impact various stakeholders with different needs. The project needs to find ways to balance landscape needs, farmer needs, cultural needs, and business needs in this protected landscape to bring the project to the delivery stage. This has taken robust planning and a lot of compromise to determine how to deliver priority environmental outcomes while ensuring the projects are commercially viable.

 

 

 

Print