A new report, Natural Capital: what farmers and policy makers need to know, seeks to understand how new and emerging markets in natural capital fit into a changing landscape for farmers. The report was written by Prof Fergus Lyon and Dr Amy Burnett of Middlesex University, commissioned by the Food Farming and Countryside Commission (FFCC) and supported by the Prince’s Countryside Fund. A working paper from FFCC, Guardrails, guidance and actions which accompanies the report, further explores what role governments should play in shaping and enabling these markets to achieve substantial and speedy action towards climate goals and nature recovery – and shows that the UK government is missing an opportunity for global leadership to make natural markets work for farmers.

The report's key findings show that:

• Without good regulation, many farmers consider the risks of getting involved are too high and this is hampering the growth of the market.
• Governments must put in place the necessary guardrails and regulation to ensure natural capital markets balance public value benefits from private finance, alongside their public investments.
• The recent Nature Markets Framework published by government is welcome in setting standards – but now we need regulation and firm commitments.
• Done well, this is an opportunity to establish the UK as a global leader in developing good policy to shape this much talked about, but still emerging, market.

In the last month alone, reports from Green Finance Institute and Bankers for Net Zero have explored how private finance could help farmers to sequester carbon, create wildlife areas and deliver other important environmental value. But despite the urgent need to invest in more sustainable farming to deliver the necessary climate and environmental actions, there is not yet enough practical action on the ground from farmers, landowners and land managers commensurate with the scale of the challenge.

The Westminster Government published the Nature Markets Framework document in early April. It is welcome, in terms of setting standards and clarifying how public and private money can work together, but doesn’t go far enough. The framework does not sufficiently recognise the underlying structural imbalance between powerful and experienced international markets players and individual farmers. As FFCC’s report shows, many farmers perceive an unequal distribution of risks and rewards across current supply chains and feel unable to risk losing further control in their markets when they are already in a weak position as price takers for global commodities.

The potential of natural capital markets is being held back by lack of clarity about what public and private finance can each do, within a coherent and aligned government vision. Nature markets can still be a vital future element of UK farming systems - if they can be made to work. Good, clear, mission-led regulation could kickstart natural capital markets, giving farmers confidence to optimise the potential of private funds, and to build climate action and nature recovery into their business plans. This could establish the UK as a global leader in these policy discussions.

Commenting on the report, FFCC’s Chief Executive Sue Pritchard said, “This report is a timely analysis of why farmers are not engaging with natural capital markets – and how this, in turn, is hampering development of these markets. It highlights the urgent need for government to put in place the necessary guardrails to ensure Natural Capital markets can develop in a fair and balanced way.

The recent Nature Markets Framework published by government before Easter is a start – but it could go further. Clear commitments and regulation could establish a global role for British governments’ leadership and ensure all UK farmers have fair access to these emerging markets.”

To accompany the release of the report, FFCC has published a briefing for policymakers and stakeholders to summarise its findings and key next steps.