Nature Market Opportunities for Tenants: Navigating Land Use, Agreements and Collaboration

This blog post written by Amy Allan, Senior Analyst, Nature Programmes at the GFI, looks at a number of the issues that tenant farmers face specifically when considering engaging in nature markets. This includes navigating land use, legal agreements and collaboration with other tenants and landlords. This blog post also puts these issues into the context of the recently launched GFI Farming Toolkit for Assessing Nature Market Opportunities, which is aimed at all farmers in England that wish to learn more about nature markets. 

This blog has been written after close engagement with the Tenant Farmers Association (TFA), which took part in a Working Group hosted by GFI in 2022 that focused on ways to unlock private sector finance for transitioning farming practices in an ecologically and economically sustainable way. Here, the TFA was able to highlight the unique issues faced by tenant farmers. These issues were looked at further within the Rock Review of agricultural tenancies, which reported to DEFRA in October 2022. You can also read this post on the TFA’s website here.

Nature Market Opportunities for Tenants: Navigating Land Use, Agreements and Collaboration

The evolving landscape of nature markets in the UK, such as those for carbon, Biodiversity Net Gain and water quality, presents both challenges and opportunities for tenant farmers. Many tenants are understandably hesitant to explore nature market opportunities when there are still many unknowns. Currently, uncertainties persist regarding the ownership of natural capital, how income from nature market trades is shared between landlords and tenants and the tax implications of changing land management practices. These markets will however play an important role in delivering UK climate and nature targets. The Government has made clear that in addition to public sector funding through Environmental Land Management Schemes, farmers will be expected to engage with the private sector to deliver environmental outcomes.

To begin to explore these markets, there are some key considerations which can help tenant farmers assess whether these opportunities could work for them. The Green Finance Institute’s Nature Programme (GFI Hive) was commissioned by Defra in 2023 to develop a free online toolkit to help farmers navigate nature markets. The Farming Toolkit for Assessing Nature Market Opportunities has been developed by engaging with over 100 farmers, farming clusters, farmer facilitators, lawyers, land agents and government officials. It guides farmers through the key considerations they may face along the journey and is aimed to help farmers determine whether these opportunities make sense for their farming business and to empower them to ask the right questions at each stage. This blog introduces some of the considerations explored in the Toolkit that are particular to tenant farmers.

Understanding Land Use Control and Data Ownership

One of the first questions tenants will need to answer is whether they are legally able to make changes to the land and engage in nature markets. Tenancy agreements may have specific stipulations for the type and extent of land use change tenants can undertake. For example, most tenancy agreements constrain tenants to agricultural land use. This would mean that any project would still need to be managed agriculturally, such as by improving soil carbon through regenerative farming practices. Tenant farmers should carefully review their tenancy agreements to understand any restrictions on land use changes and consider engaging with their landlord early on to discuss opportunities for collaboration. Additionally, clarifying ownership of data collected during baseline measurements is crucial. Some agreements may say that environmental data collected during the tenancy will belong to the landowner. Before paying for environmental baselining services, tenants should ensure that they will own the data, or engage with their landowner who may be willing to cover the costs.

Duration of Contracts

The duration of contracts versus the length of the tenancy is a critical factor when deciding whether to engage in nature markets. Annual leases may pose challenges for tenants looking to enter long-term agreements, such as Biodiversity Net Gain (BNG) projects which require a minimum 30-year commitment. However, opportunities exist in soil carbon markets with varying contract lengths. There may also be long-term ‘permanence’ expectations even in short-term contracts, meaning the environmental improvement made needs to be maintained for a specific number of years. This may mean that both landlords and tenants would be required to sign onto the agreement to ensure the environmental improvement is maintained following the end of the tenancy. Despite some constraints, tenants can collaborate with their landlord in longer-term time commitments and enter into agreements which allow them to share responsibilities, costs and benefits of the project. The TFA has developed joint guidance with the Country, Land and Business Association to guide tenants and landlords through entering nature market agreements together.

Collaboration with Other Tenants and Landlords

Engaging with neighbouring tenants can enhance access to markets and increase bargaining power.  Collaboration among tenants can be enormously helpful in negotiating terms with landlords, service providers, and buyers of ecosystem services. For example, the Wyre Natural Flood Management Project brings together tenant and owner-operator farmers in North Lancashire to deliver natural flood management interventions on their farms, paid for through commercial agreements. You can read case studies on the experience of the Wyre project’s farmers here.

There are also opportunities to receive public funding to help with the initial costs of creating an aggregated farmer group. The Natural Environment Investment Readiness Fund (NEIRF) Round 3 was launched in December 2023 and offers funding support to groups of farmers who are coming together to deliver environmental benefits at scale. The Farming Toolkit will be a key resource for the NEIRF which is open to both tenants and landowners. Applications for this round close on the 16^th of February.

What should tenant farmers do now?

With nature markets at this early stage of development, the best position for farmers to take is to get informed – have initial discussions with your landlords, try to learn about the markets available and how they work and potentially engage in some ‘no-regrets actions’ such as assessing the current environmental state of your farm. As these markets continue to develop, we are committed to keeping the toolkit up to date with useful resources, podcasts and case studies as more farmers set out on the journey.

To hear more about nature markets, why not watch our 60-minute introduction webinar. This was recorded in November 2023 and features Helen Avery, Director of Nature Programmes and GFI Hive at the Green Finance Institute, and George Dunn, TFA Chief Executive.  To watch on demand, click here.

In addition, the following on demand webinars, may also be of interest:

Trees Are Not the Only Way – Simple Steps to Improving Soil Carbon. Watch on demand here.

Putting Farm Tenants in Pole Position to Take Advantage of Natural Capital Opportunities. Watch on demand here.

Farm Tenancies and Biodiversity Net Gain, Carbon and Natural Capital. Watch on demand here.