The role of the private sector in nature recovery

The UK Government’s recent call for evidence on expanding the role of the private sector in nature recovery is a timely and welcome initiative. It signals a growing recognition that the private sector must be part of the solution to the environmental challenges we face, from biodiversity loss to water quality and climate resilience.

But while the ambition is clear, the mechanisms to deliver it remain underdeveloped.

In a previous article on enhancing natural capital, which summarised our findings following a series of dinners attended by landowners, academics, and financiers, we explored the finance gap that continues to hinder progress in natural capital projects. Whether it’s peatland restoration, nutrient neutrality, or biodiversity enhancement, these initiatives require upfront capital. Yet, private investors remain hesitant. The reason? Financial returns are still unclear in what are emerging and fragmented markets.

The government’s paper rightly identifies the need to unlock new revenue streams through mechanisms such as biodiversity credits, carbon markets, and ecosystem services. These are essential tools. As we noted, projects that generate tradable assets like carbon or BNG units, are more likely to attract investment. Habitat banks, for example, offer a model where landowners receive a guaranteed income and the “bank” profits from the sale of credits. But these models are still the exception, not the rule.

The government also calls for cross-sector collaboration and innovation to scale investment. This is encouraging. However, our experience suggests that institutional investors, pension funds, VCTs, and large asset managers will not engage at scale without clearer financial incentives. ESG and CSR driven investments, while valuable, are not sufficient to bridge the gap.

One area where the government’s paper is notably silent is tax policy. In our earlier piece, we argued that tax relief could be a game-changer. The surge in private investment in renewable energy following the introduction of tax relief schemes like EIS and VCTs is a case in point. The US and EU are already moving in this direction, using tax credits and subsidies to drive green investment. The UK should not fall behind.

In short, the government’s call for evidence is a positive signal. But to truly “move the needle,” we need policy certainty, fiscal incentives, and scalable investment models. The private sector is ready to act but it needs the right tools to do so.