BNG, LHB & Transparency

As part of my work with CBRE, I enjoyed exploring the picturesque and protected environment at the Legacy Habitat Bank ‘Helms Deep’ Pilot Project site. This site provides a good insight into the present state of the market and its future potential. Located just off the M6, North of Preston, Helms Deep shows the true beauty of BNG. Legacy Woodlands forms part of the site alongside plenty of plant species able to flourish within this space. I interviewed Ricardo and Susan from Legacy Habitat Banks about their journey into BNG and gained insight into what’s to come.

What type of land is ideal for BNG?

A crucial part of habitat banks relates to the type of land they procure. There is not necessarily a ‘cookie cutter’ or one-size-fits-all approach to land. However, food security remains a crucial issue within UK agriculture; therefore, LHB targets Grade 3 or 4 agricultural land. This agricultural land may not yield the desired crop level or affect crop choice. Supporting farmers as they navigate their options regarding their land and BNG opportunities is imperative for LHB. Nurturing these relationships now and for the next 30 years is crucial.

Understanding requirements to achieve BNG with development will be determined by an ecologist and working with a developer to source this land. Grassland is commonly the most interrupted biodiversity in most housing and commercial developments. Landowners or developers may work with LHB to ensure they develop suitable and desirable BNG unit types.

LHB’s job is to bring land to offering for BNG units, including land of no commercial viability. LHB can offer different solutions based on a developer’s needs. The need for BNG units, based on the project undertaken by a developer, is produced through an ecology report done by LHB or a third party. This outlines which kind of habitat they need to create.

What is LHB’s approach to onboarding units?

LHB operates based mainly on two approaches. Firstly, they seek and collaboratively establish habitat banks with landowner partnerships, establishing a wide-scope network of habitat banks across England. Secondly, a bespoke model whereby LHB creates a habitat bank that relates directly to the needs of a developer. This allows the developer the same unit price as if LHB had already banked these units, avoiding the statutory credits route. In the longer term, LHB has its sights set on having a habitat bank in every NCA (National Character Area), allowing access to more developer and landowner relationships within the market.

What is the model which LHB use?

LHB entered the market very early, positioning itself with a Joint Venture (JV) model between them and the landowner. This means they enter the Habitat Creation and Management Agreement, which outlines how the two parties will work together, their collective goals, and the habitat banks' overall operation. 

This agreement allows funds to be ringfenced and protected for 30 years, reassuring Local Planning Authorities and Developers of the viability of the BNG Units purchased and utilised in the planning process. This JV model allows the Landowner to retain ownership of their land while minimising capital outlay and risk for the project!

LHB maintains that the landowner should benefit the most from their natural capital, with LHB's split of the revenue generated covering the complete 30-year management of the units, reporting, audit, ecology works and marketing of the units internally, transactional service and any negotiation or consultation with the LPA.

Transparency issues: pricing and landowner obligations.

Looking more broadly at the BNG market, transparency on pricing remains to be seen. With a large volume of enquiries, LHB believes there remains a gap in the market for platforms with open pricing, and BNG unit availability would increase transparency. These platforms currently display what could be seen as future ‘potential’ BNG units, which may not be readily and immediately available. There is a need for accurate registration of BNG units which developers can purchase and utilise immediately.

Transparency issues in the market extend to clear instructions given to landowners. This relates to the need for landowners to adequately ringfence the finances to fund the BNG units’ management for 30 years. There remains some unawareness of the explicit landowner financial obligation. Through working with LHB, however, landowners can adjust the level of their involvement in the management of units, which will determine how the finance is split. A JV relationship recognises that the asset belongs to the landowner, and they hold certain autonomy over the management and any futureproofing of this asset.

Above all, market transparency goes hand-in-hand with certainty in the market. The more well-documented the process becomes, the more standardised the process will become in the less technical aspects of a BNG unit. It is important to note that every habitat differs, so a bespoke service may still apply depending on the habitat. This standardisation would act as a ‘guideline’.

Looking ahead: LPAs and Landowner involvement.

As we move closer to the January 2024 deadline for BNG to be enforced, further knowledge-sharing and resources for LPAs are both necessary to successfully achieve BNG. There will be an excellent opportunity for a two-way relationship between habitat banks such as LHB and LPAs, whereby information can be shared.

BNG can offer a real solution to farmers or other landowners who may have lost some of the subsidies they once had or feel squeezed by the pressures of farming and supermarket quotas. The value of land can be enhanced by developing BNG. BNG provides an option for the longer term for their land. As the name suggests, LHB provides a way to leave a legacy.