Shortlisted for PRI Awards 2024: Recognition for Action – Nature
Organisation: Gresham House
Signatory type: Investment manager
HQ country: United Kingdom
The approach, initiative, or process
Gresham House is a specialist alternative asset manager, with £8.5bn of assets under management, providing investors with a range of investment products across real assets, public equity and private equity.
Our corporate purpose is to deliver effective and alternative investment solutions to help clients achieve their financial objectives while contributing towards the transition to a more sustainable economy.
Why we have focused on nature–based solutions
With nature under unprecedented threat, investors are increasingly examining whether their strategies for achieving net zero are sufficient to address emerging financial risks and opportunities. Science shows that net zero cannot be achieved without pursuing positive outcomes for nature, which has historically subsidised economic growth.
A key challenge is placing a value on nature. Nature markets are evolving due to emerging laws and voluntary frameworks, such as the Global Biodiversity Framework and the Taskforce on Nature-related Financial Disclosures.
We see protecting and restoring nature as an opportunity to generate investor returns, rather than a source of externalised costs.
As WTW, the cornerstone investor in our biodiversity-focused strategy, put it: “There is a growing demand for opportunities to establish nature-positive credentials as there was a clear need for new, investible nature-based solutions. This type of solution provides an opportunity to deliver environmental impact alongside risk-adjusted financial returns in the natural capital space.”
Pioneering habitat banks as a new investment opportunity
In 2021, our British Sustainable Infrastructure strategy invested in Environment Bank Ltd (EBL). Dedicated to tackling the critical issue of biodiversity loss and ecosystem collapse, EBL creates landscape-scale “habitat banks” from unproductive land. This involves turning landscape-scale areas of non-arable farmland into mosaics of woodlands, wetlands and species-rich grasslands.
The formation of habitat banks was prompted by the UK Government’s Environment Act 2021, a critical legislative effort to protect and enhance the environment. This Act aligns with the UK government’s broader commitment to achieve net zero emissions by 2050 and reverse the decline in biodiversity.
A key feature of the Act is the Biodiversity Net Gain (BNG) requirement, which mandates that developers enhance wildlife habitats and achieve at least a 10% increase in biodiversity value, ensuring that these habitats are measurably improved post-development either through on-site improvements or offsite delivery.
EBL’s habitat banks generate BNG credits, validated via the Defra biodiversity metric, which are sold either to developers requiring planning permission, or to corporates seeking to mitigate their impacts on nature and/or enhance their nature strategies. In this way, the habitat banks deliver strong financial returns by driving positive environmental and societal impact.
The whole concept and creation of this new type of natural capital infrastructure investment was originated, developed, structured and then ultimately implemented by the Gresham House Sustainable Infrastructure Team. Team members are involved in the on-boarding of all new sites, approving the legal, financial and market feasibility of each habitat bank before releasing funds. The team also supports the EBL team in the selling of BNG units and in general business oversight.
Key outcomes:
- Positive environmental impact: Nature-based solutions (including habitat banks), at scale globally, can deliver up to 10Gt of CO2 savings per year. This is equivalent to the emissions of the US, EU and Japan combined.
- Scale: Habitat banks are large areas, typically 25-100+ hectares of low-value non-arable leasehold or freehold land on which habitats will be created and maintained for at least 30 years. The total amount of hectares supporting nature recovery that were completed in 2022 and 2023 was just under 600 hectares and we expect to add another 1,000 hectares by the end of 2024.
- Large and growing demand: Habitat banks will facilitate the planning process, thereby supporting the wider social and economic need for more homes and development in England, with market experts predicting this could translate into up to £400m per annum of offsite BNG credit requirements indefinitely. Additionally, corporates can use BNG to mitigate their nature-related impacts, and potential dependencies and risks on a voluntary basis.
Reporting and leadership
Investors in our biodiversity strategy are provided with quarterly updates and reports that detail EBL’s business performance and the KPIs, which measure the business’s impact on improving, protecting and restoring biodiversity and nature. Such KPIs include the number of hectares supporting nature recovery and the number of BNG units created.
The EBL and the Sustainable Infrastructure teams are also actively involved in thought leadership in the UK’s nature and biodiversity agenda. The teams are regularly invited as speakers at global and national events. For example, EBL’s chief ecology officer spoke at the Environmental Markets Conference and the World Economic Forum’s Biodiversity Credit Alliance Task Force Meeting. The managing director of the Sustainable Infrastructure Team, Peter Bachmann, spoke at the Bloomberg COP28 event and provided evidence to the Environmental Audit Committee on the subject of “The role of natural capital in the green economy” alongside EBL founder David Hill.
Example: Delivering a habitat bank near Milton Keynes
Emberton Habitat Bank is a 38-hectare site located on Wood Farm, which is within Biodiversity Enhancement Zone 2 of the National Habitat Network. This refers to land in close proximity to existing habitat components that are unlikely to be suitable for habitat re-creation but where other types of habitats may be created, or land management may be enhanced.
Creating habitats within this area will connect existing ancient woodland and local wildlife sites within the surrounding area. There are opportunities to buffer and extend these priority habitats while also increasing the connectivity to the wider landscape. Wood Farm also includes opportunities for the restoration of lowland meadow and the creation of hedgerows, both of which are highlighted within the UK’s Biodiversity Action Plan.
Target habitats on the farm include lowland meadows, other neutral grassland, mixed scrub and native-species-rich hedgerows. These habitats have been identified in collaboration with the landowner, considering the area’s wider landscape character and the site’s environmental conditions. Details are included within the Habitat Enhancement and Management Plan, part of the Habitat Management agreement between EBL and the landowner.
Planting has commenced and will result in the conversion of the arable fields into fields of predominantly neutral grassland, with an area of lowland meadow creation also proposed in the southwestern corner of the site. A series of hedgerows will also be planted on site, in addition to a belt of dense scrub adjoining the mature hedgerow/existing belt of scrub along the site’s southeastern boundary. Over time we are expecting to see a dramatic increase in soil quality, helping to rebuild the ecosystem services on the site, locking up water and carbon and helping to provide improved air and water quality locally. The habitats proposed on-site have the potential to attract species native to the area not currently present. These may include species such as nightingale, garden warbler and turtle dove.
Over the next 30 years, we expect this site will become established, reach target conditions and be maintained as high-quality habitat delivering BNG.
The measures to ensure transparency and generate outcomes
To ensure transparency we have implemented a range of reports and tools:
- We have a series of bespoke ESG KPIs based on the social and environmental impacts identified through our diligence process. This includes the completion of our proprietary ESG Decision tool. Performance against the KPIs is reported upon monthly by EBL as part of the Sustainable Infrastructure Team’s mandated reporting. Our quarterly reporting to investors includes reports based on this data. The KPIs are also reviewed and refined periodically in collaboration with the EBL board.
- We publish case studies on proposed habitat banks, including the strategic significance of the site and an overview of habitat proposals.
- The sustainable investment update included in our Annual Report highlights the 2023 real world outcomes of our investments and compares them to the 2022 outcomes.
- Our annual Sustainable Investment Report provides a range of case studies and KPIs that demonstrate our wider commitment to sustainability across our asset classes.
- In order to monitor and measure the impact of our investments, we apply our proprietary impact framework, which is closely tied to the Five Dimensions of Impact, developed by Impact Frontiers, an investor collaboration.
PRI disclaimer: This case study aims to contribute to the debate around topical responsible investment issues. It should not be construed as advice, nor relied upon. It is written by a guest contributor. Authors write in their individual capacity – posts do not necessarily represent a PRI view. The inclusion of examples or case studies does not constitute an endorsement by PRI Association or PRI signatories.
