Natural capital finance is investment to conserve the value of the natural environment for the long term. This can include restoring degraded natural environments, such as peatland, wetlands or coastal saltmarsh, or native forest. Restoring habitats:

• helps address the biodiversity crisis.
• can make land a more effective “carbon sink”, reducing net greenhouse gas emissions.
• can help restore natural defences against extreme events such as flooding, which climate change may make more likely.

Finance can be public, e.g. governmental subsidy to encourage managing the land in a particular way, or private, and policy in this area may include trying to incentivise private investment in land.

There are questions over how to enable investment at the scale needed to tackle the climate change and biodiversity crises but in a way that creates the right incentives, avoids unintended outcomes, and does not leave local communities feeling shut out.

The Committee held an evidence session on natural capital finance on 26 March 2024. This was a one-off session, but it may lead to other related work. Themes discussed at the session are likely to be revisited in the Committee’s scrutiny of the Land Reform (Scotland) Bill and the next draft Climate Change Plan, which must be laid this year.

Correspondence under this item of business includes letters the Committee exchanged regarding a “Memorandum of Understanding” that the public body NatureScot entered into with private investors in 2023, alongside correspondence and written evidence directly related to the 26 March evidence session.