Organisation details:

Name: Gresham House

Signatory type: Investment manager

HQ country: United Kingdom

AUM: £8.5bn

Covered in this case study:

Asset class(es): Infrastructure

Geography: UK

Gresham House’s 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. We believe sustainable investments drive investment returns because they benefit people and the planet.

Why we focus on natural capital

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. We see protecting and restoring nature as a means to create opportunities and to generate investor returns rather than as a source of externalised costs.

To date, a key challenge has been placing a value on nature. However, 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.

At Gresham House, natural capital means providing investors with access to return-generating real assets that contribute, where possible, to the transition to both a nature-positive and a net-zero economy.

One of the ways we do this is by creating new habitats and applying specialist land management techniques using nature’s intricate infrastructure. These investments create intentional and additional improvements in biodiversity, resulting in significantly enhanced flora and fauna, nutrient levels, flood defence and various other uplifts in ecosystem services.

How we have invested in new nature markets

In 2021, Environment Bank Ltd (EBL) became a portfolio business within our British Sustainable Infrastructure strategy. 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.

EBL’s habitat banks generate BNG credits, validated via the Defra biodiversity metric, which are sold to developers needing planning permission or corporates seeking to mitigate their impact on nature and / or enhance their nature strategies. In this way the habitat banks deliver financial returns by driving positive environmental and societal impact.

Habitat banks are a new type of natural capital infrastructure investment that delivers BNG with the following key features:

Positive environmental impact

Nature-based solutions (such as habitat banks and BNG initiatives), if delivered at scale globally, could have the potential to deliver up to 10Gt of CO2 savings per year.[1]


Habitat banks are large areas, typically 25-100+ hectares[2]   of low-value non-arable leasehold or freehold land on which habitats (e.g. a species-rich woodland) will be created and maintained for at least 30 years. The maintenance is usually carried out by the farmer-landowner, often incorporating conservation grazing.

Legally mandated market

The Environment Act 2021 has introduced a requirement for most development in England to deliver a mandatory minimum 10% BNG as a planning condition from February 2024.

Credible metric

The biodiversity gain is validated via a metric created and regulated by the UK Government, under which a unit may be sold as a BNG credit.

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 £400mn per annum of offsite BNG credit requirements indefinitely.[3] Additionally, corporates can use BNG credits to mitigate their nature-related impacts, and potential dependencies and risks on a voluntary basis.

The concept and creation of this new investment type was originated, developed, structured and implemented by the Gresham House Sustainable Infrastructure Team. This process took from around July / August 2020 until December 2021, when the first habitat bank was ready for investment by our sustainable infrastructure funds.

The Sustainable Infrastructure Team remains 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.

As this is a nascent market influenced by local supply, demand, specific habitat type and regional factors affecting land pricing, it is difficult to specify a single market price for BNG units.

The best proxy is found in the statutory backstop pricing that has been issued by Natural England. These statutory credits have been priced at a deliberately uncompetitive level so as not to interfere with the emerging private market, with low-distinctiveness habitats starting at £42k per unit, rising to £650k for lakes.

This is before a spatial risk multiplier is added, which doubles the amount of statutory credits needed and in turn the cost to the developer.[4] EBL is seeing the emerging private market offering in the region of £30k for medium-distinctiveness units (semi-natural habitats not classed as priority habitat).[5]

Example: Delivering a habitat bank in Milton Keynes

Emberton Habitat Bank is proposed for a 38-hectare site near Milton Keynes, United Kingdom.

The proposed site is in Wood Farm, a working farm and campsite. Creation of the habitat bank will provide connectivity to parts of Wood Farm where habitat creation has previously been undertaken, such as a recently planted woodland. The existing site comprises two large fields with very limited arable weed or botanical interest. This means that there is limited potential for other types of site use.

The site at Wood Farm is located within Biodiversity Enhancement Zone 2 of the National Habitat Network, i.e. land in close proximity to existing habitat components that are unlikely to be suitable for habitat re-creation but where other types of habitat may be created or land management may be enhanced.[6]

The habitats created at Wood Farm 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 connectivity to the wider landscape.

Target habitats on the farm include lowland meadows, other neutral grassland, mixed scrub and native-species-rich hedgerows, which are highlighted within the UK’s Biodiversity Action Plan.

These habitats have been identified in collaboration with the landowner, considering the area’s wider landscape character and the site’s environmental condition. 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[7], 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, such as nightingale, garden warbler and turtle dove.

Over the next 30 years, this site aims to reach target conditions and to be maintained as a high-quality habitat, delivering net gains in biodiversity.