Investment in Natural Capital

– in the Scottish Parliament on 31st March 2022.

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Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

The next item of business is a statement by Màiri McAllan on interim principles for responsible investment in natural capital. The minister will take questions at the end of her statement, so there should be no interventions or interruptions.

Photo of Màiri McAllan Màiri McAllan Scottish National Party

The recent United Nations 26th conference of the parties—COP26—in Glasgow highlighted Scotland’s international reputation for its natural capital and supporting policies. Those include the First Minister’s endorsement of the leaders pledge for nature to reverse biodiversity loss by 2030 and our significant public investment in woodland creation and peatland restoration as nature-based solutions to climate change.

Our natural capital has become an increasingly attractive proposition for private investment. That investment is largely focused on delivering carbon management, but it also supports a wide range of benefits, including economic development—especially in rural areas—biodiversity improvements, resilience of food supply and natural flood management. That investment is welcome and necessary, but it must be responsible. We share concerns about the need to ensure equitable sharing of the benefits of that investment with local communities and wider society, including when the investment involves the purchase of land or carbon rights for the purpose of carbon offsetting.

That is why, during COP26, we emphasised our ambition to develop a values-led and high-integrity market for natural capital. We want responsible investment that delivers a wide range of our environmental, social and economic policy priorities; that is high integrity, so that it verifiably restores and enhances nature; and that is genuinely values led, so that it supports a just transition and involves and benefits communities. That commitment is now also embedded in our national strategy for economic transformation. Private investment in natural capital is critical to enabling the pace and scale of action required to fulfil Scotland’s world-leading ambitions on addressing climate change and halting ecological decline. We have already committed significant public funding to the natural economy—more than £500 million over this session of Parliament—but the fact remains that no Government can, alone, meet the funding required.

The Green Finance Institute has estimated the investment gap for nature restoration in Scotland to be around £20 billion over the next decade. We are determined to ensure that that necessary private investment is socially responsible and provides wider public benefit, including for our local communities. As stated in our global capital investment plan, we want to work with investors who share our values so that we encourage the right investment in our natural capital. We want to work with communities to ensure that they are empowered and poised to benefit from our journey to net zero.

Our approach offers significant opportunity across our economy in terms of increased investment in good jobs and fair work, in land management, and in the supporting fintech, agritech and supply chain sectors.

NatureScot estimates that there are currently around 200,000 nature-based jobs in Scotland and that the sector has been responsible for a third of the jobs growth in Scotland over the past five years. Increasing the right kind of private investment will be important for continued jobs growth, especially in rural communities, and will also provide new income streams for farmers and land managers. We know that young people are increasingly interested in nature-based careers that help to fight the twin nature and climate emergencies.

In order to restore our natural capital, ensure a just transition, deliver good jobs and secure a vibrant future for our rural communities, we must design a market for investment with those objectives at its heart. Today, we are setting out our ambition and strategic direction to support and promote the type of activity that we want to see—striking a balance between, on the one hand, the need for responsible private sector investment that supports our policy priorities, such as climate change mitigation, fair work and a just transition, and, on the other, the need to support community rights and ambitions.

There are examples from other industries, such as onshore wind energy, of how the benefits of land-based private investment can successfully be shared with local communities. Furthermore, our groundbreaking land rights and responsibilities statement, published in 2017, sets out principles that underpin the Scottish Government’s vision for a stronger relationship between the people of Scotland and our land, where ownership and use of land deliver greater public benefits through a democratically accountable and transparent system of land rights and responsibilities. We are currently conducting the statutory five-yearly review of the land rights and responsibilities statement to assess whether it needs to be updated to remain fit for purpose and future challenges.

The Scottish Government is committed to that and to community empowerment. For example, the new Scottish land fund is now open and has awarded a total of £6.5 million to more than 80 projects so far this year. The budget for this year is £10 million and will be doubled to £20 million by the end of this session of Parliament.

The new land reform bill will aim to ensure that the public interest is considered in transfers of particularly large-scale land holdings in order to tackle problematic scale and concentration that can hamper community ambition. We will also aim to introduce a pre-emption in favour of community buy-out where the public interest test applies and where it is appropriate to do so.

Our proposals will complement existing community right-to-buy mechanisms and guidance that supports community engagement in land-based decision making. That includes our guidance on engaging communities in decisions relating to land and the Scottish Land Commission’s good practice programme, which comprises a series of land rights and responsibilities protocols.

In addition, the Scottish Government is working in close collaboration with partner agencies. That includes the work that the Scottish Land Commission is taking forward as a matter of urgency to help us to better understand the implications of investment in natural capital on the land market.

In advance of more formal policy developments, today we are publishing a set of interim principles for responsible private investment in Scotland’s natural capital. The interim principles set out our ambition for the market in Scotland and spell out our commitment to ensuring that the interests of thriving and empowered local communities and the wider public are at the very heart of our approach, both now and in the future.

As a priority action under the national strategy for economic transformation, we will develop new market infrastructure, rules and governance arrangements for responsible private investment in natural capital. The approach will build on existing investment mechanisms, such as the Woodland Carbon Code and “The Peatland Code”. Market development will take time to come to fruition and will depend on partnership work across the public, private and third sectors.

On that note, I extend my gratitude to the economic, environmental and societal agencies whose insight and expertise have been instrumental in the development of the principles. As I mentioned, Government cannot achieve the scale of our ambition alone—we need to build a broad coalition of the willing. That collaborative approach will be continued through discussion with communities, land managers, investors and other stakeholders on the interim principles and how they will apply in practice, and to help us to develop best practice and options for market infrastructure.

To that end, we will engage on the interim principles through existing initiatives such as the Scottish Forum on Natural Capital, the Scottish nature finance pioneers group and networks such as those used by the Scottish Land Commission to support the land rights and responsibilities statement. Collaboration will be critical to achieving our aims.

No Government has all the answers or has all this worked out yet. However, we are here and ready to lean in to the challenge, alongside those who share our commitment to a high-integrity, values-led market and to learning by doing. That will not be easy, but the things that are worth doing seldom are. I hope that we can all get behind the challenge, and I very much look forward to working with Parliament to turn the vision into reality.

The Deputy Presiding Officer:

The minister will now take questions on the issues raised in her statement. I intend to allow around 20 minutes for questions, after which we will move on to the next item of business. It would be helpful if those members who wish to ask a question were to press their request-to-speak buttons now.

Photo of Rachael Hamilton Rachael Hamilton Conservative

I thank the minister for prior sight of her statement.

The statement goes some way towards addressing the interim principles for responsible investment in natural capital, and we welcome aspects that the minister has touched on today. However, it falls short of the expectations of many people in rural Scotland. Although the Conservatives support investment in natural capital, it has to be done responsibly and while ensuring that rural livelihoods are not lost in the process—a sentiment that I believe we all share.

I recently spoke to the Scottish Tenant Farmers Association about the loss of agricultural land as a result of the expansion of large-scale forestry by companies that are seeking to offset their carbon footprint. We have seen not only tenant farmers but other rural workers, including gamekeepers and ghillies, moved off their land. Tenant farmers’ primary concerns are around agricultural tenancy laws, which allow for the facilitation of the disposal of land for greenwashing.

Alongside the new interim principles, will the minister consider further supporting tenant farmers so that they, too, can benefit from net zero and from these principles? Will she seek to ensure that tenancy laws in Scotland reflect the need to prevent productive agricultural land being lost to so-called Highland clearances?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

I thank Rachael Hamilton for welcoming what the Government has set out today, in so far as she did so. I am very aware of both the opportunities and the challenges that are presented by the move to net zero, and of the centrality of our land within that. That is partly why we are here today. Within that, I am aware of the concerns of farmers, including tenant farmers, and crofters. I and my colleagues across Government—because this is a genuinely cross-Government effort—engage regularly with farmers, crofters and tenants.

To give Rachael Hamilton some comfort—I hope—on the extent to which the Government is aware of that issue, I will read from principle 6 of the principles that we are publishing today, which is headed “Investment that supports diverse and productive land ownership”. Point 3 states:

“Where there are leases or other forms of tenure in place, for example in agricultural tenancies or crofting tenure, investors should identify and engage relevant parties early in decision making and consider opportunities for shared benefit.”

As I said, this statement today is the beginning, not the end. Following the publication of the principles, there will be a process involving further engagement and the development of best practice. I hope that that reference to inclusion gives Rachael Hamilton some comfort on the point that she raised.

Photo of Mercedes Villalba Mercedes Villalba Labour

I thank the minister for advance sight of her statement. However, given that an important statement on ferries was bumped for this one, it really ought to have contained a lot more substance. Today’s statement does nothing to address the fact that Scotland’s land market continues to be dominated by private investment and that wealthy individuals continue to own vast amounts of land.

The Scottish Government is seeking to improve transparency around land ownership through the register of persons holding a controlled interest in land, but the enforcement measures that have been announced for non-compliance with the register are weak. A £5,000 fine will not deter those wealthy landowners who can afford to pay. Can the minister confirm whether the Scottish Government will remove public subsidies from landowners who refuse to comply?

Although the Scottish Government has published the interim principles today, it is unclear how landowners will be made to comply with them. Will the principles be incorporated into the land rights and responsibilities statement? Will the Scottish Land Commission be given the powers to turn those interim principles into an enforceable code of practice for landowners?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

I share Mercedes Villalba’s concerns and I am considering all of them as we develop this work and the land reform bill.

However, this Parliament voted for what were then—and are still—regarded as the world’s most ambitious targets for emissions reduction.

Photo of Màiri McAllan Màiri McAllan Scottish National Party

If the member gives me a chance, I am answering the question.

Because the Parliament voted for the targets, it is incumbent on all of us to make sure that we achieve them. In Scotland, we are fortunate that we have ample scope in our natural world to sequester carbon and support diversity, but it is absolutely clear that the Government cannot fund that work alone. There is a £20 billion investment gap between what the public sector can do and what is needed in order to do the land-based work that will allow us to fulfil our targets.

The member is asking me to answer her question, but I am afraid that many of the questions that she has posed today are part of legislation for which the consultation is still being developed, and it would be inappropriate for me to come to the chamber and divulge that information prior to public consultation. However, I assure her that I am considering all of that work, as well as the review of the land rights and responsibilities statement and the advice that I will get from the Scottish Land Commission on what are informally being called “green lairds”. All of that will be fed into the legislation as it is developed.

Photo of Jim Fairlie Jim Fairlie Scottish National Party

Those principles clearly touch on issues that will be of huge interest to the agricultural sector, so how do we take the crofters and tenant farmers with us on that journey as we seek to restore and enhance nature?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

Jim Fairlie is absolutely right that, when it comes to Scotland’s land, our farmers and crofters are key. Not only do we rely on them to produce our food and fulfil the Government’s good food nation ambition that we are rolling out, but their stewardship of our land makes them an absolutely key player in the delivery of a net zero Scotland that lives in harmony with nature. Therefore, I assure the member, just as I did Rachael Hamilton, that the Scottish Government is seized of the importance of supporting farmers to deliver sustainable food production and to fulfil what we need them to do—and what they are well poised to do—in relation to climate change mitigation and support for biodiversity. The member knows that my colleague the Cabinet Secretary for Rural Affairs and Islands is undertaking that work through the agriculture reform implementation oversight board—ARIOB—but it is also front and centre of the work that we are publishing today. I refer the member again to principle 1,

“investment that delivers integrated land use”,

principle 6,

“investment that supports ... productive land ownership” and principle 6.3, which I read to Rachael Hamilton.

Photo of Brian Whittle Brian Whittle Conservative

Last year, against the Scottish Government target of 20,000 hectares, 5,600 hectares of peatland were restored. That is the fourth year in a row that that target has been missed. Ambitions and targets are relevant only if there is a route to achieve them. There is a lack of qualified men and women in the green economy. What is the Scottish Government doing to ensure that the education system is supported to develop green economy qualifications, in order to enable the national capital investments, which the minister talks about, to be realised?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

Again, the member touches on the crux of the issue that we are facing. The public sector has a role to play in setting targets, including those on emissions reduction and peatland restoration. We can invest money to provide stability in the market, and we are doing that with peatland restoration. We have committed £0.25 billion over the next decade, but there is, inevitably, a gap. The principles that we are publishing today are exactly about trying to rise to the challenge of that gap by leveraging in private investment, but doing so in a responsible way.

The member is absolutely right to mention the importance of skills, because not only are they essential for all the work that we need to undertake in woodland creation, peatland restoration and marine habitat, but young people are continually crying out to be involved in those areas—they want to be part of the green sectors of the future. A number of pieces of work are being undertaken in my portfolio, including a review of land-based learning, and investments are being made in land-based work as part of our skills guarantee. I would like to assure him that we are trying to rise to that challenge, not only because it is necessary but because young people are calling out for us to do so.

Photo of Jenni Minto Jenni Minto Scottish National Party

I thank the minister for her statement, which highlighted that the estimated investment gap for nature restoration in Scotland is around £20 billion over the next decade and that Government alone cannot address that gap. As she has said, responsible private investment will be critical to that, so could she please expand on how the Scottish Government will balance the need for private investment in a way that ensures harmony with its land reform ambitions and with any aspirations that are expressed by communities?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

As I have said today, we are absolutely committed to taking action to ensure that increasing levels of natural capital investment in Scotland are delivering benefits for local communities and wider society. That is part of fulfilling not only our legal commitments to emissions reduction but, equally, our important legal commitment to a just transition. I have mentioned already the package of work that I am expecting from the Scottish Land Commission to help the Scottish Government find a pathway to balancing the need for private sector investment in natural capital with community rights and with that all-important legal commitment to a just transition.

That is all reflected in what we are publishing today, which are the principles for our values-led high-integrity market. All of that is set out in the papers that have been published. Moving forward, we will take what we have published today, which I am pleased to note is already being welcomed by stakeholders, to communities, crofters, farmers and investors. We will use those principles as a vehicle to better understand best practice and to inform how we set the rules for the market. A number of land-based pieces of legislation are due to come through Parliament this term, which I expect all of this work to feed into.

Photo of Rhoda Grant Rhoda Grant Labour

The minister’s statement is vital and detailed, especially regarding the green lairds who have already been buying up huge swathes of Scotland. Will she bring forward proposals to regulate our land market to stop land being bought and used when there is no public interest? Will she confirm whether the right of pre-emption for communities will mean that they no longer have to register an interest in land?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

I thank Rhoda Grant for that question; again, I know that she cares very much about this issue, and she and I have had exchanges about it in Parliament before.

I would like to assure Rhoda Grant that this work, as well as the other work that is being taken across the land reform and environment portfolio and in others, is entirely geared towards the objective that a net zero Scotland should be a country in which more people live and work sustainably on our land, and not fewer. Community empowerment is a huge part of that.

There are examples of how we can empower our communities. It can be through jobs, for example, as has been mentioned before. It can be through community benefit. I think that all of us across the chamber will have examples in our constituencies and regions of town centres that have been transformed by funds that have flowed from renewables development.

As regards the right of pre-emption, I have to tell Ms Grant what I told her colleague. I am still very closely considering the content of the land reform bill and how it will function, but I hope to publish the consultation shortly.

Photo of Emma Roddick Emma Roddick Scottish National Party

The minister made mention in her statement of jobs in rural communities. Is there anything that the Scottish Government is able to do to ensure that private investors make a contribution to the rural communities that they will come into contact with?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

The member touches on another important issue. There are changes in the market, and the centrality of our land to our climate and nature aspirations is driving this quite rapid development in our market. That presents opportunities and it presents risks. In what we are publishing today, the Scottish Government is seeking to mitigate the risks and rise to the opportunities. Some of those opportunities could be for community benefit, as I discussed in my response to Rhoda Grant, and they could be for jobs and they could be for a series of other things.

On jobs, as I said to the member on the Tory benches, we know that people are increasingly looking for jobs that will help them to contribute to the restoration of our natural world. Not only that, those jobs could allow young people from constituencies such as mine, who perhaps feel that they have to leave their local communities in order to find opportunities, to stay and contribute to something substantial.

On the specifics of Emma Roddick’s question, I draw members’ attention to principle 2,

“Investment that delivers public, private and community benefit”,

and to point 1 under that, which reads,

“Investment in and use of Scotland’s natural capital should create benefits that are shared between public, private and community interests contributing to a just transition.”

Photo of Liam McArthur Liam McArthur Liberal Democrat

I thank the minister for early sight of her statement and add my welcome to the long-overdue recognition at COP26 of the role that nature and biodiversity must play in helping us to keep global warming below 1.5°C. The Scottish Liberal Democrats believe that nature restoration and rewilding are key to achieving our net zero and biodiversity targets. Will the minister commit to setting additional targets for rewilding of publicly owned land and will she say how she will ensure that proper due diligence is carried into any private investors?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

I tend not to use the term “rewilding” because I sometimes worry that it could mean rewilding to the absence of people. As I have said, my and the Government’s vision for a net zero Scotland is of a rural Scotland with more people living and working sustainably on the land. Although there are aspects of rewilding that we support, which can be actions ranging from very small scale to landscape scale, I prefer to use the terms “rewilding” and “repeopling” together, which I know is something that the member will appreciate.

As regards targets, I will not pre-empt the content of some of the work that my colleague Lorna Slater will be taking forward in a natural environment bill this session. I have no doubt that Ms Slater will be keen to engage with the member on that.

Photo of Alasdair Allan Alasdair Allan Scottish National Party

Can the minister say more about the way in which the principles will continue to reshape people’s relationship with the land in Scotland and the pattern of that relationship, given that the relationship has often been skewed historically by iniquitous patterns of land ownership and use?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

That is a very important point, because that iniquitous pattern of land ownership is partly why we are here today and it is why the Government maintains an unwavering commitment to continuing Scotland’s land reform journey. Too often in decades and centuries gone by, developments in Scotland have happened at the expense of communities. As part of a just transition, we cannot allow that to happen again; we must learn from the mistakes of the past.

We want empowered communities to be able to benefit from the opportunities that land and land use change will present over the next 20 years. As I have mentioned, the principles that we are publishing today will be taken forward as part of an on-going engagement process. That will allow us to develop an evidence base to ensure that best practice is being undertaken and it will inform future laws including part of the land reform bill and others.

Photo of Ariane Burgess Ariane Burgess Green

I thank the minister for advance sight of her statement. It is heartening to hear the Government reiterate its commitment to community empowerment through mechanisms such as the pre-emption in favour of community buyout where a public interest test applies. Will the minister outline what is being done to support communities to get organised so that they can grasp the opportunities that will arise as a result of the new legal mechanisms delivered by the Scottish Government and the Greens?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

I thank Ariane Burgess for that question, because I agree that, although we have a job in the Executive and the legislature to make sure that the rules are there to facilitate land reform, it is equally important that communities are able to utilise those and be supported to do so. Thankfully, communities in Scotland have more options than ever before to take ownership of land and assets, including several distinct rights to buy in existing legislation, and they can now choose which route to community ownership best suits their aspirations. Measures in the forthcoming land reform bill will aim to complement what has gone before and support existing rights.

However, communities ought not to wait for the next land reform bill but should use the opportunities that are currently available to them, which include grant support to help them with the acquisition of land and land assets through the Scottish land fund, which I mentioned in my statement. Grants of up to £100,000 are available as part of that fund.

My feeling is that the land reform laws that have gone before have created a culture in which communities feel more able to use and buy assets to suit them; that they do not always use the legislation to do that is a good thing. However, the march of land reform in Scotland continues apace.

Photo of Liam Kerr Liam Kerr Conservative

The minister talked at length about the need for private investment in natural capital and said that there was a £20 million gap. However, I do not think that I heard in the statement how the Scottish Government will encourage and incentivise individuals and firms to make those investments, what the identity of those firms and individuals might be and where, for example, they are registered as companies. Can the minister assist me now?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

The question of leveraging and mobilising funding is a good one. Ultimately, investors value certainty, and the principles that we have published today provide clear policy signalling that tells investors where we stand in Scotland, which will allow them to take investment decisions based on that knowledge and on the certainty of the Government’s position.

As I said to the member’s colleague, the interim principles are a start and not the end. They are designed to be a vehicle for engagement with the investment community that will ensure that we establish a market that works for investors and communities.

Photo of John Mason John Mason Scottish National Party

Following on from Liam Kerr’s question, can the minister go into more detail about the kind of natural restoration enhancements she envisages private sector investment bringing about, and does she perhaps have a current example thereof in Scotland or elsewhere?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

Yes. That is another good question, which goes to the heart of why we are here. I bring my comments back, again, to the fact that Parliament set world-leading climate targets and is committed to treating the climate emergency and the ecological emergency as twin crises. We are very fortunate in Scotland that marvels of our natural world will come to our rescue in those challenges.

The member asks for examples. Woodland creation is a key example. In the past few years, Scotland has planted 80 per cent of all trees that have gone into the ground across the United Kingdom. Another example is peatland restoration, which is truly a win-win in the climate and nature emergencies, as it sequesters carbon, supports biodiversity and creates green job opportunities.

Onshore and offshore renewables are, of course, other good examples of land-based investment, and an example of increasing importance is blue carbon, which includes seagrass and salt marsh restoration.

All of those nature-based processes will help us take on the climate emergency, and all of them are opportunities that Scotland is so well placed to utilise.

The Deputy Presiding Officer:

That concludes the statement. There will be a very short pause before we move on to the next item of business.