What is Biodiversity Net Gain? Exploring Nature Markets

With the number of UK species having declined by 19% since 1970 and 1 in 6 potentially facing extinction, Biodiversity Net Gain will play an important role in requiring English developments to deliver a measurable increase in biodiversity.

We sat down with Helen Avery from the Green Finance Institute and Thomas Pickford from The Nature Conservancy to discuss Biodiversity Net Gain and what it means for nature markets. You can listen to this episode on the Financing Nature podcast.

In this guide, we’ll break down what Biodiversity Net Gain is, what it means for developers and nature markets, as well as how farmers can get involved in creating wildlife habitats.

What Is Biodiversity Net Gain?

Biodiversity Net Gain (BNG) is a policy that applies in England, which requires that all new developments achieve a measurable increase of at least 10% in biodiversity when compared to pre-development sites.

As a pioneering policy, Biodiversity Net Gain has the potential to channel private finance towards nature across England and integrate biodiversity into planning processes.

The concept for Biodiversity Net Gain emerged in the 2021 Environment Act, although the regulations did not come into force until February 2024. BNG is a mandatory requirement for all major developments to achieve 10% net gain and came into force under the Town and Country Planning Act, meaning this is, first and foremost, a planning tool.

Understanding Net Gain and the Mitigation Hierarchy

‘Net gain’ means developers have to go beyond compensating for the impacts of their development on biodiversity and actually achieve an increase compared to the biodiversity on that site before development.

The mitigation hierarchy is a framework guiding developers to first avoid negative impacts. Those that cannot be avoided need to be minimised and mitigated. Those that cannot be minimised or mitigated are restored or rehabilitated (compensated). Offsets are only then used to achieve no net loss.

In contrast, net gain requires developers to do all of the above, minimise, mitigate, compensate, and then go further and enhance biodiversity beyond what was already there.

Not all developers will be able to achieve a 10% increase on site. It might not be possible space-wise or because of the specific context of the development.

Recognising the loss of biodiversity in the UK, Biodiversity Net Gain is a policy in England requiring developers to deliver a 10% net gain in biodiversity from new developments.

What is a Nature Market?

If a developer cannot achieve a 10% uplift on site, they can buy biodiversity units off the nature market, paying someone else who is restoring and protecting nature elsewhere. This is usually done by buying units from habitat banks: areas of land set aside by a land manager for long-term nature restoration.

If you’re interested in purchasing biodiversity units, we offer these through the Wendling Beck Project. Find out more about our BNG solutions here.

In the cases where developers can’t find appropriate off-site biodiversity units, they can buy statutory credits as a last resort option. It’s the most expensive option and is government-backed; you are essentially paying the government to do nature restoration somewhere in England at a more strategic level.

This policy has created a government-regulated compliance market for biodiversity credits in England.

How Does BNG Work?

BNG is calculated using the statutory biodiversity metric, developed by DEFRA, that uses habitat as a proxy for measuring biodiversity. This allows developers to measure biodiversity on a site before development and how much habitat they need to restore, on or off-site, to achieve net gain after development.

As a developer, you’ll only be able to achieve planning permission if you have conducted this calculation and produced a net gain plan for your site.

The biodiversity metric assesses:

• Habitat type (distinctiveness)

• Condition

• Size

• Strategic significance - how it fits into the broader landscape or ecosystem

There is a spatial multiplier built into the metric to promote the mitigation hierarchy. It encourages on-site first, then local compensation within a local planning authority boundary or national character area.

If you buy an off-site unit beyond the local area, you have to buy more units, making it more expensive and incentivising locality.

Maintaining Habitat Improvement

Under Biodiversity Net Gain, any habitat improvement must be maintained for 30 years. Developers must submit a plan for maintaining on-site habitats over that period. Off-site biodiversity units must be secured and managed for 30 years through legal agreements like conservation covenants or Section 106 agreements.

Irreplaceable Habitats

There is also the complexity of irreplaceable habitats, such as ancient woodlands and blanket bogs. BNG is not really applicable in those circumstances, recognising that development should not be impacting those areas at all, and a full compensation strategy is required if you are impacting irreplaceable habitats.

Limitations of BNG

The concept of using habitats as a proxy for biodiversity has limitations: specific considerations for species and ecological functionality are not fully accounted for.

BNG does, however, provide a common, consistent, standardised science-based framework for nature credits and a basis for integrity. It’s also a means of getting payments to farmers and land managers to develop habitat banks.

How Are Wildlife Habitats Created and Maintained by Farmers​?

We’ve seen more farmers putting aside some of their land for nature recovery. There will always be a lag time between investment in nature restoration (and any lost income if it was productive land) and the production of biodiversity credits. Investment in habitat banks as a long-term strategy is emerging.

The Biodiversity Net Gain policy has only been in effect for 18 months, so figures are hard to come by. According to the Green Finance Institute, 3,000 hectares of land went on the register in the first 16 months, but less than 2% of that has actually been sold, suggesting demand is low and pointing to underlying factors and the need for reforms.

We recently hosted a test & trial for DEFRA, inviting farmers from across our region to join us for a series of workshops.

How Developers Are Responding to BNG

This may tell us that most developers are choosing to achieve 10% BNG on site. There isn’t really a monitoring framework in place to track whether they are actually achieving net gain over 30 years, and local planning authorities often don’t have the capacity to check.

A report from eftec, commissioned by Wildlife Trusts, Wildlife and Countryside Link and the Lifescape Project, found that 86% of approved planning applications in the first year of BNG achieved exemptions from BNG, which is concerning and limits demand.

The best available data suggests 680 hectares have been secured for off-site habitat creation/enhancement and a further 95 hectares on site—about 773 hectares overall—compared to DEFRA’s prediction of roughly 5,000 hectares annually.

Legislative Changes to BNG

There are proposals to integrate nationally significant infrastructure projects into BNG regulations as of May 2026, which could unlock more demand for biodiversity units.

At the same time, there are proposals to remove small sites from BNG, and an estimated 38% of demand so far has come from sites under 1 hectare; changes there could undermine demand further.

What is an Example of BNG?

The Wendling Beck Project was one of Natural England’s pilot projects for BNG. The project is just over five years old.

We collaborated with a number of landowners to create something bigger and better than the sum of the parts, and needed aggregation to deliver at the scale we wanted. Wendling Beck is a couple of thousand acres with four farms, at about 500 acres each.

Based in Norfolk, we are on marginal land with very thin sandy soils. Our businesses were not resilient from a farming perspective; we were particularly exposed to drought. It is hard to deliver habitat in these conditions, but it is a lot more forgiving than trying to grow barley or wheat on this type of land.

Gaining Funding

When we began, we were one of the round one NEIRF projects (Natural Environment Investment Readiness Fund). That funding helped with feasibility and getting off the ground.

We also became a DEFRA BNG pilot, which enabled baselining and early habitats through early interventions. There is quite a lot of upfront grant funding needed to help land managers and farmers.

The NEIRF funding was £100,000; we are now at about £2-2.5 million pounds of investment, which includes lots of habitat creation and capital works.

How Much Are BNG Units Worth?

At Wendling Beck, we have about 3,000 BNG units to deliver. Temporal multipliers within the metric mean that if you create habitat in advance, there is less risk of failure, and you are rewarded with more units if you sell at a later date, making it difficult to nail down exactly how many units will be delivered.

When we started, early eftec analysis had BNG units at an average value of about £11,000 a unit. By the time we got close to being market-ready, they were about £35,000 a unit (this is for 30 years and includes capital works and inflation). We have a business model which considers around 125 years.

 As supply and demand become more equalised, average BNG unit prices have dropped from about £35,000 a unit to about £25,000 a unit. There are big variations between habitat types: a watercourse unit might be around £150,000, while simple neutral grassland could be less than £20,000 a unit.

Selling BNG Units

It’s a reality that we might not sell all of our BNG units. Our business model is predicated on selling a decent proportion (50% to 70%).

We think the economics stack up better than the opportunity cost of farming this land, particularly on poor-quality soils and with an unstable farm policy environment.

We mitigated upfront costs by stacking. Norfolk is generally in a nutrient neutrality area, and Wendling Beck is also delivering nutrient credits.

Selling some nutrient credits early provided working capital to deliver habitat. The nutrients pay for taking land out of production; the BNG pays for delivering and managing high-distinctiveness habitats over the long term.

The Social Impact of Biodiversity Net Gain

In nature recovery projects, the benefit to local communities and wider society is hugely important. There isn’t a framework that predicates this must be part of design or execution; it is more of a best-practice approach to integrate people.

At Wendling Beck, we use habitat as a proxy for species, but people living close to or visiting sites can be neglected in design.

We’ve engaged with local community groups and volunteers, put in a cycle path to connect the local town centre to villages, and installed people counters on the footpath network and cycleway to understand use over time. We track walking, running and cycling as part of our natural capital account and its wider value to society.

We welcome people into Wendling Beck with cycle and footpaths, cabin stays and the opportunity to volunteer.

Social Impact Challenges

We don’t 100% know how our finances will work over time. If markets change or policy goes, we need to be able to justify public money for public goods in the future. Having data on improving things like health and well-being helps. There’s also a feel-good factor in creating something to be proud of and a space for nature that invites people in.

There is always a balance between high-distinctiveness habitats, species recovery and people because they are not natural bedfellows; recreational disturbance is a risk. Our design needs to keep the highest distinctiveness areas separate from where people are encouraged to explore.

Delivering Biodiversity Net Gain

We hope this article has given you a deeper insight into Biodiversity Net Gain, what it means for nature in the UK and its challenges and opportunities for developers and landowners.

If you’d like to learn more about Wendling Beck, you can find our BNG solutions and Nutrient Neutrality services here. Get in touch to discuss how we can support your development.

If you’re interested in visiting Wendling Beck, we offer opportunities to explore, stay with us and volunteer.