With natural capital and afforestation driving market interest and land values, a new report by Scotland’s Rural College (SRUC) has identified associated risks that need to be managed.
Farmland values across the UK rose by 6.2% in 2021, with Scotland experiencing the strongest growth in values of just over 31% overall and 60.8% for poor livestock land.
More than 40 percent of farmland was bought by investors and amenity buyers over the past five years, figures show.
Natural capital buyers are also increasingly important in the estates market, with £112m invested in Scottish estates in 2020 – an increase of 55% on the ten-year annual investment.
In addition, increased demand from institutional investors and financial institutions led to average sale prices for commercial forestry land exceeding valuations by around 50% in 2021.
The report, co-authored by Professor Mark Reed - Co-Director of SRUC’s Thriving Natural Capital Challenge Centre, outlines the risks these trends could create for markets, land managers and rural communities.
Following an evidence review and a roundtable event with more than 60 experts, the report also proposes sixteen options for policy and practice.
Among the risks identified by the project is that without buyer checks, it is possible for highly polluting industries to reach net zero via offsetting rather than reducing their emissions at source.
The report's authors warn this would undermine the integrity of both markets and global political agreements.
And while land value increases provide benefits for existing owners, it could exclude new entrants to farming, re-concentrate landownership and limit access to land by rural communities.
The options for reducing the risks and enhancing the positive impacts of natural capital investment include developing guidance on the rights and responsibilities for investors entering the UK market.
The report also calls for support for alternative landowner models, such as community ownership, as well as addressing barriers to tenants engaging in ecosystem markets.
Professor Reed said: “Interest in natural capital and ecosystem markets is driving rapid and significant change in the land use sector across the UK.
"But these changes are layered on top of - and often symptomatic of - long term and systemic issues in land markets, such as concentration of landownership, and other market drivers, such as timber prices.
“It is important that effective and well-aligned market-based and public-support mechanisms are designed to tackle existing structural barriers, avoid policy conflicts and ensure land use transitions are viable across a wide range of land managers and holding types and sizes.”
The report was funded as part of a SEFARI Special Advisory Group in collaboration with the Scottish Land Commission.
