Recent studies provide guidance for developing nature value markets
Three separate studies examine the development of nature value markets from the perspectives of sellers who generate nature values, buyers and intermediary organisations. According to the studies, nature value markets are an important means of increasing private funding for nature action, but their large-scale establishment requires clear rules and additional incentives.
The halting of biodiversity loss requires commitment from society as a whole. In addition to public funding, private investment and new funding mechanisms are needed to support actions that strengthen biodiversity. Nature value markets provide a financial incentive for efforts to improve the state of nature. In a well-functioning market, landowners can improve the state of nature and sell the resulting nature values to buyers. Buyers may include companies, the public authorities, foundations, organisations or private individuals seeking to compensate for environmental harm or to support biodiversity.
For trading to be reliable, clear rules, science-based measures, independent means for verifying nature values and safeguards for their permanence are required. To promote trading, it is also necessary to have marketplaces and intermediary organisations operating between sellers and buyers.
Three studies have been completed to support the development of nature value markets, examining the markets from the perspectives of buyers, sellers and intermediaries. Their findings provide guidance for the ongoing development work led by the Ministry of the Environment and the Ministry of Agriculture and Forestry.
”Improving the state of nature is increasingly part of responsible business. Finland is at the forefront of developing nature value markets and means to channel private funding into nature action, and these recent studies provide a valuable foundation for further work. We need rules to prevent greenwashing,” says Minister of Climate and the Environment Sari Multala.
The studies also support the preparation of Finland’s national restoration plan, which is based on the EU Nature Restoration Regulation. One of the key objectives of Finland’s plan is to implement cost-effective measures and find new funding solutions to improve the state of nature.
“Nature value markets can diversify livelihoods. For example, in agriculture and forestry, they can provide supplementary income for landowners. However, this requires genuinely well-functioning markets in which landowners can offer nature values flexibly alongside their primary business activities. Nature value markets can also create new business opportunities in areas such as nature tourism, contracting and consulting,” says Minister of Agriculture and Forestry Sari Essayah.
Intermediary organisations play a key role in supporting the markets
With nature consultancy firm One Planet, the Ministry of the Environment examined the development of market structures for nature value trading and the prerequisites for intermediary organisations and marketplaces. The results indicate that the model of voluntary ecological compensation included in Finland’s Nature Conservation Act provides an internationally advanced foundation for market development. However, expanding the market requires additional incentives to strengthen demand for nature value units.
International experience shows that well-functioning nature value markets are based on clear regulation, credible verification and sufficient demand. Intermediary organisations play an important role in enhancing market trust and facilitating trading by supporting landowners and businesses in practical processes. The marketplaces for nature values are expected to be sufficiently broad and transparent, and their development and stabilisation are anticipated to follow as markets grow.
A key strength of the Finnish system is the reliability provided by the verification of nature value units by the authorities. The studies identify the strengthening of demand and the introduction of financial and regulatory incentives as key development needs. For example, granting tax deductions to buyers of nature value units would be an effective way to increase demand-related incentives.
More incentives needed to encourage participation
Sitra collaborated with One Planet to examine the conditions for accelerating nature value markets and assessed their potential. The study mapped barriers and incentives to market participation and presented three scenarios for the development of these markets. It concluded that more incentives were needed to encourage participation. Market development requires the consideration of the perspective of buyers such as companies when designing market structures. Clearer financial incentives and making ecological compensation more binding would help strengthen demand.
Private investment in nature value markets could be increased by offering tax benefits to buyers and ensuring sufficient initial market volume through the active participation of municipalities and state-owned companies. Clear rules are also needed for the use of nature value units to distinguish officially verified units from other types of nature-related actions. To build an ecologically effective and economically sustainable system, coordinated cooperation between the public and private sectors is required.
Nature value markets may provide supplementary income for landowners
The Ministry of Agriculture and Forestry commissioned a study by Pellervo economic research PTT exploring opportunities to develop nature value trading from the perspective of the agricultural and forestry value chain and landowners’ livelihoods. The study was published in October.
According to the study, the generation of nature values for voluntary markets may provide supplementary income for landowners operating in the agricultural and forestry sector and diversify rural livelihoods. However, the large-scale establishment of the market requires clear rules. The study found that landowners were interested in participating in nature value trading by offering generated nature values. Their willingness depended on the level of compensation, as well as the degree of commitment and flexibility involved in market participation. The broader market establishment therefore requires fair compensation, clear operating conditions and a reliable operating environment. Market development can be supported through measures such as pilot projects and further studies.
Inquiries:
Suvi Borgsröm
Senior Specialist, Ministry of the Environment
firstname.lastname@gov.fi
+358 295 250 342
Johanna Vanhatalo
Chief Specialist, Ministry of Agriculture and Forestry
firstname.lastname@gov.fi
+358 295 162 177
Emma Kari
CEO, One Planet Oy
emma@oneplanet.fi
+358 44 3006801
Tatu Torniainen
Senior Lead, Sustainability Programme, Sitra
firstname.lastname@sitra.fi
+358 294 618 608
Paula Horne
Research Director, Pellervo economic research PTT
firstname.lastname@ptt.fi
+358 40 592 6820
