How to unlock the potential of your land

Much of Britain’s countryside is owned by what people would refer to as non-traditional property owners, that is to say, not farmers or landed estates.

This group of rural custodians includes pension funds, utility companies, local authorities and other public bodies, institutions such as the Church, Oxbridge colleges, charities and many others. Each will have different ownership objectives and varying levels of engagement with the land that they own, but one thing they generally have in common is that they don’t often farm the land in hand, instead relying on tenants to look after it.

From our experience, this arms-length relationship can sometimes mean that opportunities to maximise the value – or realise the potential – of the land are overlooked or inhibited. Natural capital,  the new up-and-coming ESG asset class,  is a good example of this.

Below we share some thoughts on how to make the most of it. Not all the ideas will apply to every institutional or corporate rural property owner, but we hope that you find something thought-provoking in our list.

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1. Baseline and value your natural capital opportunity – don’t undersell

It sounds obvious, but it is impossible to create a natural capital strategy without knowing what you have at your disposal and how much it might be worth. There are a number of providers who can provide a baseline natural capital survey and most of the work will be done remotely using satellite and other existing data, so it needn’t involve extensive negotiations with tenants, although to be really accurate, a certain amount of ground-truthing will ideally be utilised.

Once you have your baseline results, you are in a better position to work out what to do with the natural capital, whether that be to create tradable carbon, biodiversity or nutrient neutrality credits, helping you to hit your wider organisation’s own net zero ambitions, incorporating it into your CSR/ESG activities or using it as an opportunity to restructure the relationship with your tenants (see point 3).

A large number of organisations, with varying degrees of credibility, offering to pay you for your natural capital have sprung up over recent years. Using them to broker your newly identified natural capital may sound like the most convenient approach, but it may not maximise value. Also, consider how much of your natural capital you will need to retain to satisfy your own requirements such as net zero and CSR ambitions.

Larger corporate or institutional landowners with a strong reputation, or an emerging brand, may be in a position to do something more creative with any natural capital that is surplus to their own requirements. This could involve selling a bespoke package of nature-based solutions to an organisation needing to satisfy its corporate ESG strategy.

Watch how Knight Frank's Rural team can support commercial businesses with their land use strategies below:

2. Take note of policy direction

If only we had a working crystal ball, then we would know for certain what was going to happen in the increasingly intertwined world of agricultural and environmental policy and forthcoming legislation. However, we need to recognise some overarching themes that seem to have prevailed and be supported by the major political parties in the UK and globally.

It appears unlikely that we will witness a complete change from a trajectory that appears set and is being reinforced through internationally endorsed bodies such as the Taskforce on Nature-related Financial Disclosure (TNFD). According to the TNFD, more than half the world’s economic output – some US$44 trillion – is either moderately or highly dependent on nature.

Financial institutions and corporations don’t have the information they need to understand how nature impacts their immediate financial performance or the longer-term financial risks arising from how the organisation impacts nature. The idea is that better information will allow organisations to incorporate nature-related risks and opportunities into their strategic planning, risk management and asset allocation decisions.

Assessing and reviewing your core objectives, duties, purpose and/or business model will be a requirement in the face of change. Few may realise but since 1 January 2023, all public authorities (in the course of delivering their functions) must have regard to conserving and enhancing biodiversity. Measuring impact and harnessing data and new metrics will be key. The enhanced biodiversity duty is a step change and should be interpreted as a signal of intent by government. The private sector should take note.

3. Build relationships – internal and external

As mentioned before, much of the farmland owned by institutions and corporates is farmed by tenants. The temptation can be to manage these relationships fairly passively or via an agent who handles rent reviews and the like in isolation.

But the growing awareness of the opportunities presented by natural capital and the grave consequences of continuing with the status quo in the face of the climate and biodiversity crises requires a higher level of engagement, in our view. Unsurprisingly, given that it didn’t exist as a concept when the legislation behind it was created, tenancy agreements are pretty inconclusive when it comes to the treatment of natural capital.

Aligning the aspirations of landlord and tenant may require difficult conversations, but the benefits to both parties could be worth the effort. Similarly, large organisations can be highly compartmentalised and perhaps not realise the synergies in front of them by relying on their existing teams.

All too often, whether by accident or design, different parts of the entity can become siloed, and opportunities accruing in one part of the organisation that could benefit other parts of it can be overlooked.

4. Make more of third-party funding opportunities

There is a plethora of grant opportunities available for rural property-owning businesses that want to help the planet, but generally, they are claimed by individual farmers. However, many of them are just as applicable to institutional or corporate landowners. Indeed, organisational scale will be an advantage when it comes to certain funding streams such as the Landscape Recovery Scheme.

Some of the grants available are well known, but there are a surprising number that aren’t widely publicised. A number of farming NGOs, particularly those focused around research, are also looking to work with partners at scale.

We are also finding more corporates and financial institutions are investing in bespoke projects with positive impact rather than traditional grant-funded landowner projects. Knight Frank is uniquely positioned to help facilitate these investments.