Exploring natural capital opportunities on a Hertfordshire estate
Knight Frank’s Rural Asset Management team is helping a large farming estate to assess its natural capital options. The Rural Report shares some of the findings.
3 minutes to read
Environment, social and governance (ESG) is not a new bandwagon to jump on for the Pilkington Farms Partnership, which has been farming in Hertfordshire and Yorkshire for five generations of the family.
“The ethos of the estate has always been to farm the land properly, but in a way that goes hand in hand with the environment,” says estate CEO Tom Duffin as we walk around Offley Hoo Farm, near Hitchin, with owner Richard Pilkington.
“I have always maintained that you can farm commercially without degrading the environment,” agrees Mr Pilkington. “We were one of the first farms to join the Higher Level Stewardship scheme and we focus a huge amount of effort on improving our soil by adding lots and lots of green waste and manure.”
However, he has mixed feelings about the environmental schemes the estate was involved with in the past. “I did find it ridiculous that we were being paid not to farm some of our land. And I think we’ve actually seen more wildlife here since we left some of the schemes.” There is certainly plenty of insect life: the estate is home to over 2 million honey bees.
With the farming business able to stand on its feet without subsidy payments, the loss of the Basic Payment Scheme post-Brexit is not weighing too heavily on Mr Pilkington’s shoulders, but he has been eager to discover more about the government’s new initiatives to deliver “public goods” in return for “public money”.
Alastair Paul and colleague Tom Heathcote were asked to look at the options. “First on the list was biodiversity net gain,” says Alastair. “The estate sits in a sweet spot that pretty much links three large local towns and an airport so there are a lot of potential development opportunities.”
A detailed study showed that it would be relatively easy to offset any future developments within the actual site. “You’d have to really wind up the housing density before you’d need to look elsewhere for offsetting,” says Alastair.
Providing land for other developments to offset their biodiversity losses was also considered, but passing on long-term obligations to the next generation didn’t really appeal to the owners, Alastair notes. “It would probably be better to buy a piece of lower-quality ‘sacrificial’ land and use it to house net gain obligations,” he says.
With biodiversity net gain looking less attractive, the next stage of the plan is to investigate the potential for carbon offsetting. The most obvious route at the moment is to plant more trees, but Richard Pilkington believes it doesn’t make sense to do this on quality arable land. “To get the economics right on tree planting you've got to be in at £2,500 an acre for the naked land.”
So instead, Knight Frank's Tom Heathcote is in the early stages of evaluating a bespoke arable carbon sequestration scheme, possibly based around break and perennial crops such as miscanthus. Once certified, this would enable the estate to generate and sell create carbon credits.
The estate is now working towards becoming carbon positive (i.e. sequestering more carbon than it produces) and Tom Heathcote believes that carbon credits from a carbon-positive organisation will attract a premium when sold.
“I think there could be a real demand from local businesses with deep roots in their communities who want to offset locally,” he says. “But it is important to work out how your own farming business can reach net zero before selling all your credits to other people.”
“What we really want to do is understand the situation in good time before wider carbon markets develop,” says Tom Duffin. “We want to stay just ahead of the curve.
That’s what we were trying to do here on the estate long before everybody started talking about ESG.”
