Community Benefits Standard

Deciding Matters and members of the Nature Finance Certification Alliance (NFCA) have incubated a project proposal, seeking funding from the FIRNS grant programme, to establish an outline business case for a new UK-wide standard for community participation and how this would translate to a clear set of community benefits, under a clear set of community wealth building principles.

We will develop and test the commercial viability of a certification product that would provide buyers of ecosystem service credits assurances on the approach taken to generating place-based community benefits. As a cross-cutting, thematic, “plug-in” certification, it will complement market/ecosystem focused nature investment standards, enabling project developers to sell credits that reflect the additional value placed into local communities and businesses.

A prototype certification product will be derived from a key output of our development phase work: a Best Practice Participation Guide: Community Inclusion for Community Benefit. Co-designed with key stakeholders from each of the pilot sites identified, with deliberative input from their wider communities as well as broader stakeholder networks, and critical feedback from an expert advisory board.

This guide will build on and complement existing frameworks, including the National Standards for Community Engagement (SCDC), the Participation Framework (Scottish Government), Public Engagement Strategy for Climate Change (Scottish Government), Community Wealth Building and a Just Transition to Net Zero (Community Land Scotland), Green Finance Institute Toolkit and recent research completed by the University of Strathclyde on ‘Carbon Offsetting for Communities’.

It will provide a series of recommendations for community inclusion, with clear actions attached, and insights into the community benefits gained by undertaking such action. With a focus on developing community benefits, we will embed the principles developed by Scottish Land Commission on “community benefits from investment in natural capital” and integrate with the British Standards Institute (BSI) Nature Investment Standards framework.

A number of private-sector led Natural Capital projects in Scotland have excluded local communities in planning, management and decision making. Without their involvement, opportunities can be missed to provide additional economic, social and well-being benefits, alongside creating reputational and delivery risks for the investors in the project.

There is currently no such certification product in Scotland, or the UK, for nature-based solution projects (NbS). The international Climate, Community & Biodiversity (CCB) Standards by Verra are prohibitively expensive for most UK projects and do not address specific Scottish needs.

Our working hypothesis for the certification will be that it can be bundled with the ecosystem services, to attract a higher revenue income from the private sector.

Working with existing established codes (Woodland Carbon Code and IUCN Peatland Code), means we can have the ambition to provide project developers, codes and investors an integrated solution to developing and marketing “Community Plus” projects, by 2025.

Alongside existing codes, our project will also interface the work of CreditNature, one of the most advanced, holistic, forms of Nature Positive Biodiversity Credit available, and supported via the Innovate on Nature Civtech Programme, sponsored by Scottish Government, NatureScot and SEPA.

We will also work with two marine projects, one place-based and one developing a ‘community contract’, ensuring the evolving Marine Natural Capital market is included within scope.

While the number of nature restoration projects involving private financing across Scotland is accelerating (predominantly involving voluntary nature-based carbon offsets), it remains unclear whether these projects will provide communities with direct benefits or control.

Furthermore, the viability of such projects can be undermined if engagement with impacted communities isn’t carried out with a strong community wealth building ethos.

Community participatory approaches are a way to build and sustain relationships between the public sector and community groups - helping them both to understand and take action on the needs or issues that communities experience. Participation, rather than simple engagement, means a more collaborative dynamic approach, especially if the community is directly involved in the development of an offset project, potentially as a part-owner or with decision making powers.

The National Standards for Community Engagement, by the Scottish Community Development Centre (SCDC), are good-practice principles designed to improve and guide the process of community engagement. Specific guidance on community engagement for natural capital projects is available through the Green Finance Institute’s Investment Readiness Toolkit, which helps identify the range of activities that could be undertaken.

The University of Strathclyde’s ‘Carbon Offsetting for Communities’ project commenced in September 2022 and is currently concluding its findings 2023. Funded by the Scottish Universities Insight Institute and the Strathclyde Centre for Sustainable Development’s COP26 Legacy Fund.

The project has explored how voluntary nature-based carbon offset projects may impact Scottish communities and how they could be designed to maximize place-based, community benefits in the future.

Community benefits toolkits are emerging, such as The Woodland Benefits Tool, that support investors with reporting social, environmental, and economic benefits of a project.

Through the work commissioned on behalf of Community Land Scotland (“Community Wealth Building and a Just Transition to Net Zero”) a set of community wealth building principles have been developed.

A recent National Strategy for Economic Transformation (NSET) workstream on community benefits from investment in natural capital, led by the Scottish Land Commission with support from Highlands and Islands Enterprise, has led to an instructive discussion paper and related case studies, that present clear recommendations with regards to community wealth building principles and desired outcomes.

These various strands of work need to be brought together, alongside further direct engagement with live natural capital project leaders, to derive best practice, guidance, and a recognisable standard for approaches to developing a community wealth building plan, that can be baselined and monitored, according to a set of community benefit metrics that can be standardised across existing and emerging ecosystem service credit mechanisms (“codes”).

The British Standards Institute (BSI) have an established programme, funded by DEFRA, to develop a Nature Investment Standards framework. Currently concluding its discovery phase, this programme will rapidly move to recommendations, by September 2023, for the development of codes and a roadmap for the development of the overarching framework.

Therefore, this project needs to be funded for commencement in September 2023, to realistically feed into the work of the BSI and mitigate the risks associated with the absence of a clear guidance and standards for community benefits development as part of the wider project development approach taken.

Research on Scottish land markets indicate that we are seeing rapid change in who owns and manages land, with an increase in corporations and investors entering the market for carbon offsets. There are concerns about ‘green lairds’ extracting wealth from our finite natural resources and excluding and disadvantaging communities.

This private finance brings an opportunity to support the development and sustainability of rural communities if harnessed and regulated effectively. A voluntary approach to delivering community benefits is of interest to investors (e.g. see Glen Dye Moor which specifically references the Scottish Government Interim principles for responsible investment in natural capital) and certification could provide an incentive to adopt verifiable expectations for providing community benefits.

Our project seeks to establish the outline business case for a “plug-in” standard for developing a Community Benefits Plan for any natural capital project, starting with existing and developing ecosystem credit mechanisms (“codes”) that are the subject of the British Standard Institute (BSI) led programme on Nature Investment Standards for the UK.

Our geographical scope for this development project will be Scotland, along the principle of ‘piloted in Scotland, applicable across the UK’. To ensure join-up with UK-wide developments, we have sought, and secured, the participation of BSI on our project, who have identified our work as one of the seven priority actions on ‘nested thematic standards’ to be delivered between now and March 2024.

Within Scotland, this ‘Phase 1’ project will focused on working with community and project leaders drawn from 8 place-based projects:

• Anstruther Improvements Association: Dreel Burn Catchment
• Bioregioning Tayside: River Ericht Catchment
• City of Edinburgh Council: Edinburgh New Gardens – Water of Leith Catchment
• CreditNature: Drumadoon Farm
• Dumfries and Galloway Council: Solway Coast and Marine Project
• Highlands Rewilding: Tayvallich Estate
• NorthWest 2045: Kinlochbervie NW2045 Land+ Futures
• Perth and Kinross Countryside Trust: Almond Headwaters

We also connected with the following Scotland-wide projects and impact pathways:

• Community Contract for Marine Natural Capital (Kaly Group / Scottish Wildlife Trust, Living Seas Programme)
•  Scottish Community of Practice of 'community buy-out' projects (Community Woodlands Association)
• Standard Contracts for Biodiversity Credits (IUCN UK Peatlands Programme/ Woodland Carbon Code)

Through this approach of connecting with place-based projects, we are covering the following broad categories of natural capital:

• Native woodland restoration
• Riparian Zone restoration
• Peatland restoration
• Water management
• Marine nature based solutions

The Scottish Government’s Interim principles for responsible investment in natural capital include an expectation that nature finance “should create benefits that are shared between public, private and community interests, contributing to a just transition”.

Advice and research published by the Scottish Land Commission highlighted the importance of nature finance in providing specific and deliberate benefits to local communities. Their discussion paper published in February 2023 proposed a definition of community benefits and a set of expectations for delivering community benefits which received wide support from respondents to the paper. They intend to publish guidance on delivering community benefits from land use change in September 2023.

Core to the emerging advice on community benefits is the concept of shared ownership, control or governance of land, which should underpin community benefits and be rooted in quality, meaningful engagement with communities.

Although current standards in the UK ensure high levels of environmental integrity, community wellbeing in project areas is not covered in the depth required for a fair and equitable Natural Capital investment project.

The Nature Finance Certification Alliance (NFCA) therefore sees the addition of a new, community focused standard, that would sit alongside the developed and emerging standards, could fill some of this gap for all project types in Scotland

This is a viewpoint validated by the British Standards Institute, who have identified the development of a UK-wide Community Benefits standard as one of 7 priorities for “nested thematic standards”, in their published June 2023 ‘Nature Investment Standards: Thematic and Market Standards Recommendations’ report.

Getting this right is not only about fairness, but research has also shown how community participation in Natural Capital projects amplifies their potential for success.

By sitting alongside standards, such as the Woodland Code and Peatland Code, which already demonstrate environmental integrity, it is expected that the standard will be more cost effective.

In the international voluntary carbon market, projects that bring demonstrable benefits to communities are priced at a premium. Research conducted by Ecosystem Marketplace found that SDG certifications sold on average at a price 16% higher than those without. SDG 1, No poverty, was the most influential, bringing a price on average 29% higher, demonstrating the demand from buyers for social benefits to carbon projects. Other co-benefit certifications, such as Verra’s Climate, Community and Biodiversity (CCB), sold at an 18% premium to those without in 2021. The buyers engagement process that will be conducted during the course of this project will aim to assess the attractiveness of the community certification product and willingness of buyers to pay extra for such certification, producing a final report on financial viability.

Buyers are increasingly looking for guarantees that projects are not adversely impacting the communities around them. Rating agencies, which are becoming increasingly influential, are also assessing co-benefits (Trove, Sylvera etc). Scottish Land Commission have been approached by a number of investors on how to embed community engagement and benefits into their natural capital projects. As such, we also expect investors to be interested in, and potentially perceive additional value in projects that have been certified. This hypothesis will be tested during the buyers and investors engagement process.

The Integrity Council for the Voluntary Carbon Market (ICVCM) Core Carbon Principles include to ‘do no harm’. All credible global carbon (and by extension of principle all ecosystem service) crediting schemes will be assessed against these principles. Demonstrable community engagement and benefit are likely to be essential for credits to gain market access and credit price points are likely to be influenced by the positive impacts of those community benefits.

The Scottish Land Commission’s (SLC) casework service through the Good Practice Programme has had a number of enquiries in delivering community benefits from investors, demonstrating a genuine interest in this approach. Consultation led by SLC with core stakeholders including the Scottish National Investment Bank and UK Infrastructure Bank have also indicated interest from the markets in clear guidance on community benefits.

Research output from the exploratory phase of the Civtech 8.6 Biodiversity Credits challenge, from Kana (a member of the NFCA) provides further insight into demand for ‘Carbon+’ and Biodiversity Credits that link to their corporate social responsibility (CSR) values.

• January 2023: Survey of 100 companies from the FTSE 350
• Firms that are further on the Net Zero journey are more likely to pay for their carbon offset units
• Top motivations to pay a premium for carbon / invest beyond offsetting reasons included, demonstrating CSR, ‘doing the right thing’, good PR and community engagement.
• To compete in a growing demand for sustainable funds, fund managers are seeking to secure the high sustainability ratings, such as those provided by Morningstar.
• Therefore, companies seeking investment through these funds, are motivated to demonstrate strong environmental credentials, through financing of high-integrity natural capital projects.

Given the potential downside reputational risks of claims of greenwashing, our hypothesis is that corporates would pay a premium for ecosystem service units with assurances of how the local communities participated and directly benefit from the project. This hypothesis will be tested during the buyers engagement process conducted by Finance Earth.

“The involvement of communities in natural capital investments is, so far, mostly absent, and the resulting deals lack ‘transparency’ in terms of the potential impacts of land use change for local communities- which are often far-reaching and inter-generational.” NW2045, Land+ project, anchored by the Assynt Development Trust

In some cases, communities have been adversely impacted by carbon projects as land prices or rent increase and land use changes impact livelihoods. In general, communities are being left behind, while a complex, opaque marketplace profits from the landscapes around them.

Therefore our working hypothesis is that our project can make a change to the status quo, to enable communities living in or in the vicinity of project areas, and often having deep rooted connections to the environment encompassed within project boundaries, to benefit from private investments in Natural Capital projects.

There is a gap in the market for a standard that ensures this is the case, and best practices are followed. A successful application would mean that the design and development of this standard could be fast tracked, through interfacing with the British Standards Institute work on a UK Nature Investment Standards framework; where our proposed product has been confirmed to be a gap in their identified set of cross-cutting ‘2nd tier’ standards (1st tier are linked directly to ecosystem services), that needs to be addressed.

The standard designed by this project would incentivise project developers to integrate community participation and decision making into the project. How to create community benefit agreements, following research backed best-practice, which would need to be in place for the project to receive certification, would be one product from Phase One of this project.

These agreements would ensure that the rights of the local community are recognised, and free and informed prior consent is given by communities to project developers. Project developers would inform communities about how these markets function and how the financing works. Also within these agreements, grievance mechanisms would be defined, allowing community members to effectively raise concerns and track progress of issues.

Project developers would agree with communities how benefits, including revenue, would be fairly and equitably distributed. Any investment in community development would be at the control of the communities. These agreements would be transparent and project developers would be held accountable against the arrangements.

This standard would be an additional certification alongside those that already recognise environmental best practices, such as the Woodland and Peatland Codes. As new ecosystem standards emerge (e.g. hedgerows, blue carbon, freshwater metrics and biodiversity credits), this standard would ‘plug in’ alongside those too - ensuring a consistent approach across all Natural Capital markets in the UK.

If successful, and there is demand for the uptake of the standard, not only would communities start to benefit from the projects, they would also be intrinsically linked to the project. This positive relationship with the project could amplify conservation and regeneration efforts as has been the case elsewhere. If the project succeeds, so does the community.

Finally, the availability of this standard would pressure buyers to demonstrate that the credits/units they purchase follow best practices when it comes to community participation and engagement. Even those projects that opt against adopting the standard, would likely need to showcase how they are delivering benefit to the communities included within their project area.

Collaborative partnership working will ensure outcomes are successfully delivered in accordance with a pre- agreed timeline. We will achieve the following outcomes:

1. Creation of a co-designed Best Practice Participation Guide: Community Inclusion for Community Benefit.
2. Creation of a Community Certification Plug-In, a measurable and auditable translation of the Guide.
3. Delivery of a report on the financial viability of the Plug-In.

Each of these outcomes can be shared and utilised independently, and together they form the foundation for innovative change for nature financing and community benefit. Outcomes will be shared publicly, with use of the resources to be encouraged across nature-based programmes.

The new Certification will be hosted by a relevant body, taking into account impartiality, and the capacity to validate and audit. This decision will be made once the content has been designed to ensure the responsible body is suitable.

During the Market and Investment Readiness phase, following pilot projects utilisation of the Best Practice Participation Guide: Community Inclusion for Community Benefit, SACL will conduct test audits using the draft framework derived from the guide during this development phase. 

These audits will iteratively test the framework’s efficacy in providing an objective assessment of whether best practice has been followed. The framework is expected to include assessment of evidence provided by projects together with outreach to project communities to corroborate claims and evidence provided by projects.

The key purpose of a 'Phase 2', would be to achieve a full business case, that would lead to the launch and roll-out of the standard across the UK. 

The BSI Nature Investment Standards programme is developing a suite of new standards for UK nature markets including the principles and requirements to support robust and high integrity supply of nature projects.

BSI have found a strong need to provide assurances on the approaches taken to generating place- based community benefits and ensuring the equitable sharing of benefits across local communities.

BSI have included this within our set of proposed principles and the BSI recommendations to Defra makes the case for a community benefits standard to be further explored. This includes working with industry led initiatives to build on these and potentially formalise into a new BSI standard in the future.

BSI support the work proposed by Nature Finance Certification Alliance (NFCA) members to progress work, through the FIRNS grant programme, on the development of best practice and certification tools for community benefits in the UK.

BSI will be an advisory partner and work with the project to align with the BSI market integrity principles standard in development (first version expected in Q1 2024) and to consider the option of building on this work to develop a future BSI standard as part of our wider nature investment standards programme.

While a meaningful and inclusive community engagement process will be delivered throughout Phase 1, some aspects of community inclusion for community benefit cannot be tested and explored in-depth during this Phase. 

Therefore, Deciding Matters have identified the following lines of enquiry to explore during a Phase 2:

Governance models

• During the next phase, it is recommended that project leads are supported to understand and identify different methods of governance.
• Project leads should be supported to undertake a testing phase, implementing appropriate governance models to enhance community inclusion.

Community testing of the Certificate Plug-In and the Best Practice Participation Guide

• Communities should be supported (with both expertise and financing) to undertake an engagement process based on the outputs from this Phase, with critical feedback gathered regularly from communities, stakeholders, and the delivery teams
• This work will be in collaboration with the Certification Body identified during Phase 1

Refining of the plug-in and best practice guide based on the feedback received during community testing

• Project leads and key stakeholders should once again be invited to join a deliberative process to refine the outputs using a co-design approach, alongside the responsible Certification body.
• By working in collaboration, these partners can refine the Guide and Certification while maintaining community voice, financial viability, and auditability.