‘Incoherence’ Between BNG, Nature Restoration Fund Could Undo Market Growth
The Planning and Infrastructure Bill (PIB) that is awaiting royal assent before becoming law could hinder and damage the development of the nearly two-year-old Biodiversity Net Gain (BNG) policy in England, according to the legal counsel of a U.K. environmental services firm.
Alexa Culver, general counsel at RSK Wilding, a company founded in 2020, told OPIS that the PIB and its mechanisms, particularly the creation of the Nature Restoration Fund, could affect how developers, local governments and other stakeholders engage with BNG policy and requirements.
“When you just logically look at how those policies would sit next to each other — the PIB, its levies, and BNG — there is an incoherence between them that I think surely won’t be allowed to last for long,” Culver said.
BNG is a policy that was implemented under the previous Conservative government in February 2024. It requires developers in England to not only compensate for their direct impact on nature but to enhance nature — either through improvements on-site, off-site, or through the purchase of BNG units from the government as a last resort — by at least 10%.
BNG has become a compliance driven nature market, as developers seeking to build across the country have to comply with BNG requirements. According to a report published this summer by Biodiversity Units UK, an environmental services firm, the BNG market could become a £3 billion ($3.96 billion) market by 2035. It has already attracted the attention of some large European banks.
Differences between BNG and the Nature Restoration Fund
The current Labour government under Prime Minister Sir Keir Starmer is pursuing an agenda focusing on growth and the construction of 1.5 million houses across the country, which is taking place at the expense of nature and BNG, Culver said.
The government introduced the PIB in March 2025 and, according to Culver, some of its proposals could put stress on the developing BNG market and provide an alternative route that bypasses the mechanisms that BNG has put in place.
In a factsheet, the U.K. government said that the creation of a Nature Restoration Fund under the PIB is an opportunity “for housing and infrastructure to do more for environmental recovery.”
The Ministry of Housing, Communities and Local Government said in a blog in March that the Nature Restoration Fund could be “a wholly new way for developers to discharge environmental obligations by making a payment, with that funding then used by [government nature agency] Natural England to take a strategic approach to nature restoration.”
This model would allow for more flexibility, the ministry said, as long as there is an Environmental Delivery Plan (EDP) in place. Natural England will be in charge of creating these plans, or conservation measures that would engage with the environmental impacts of the proposed developments.
Natural England, a non-departmental advisory body to the government, would use levies paid by developers towards “actions that protect and improve the conservation status of sites and species, rather than developers having to go to sometimes extreme lengths to try and precisely calculate and offset the impact of each project.”
EDPs will be “evidence-based and properly scrutinized before being put in place” as Natural England will also “work with third parties such as farmers, habitat banks, and environmental NGOs to deliver conservation measures”, the ministry said in a factsheet published in September.
Developers would pay a levy rate “sufficient to cover the costs of the conservation measures” as part of the EDP approval process, according to the ministry.
This route has garnered criticism from environmental groups.
The Chartered Institute of Ecology and Environmental Management (CIEEM) said that having developers paying into the Nature Restoration Fund risks a “regression of environmental protections.”
Culver told OPIS that paying into the Nature Restoration Fund rather than going through the BNG process cuts against what BNG was designed to do: require developers to be not only aware of the harm that is occurring as a result of a development but to compensate for its impact on the environment.
“If there’s going to be compensation for those plans [through the payment of Nature Restoration Fund levies], somehow, they can be delivered many years after the harm has taken place, and those compensation measures may never be delivered at all,” said Culver. “They may not collect enough money to deliver it, the money might just go into administration, and there’s no direct legal obligation on anybody to even do the compensatory hard work.”
Culver expressed concern that perhaps the biggest vulnerability for BNG is the possible exemptions of certain developers from this policy, which could be as narrow or as wide as a government may want them to be.
“While [BNG] policy itself is very strong and robustly designed, there is the ability through secondary regulations that are quite easy to pass and are not scrutinized by parliamentarians or debated in the same way that primary legislation is where you could easily broaden the exemptions to BNG so that you basically make most developments exempt,” Culver said.
A spokesperson for the U.K.’s Department for Environment, Food & Rural Affairs (Defra) told OPIS that the government was carrying out a consultation on changes to BNG “to deliver gains for smaller developers while protecting nature and nature markets.”
Defra added that the Nature Restoration Fund would help builders meet their environmental obligations faster and at a greater scale through the pooling of their contributions to fund larger environmental interventions.
“These changes will remove time intensive and costly processes, with payments into the fund allowing building to proceed while wider action is taken to secure the environmental improvements we need,” the spokesperson said. “Natural England will continue to provide advice, based on clear evidence, on how it can achieve its ambitions and environmental targets through sustainable development as plans develop.”
Government announces BNG exemptions for certain small sites
Earlier this year, the government conducted consultations on the exclusion of small- to medium-sized development and the inclusion of nationally significant infrastructure projects (NSIPs) under BNG.
On Tuesday, Housing Minister Matthew Pennycook announced in a session at the House of Commons that the government would introduce exemptions for development sites of 0.2 per hectare in size from complying with BNG.
Additionally, Pennycook said the government would introduce a number of simplified requirements for small- and medium-sized developments that are larger than 0.2 hectares and to carry out a consultation on brownfield housing developments of up to 2.5 hectares in size.
In a statement issued on Tuesday, CIEEM “cautiously” welcomed the government’s confirmation, which came in below a rumored 0.5 per hectare size threshold for exemption for development sites.
“Whilst this still falls disappointingly short of the 0.1 hectare exemption that much of the sector has consistently called for, and which the evidence supports, it represents a significant improvement on earlier rumoured proposals and reflects the extensive efforts of environmental organisations, businesses, practitioners and investors to highlight the serious risks that a 0.5 hectare exemption would have posed to nature recovery and to the emerging private finance market for nature,” the CIEEM said.
According to a study from eftec, an environmental economics consultancy in the U.K., the 0.2 per hectare site threshold would exempt around 82% of all planning applications and result in a reduction of around 2.4% of the overall biodiversity unit market.
“While significantly less damaging than a 0.5 hectare exemption, this is still four times larger than environmental experts have proposed. It will therefore weaken cumulative biodiversity outcomes and reduce investment flowing into nature recovery,” CIEEM said.
Prior to Tuesday’s announcement, environmental groups had lobbied hard against the exemption of development sites under 0.5 per hectare threshold. Culver told OPIS that this effort was crucial as excluding sites of this size would have exempted a large percentage of developments in the country.
Pennycook also confirmed that a consultation response would go live in May 2026 regarding the implementation of BNG for NSIPs.
CIEEM said that the announcement of this consultation response is “essential for ecologists, local authorities, developers and investors preparing to deliver BNG for NSIPs effectively.”
Allowing the market to reach fruition
BNG, which has been active for nearly two years, hasn’t yet reached full fruition despite showing strong potential, Culver said, though it has caught the eye of large financial institutions like Deutsche Bank.
Markus Muller, chief investment officer for sustainability and co-chair of the bank’s nature advisory panel, told OPIS in late November that BNG “represents a regulated and high-integrity market with strong growth potential, projected to reach £3 billion by 2035 in the U.K. alone.”
Muller recognized that the PIB “could reshape the BNG market in important ways.” Requiring biodiversity uplift from NSIPs is a positive development that could drive scale in the BNG market and help to create long-term demand, Muller said, but he noted the concern surrounding the possible exemptions for smaller sites and the use of the Nature Restoration Fund as an alternative compliance route.
“For investors and developers, changes signal a maturing market where strategic, well-governed projects with clear conservation outcomes will be best positioned to attract early partnerships,” Muller said.
Muller added that the BNG system in England could also become a standard or model for other countries and regions around the world “as it operationalizes global biodiversity goals locally, creating measurable, nature-positive outcomes.”
“Overall, the direction of travel remains supportive of nature-positive investments, although it will be important to monitor details on implementation and consultation outcomes when finalized,” Muller said.
Following the PIB’s passage through the House of Lords in late November without amendments to the legislation, CIEEM said that it was “incredibly disappointed” by the outcome. The bill returned to the House of Commons and now awaits royal assent.
“We will continue to hold the government to account as the first EDPs and associated regulations and guidance are developed,” the institute said.
For Culver, BNG still needs more time to mature and grow in order to encourage mutually reinforcing demand and supply but also for corporates and financial institutions like Deutsche Bank to enter the market. As these markets mature, Culver argues, financial firms can then deliberate and decide on their relationships with them.
“But for as long as policy interferes with either the supply or the demand, it distorts the market. It means that developers have less available supply for what they need. It means that the whole thing becomes a self-fulfilling prophecy if you don’t allow it to reach its fruition,” RSK Wilding’s general counsel concluded.
Reporting by Humberto J.Rocha hrocha@opisnet.com