Mobilising private investment in natural capital: report

Section 2: Methodology

The project ran from April 2022 to September 2022 and included five phases. Each phase of the work had distinct objectives and was designed to build on the previous phase.

1. Evidence review: Review evidence and learnings from existing relevant financing mechanisms (nature funds and PFG mechanisms) in addition to the current policy context within Scotland;

2. Design action research: To ensure an inclusive approach to the research, Finance Earth worked with the Scottish Government, NatureScot, Forest Carbon and RSPB to map stakeholders and design questionnaires and other materials for engagement;

3. Develop the business case: This phase was designed to identify the various structural options for a SCF and PFG mechanism that would be tested through the action research programme. Prior to initiating the action research programme, Finance Earth convened an options assessment workshop to discuss the key structural options to be tested with the project steering group;

4. Stakeholder testing and analysis of findings: Targeted interviews and questionnaire surveys were used to explore stakeholders' views on key barriers to peatland restoration, their experiences of carbon markets so far and overall appetite for participating in voluntary carbon markets (see Annex B for further details). In this phase, Finance Earth interviewed over 30 stakeholders, including landowners and managers, project developers, NGOs and community organisations, carbon brokers, investors and potential buyers of carbon credits. A full list of stakeholders interviewed can be found in Annex A. Through this stakeholder testing phase, two intermediary workshops were held with the steering group to provide an opportunity to share findings to date and refine recommendations on the proposed financing mechanisms; and

5. Report and recommendations: Based on insights from stakeholders and Finance Earth's analysis of the market, recommendations were put forward on how the SCF and PFG Mechanism should be designed so as to meet the requirements of various market participants, while also ensure that public funds, where used, are spent effectively to crowd-in private investment.