Natural Capital Market Framework

Executive Summary

Scotland's natural capital^[1]—its biodiversity, forests, peatlands, air, water, and soils—underpins the nation's economy and well-being.^[2] As the world faces the twin crises of climate change and biodiversity loss, private investment in Scotland's natural capital is essential to complement government efforts in restoring and protecting these vital resources.

Scotland's natural capital market framework (market framework) aims to foster responsible, values-led private investment that supports Scotland's transition to a net zero and climate-resilient economy while delivering benefits to local communities. It embeds Scotland's six principles for responsible investment, including integrated land use, engagement and collaboration, community benefit, and high environmental integrity. These principles are designed to ensure that investments in natural capital markets meet the highest standards, delivering measurable environmental and social outcomes.

This market framework provides guidance to investors, land managers, communities and other market participants. It provides links to tools and resources to develop natural capital projects that attract responsible private investment. It also highlights key interventions and developments expected by 2026 to strengthen Scotland's position as a leader in high-integrity natural capital markets. Through this market framework, the Scottish Government seeks to align investment opportunities with national priorities, ensuring that the benefits of natural capital are shared by all.

There are many opportunities for investment in natural capital. Some of these are at a very early stage of development so this first market framework for Scotland is focused on:

• the expansion of high-integrity voluntary carbon markets via the Woodland Carbon Code (WCC)^[3] and Peatland Code (PC)^[4]
• the development of high-integrity opportunities to invest in Scotland's nature and biodiversity;
• applying our six principles for responsible investment in natural capital, including the expectation that projects generate tangible benefits for local communities;
• actions anticipated before the end of Scotland's current parliamentary term in 2026.

This market framework will be regularly updated to ensure that natural capital markets in Scotland continue to serve the evolving needs of its environment, investors and communities, including farmers and land managers. Future versions may expand the scope to address other emerging natural capital markets such as marine ecosystems, water quality, flood resilience, climate adaptation, principles for insetting and sustainable agriculture. The Scottish Government encourages investors and land-managers to use this market framework as a reference for responsible investment in natural capital, and to collaborate with us in this effort. Wherever appropriate, this market framework aligns to other UK and overseas efforts to develop high-integrity natural capital markets. For further advice or to get involved, please contact our programme team.^[5]