Expanding natural markets: United Kingdom forges ahead with broader strategies for nature trading markets
In a significant stride towards sustainable development, both the UK and EU governments have been actively working on establishing high-integrity nature investment standards. These standards are designed to guide and assure green investments, prevent greenwashing, and foster confidence among investors.
The UK government's efforts began in March 2025 with the launch of the world's first Nature Finance Standard by the British Standards Institution (BSI). This standard covers both the supply and demand side of nature markets, aiming to ensure consistency and high integrity [1][5]. The UK's approach integrates these standards with policy instruments such as the Natural Environment Recovery Fund (NRF) and Protected Site Strategy (PSS), which support sustainable development and environmental restoration [1].
The UK government's strategy includes investing over £2.7 billion annually in farming and nature recovery, promoting environmental delivery through nature markets, and encouraging competition and innovation via an open procurement model for nature services [1][3]. The UK is also developing a Green Taxonomy and aligning financial disclosures with international frameworks like the International Sustainability Standards Board (ISSB), enhancing transparency to reduce greenwashing risk in sustainable investment products [2][4].
In the EU, the adoption of the Nature Restoration Law, endorsed by the European Council in 2024, strengthens environmental and climate resilience by protecting ecosystems and boosting natural carbon sinks crucial for meeting 2030 climate targets [4]. This law aims to prevent greenwashing by establishing clear regulatory and investment frameworks aligned with the European Green Deal, thereby providing policy certainty and increased coherency to encourage sustainable finance [4].
Both regions emphasise alignment with international sustainability reporting standards to facilitate credible and transparent investment markets in nature-related assets. For instance, the UK's Financial Conduct Authority (FCA) Sustainability Disclosure Requirements (SDR) and fund labeling regimes complement BSI standards and taxonomy data to ensure accurate green claims and prevent misleading advertising [2]. Enhanced sustainability reporting standards (UK SRS), aligned with global ISSB standards, improve comparability and quality of sustainability information disclosed by companies [2][4].
These standards interact closely with government policies to ensure compliance. Annual monitoring and evaluation of environmental targets and policies, such as England's Environmental Improvement Plan, ensure the standards' effectiveness [1]. Government-led spatial strategies for protected sites and nature markets create controlled conditions for private investment consistent with policy goals [1][3]. Legal frameworks and regulatory oversight, like the Advertising Standards Authority, police greenwashing in marketing and financial products [2].
The UK government is planning to create market-specific standards for biodiversity, nutrients, and natural carbon. The government is also investigating the feasibility of "stacking" credits, which involves the sale of multiple, separate environmental outputs or outcomes from the same supply area [1]. The government has issued a call for evidence on expanding the role of the private sector in nature recovery, seeking input on how to collaborate with the private sector to protect and improve the natural environment [1].
The UK government's Natural Environment Investment Readiness Fund awarded nearly £8 million in grants to projects that produce revenue from ecosystem services between 2021 and 2023 [1]. Nature markets provide a mechanism for trading credits for environmental outputs or outcomes from nature-based activities, with established markets already existing for mandatory biodiversity net gain and nutrient mitigation [1]. Carbon markets focus primarily on carbon sequestration and offsetting greenhouse gas emissions [1].
The potential of nature markets is yet to be fully realised, with the possibility of assisting with other nature-based mitigation schemes [1]. The UK government is planning to create local nature recovery strategies (LNRS) to ensure that nature markets are situated in the right places by mapping the most valuable areas for nature and proposing improvements for habitats and wider environmental goals [1]. The British Standards Institution (BSI) has developed an overarching set of investment standards for nature markets (BSI Flex 701) [1].
Businesses should keep abreast of the government's response to its various consultations and monitor developments across and within each nature market. The government's Projects for Nature platform offers opportunities for businesses to invest in nature projects, not as a means of formal mitigation but as a way to help finance nature's recovery and align with their own nature priorities [1]. The EU is also developing nature market regulation with a similar emphasis on high-integrity credits [1].
The benefits of nature markets, once the details are clarified, should extend to providers of environmental-based credits, who can look forward to a more standardised and transparent accreditation process, and buyers of these credits, who will be assured of their high integrity and a gradual increase in the number and variety of credits available for purchase [1].
- The UK government's Green Taxonomy, aligned with international frameworks like the International Sustainability Standards Board (ISSB), aims to enhance transparency in environmental-science, reducing greenwashing risk in sustainable business investments.
- In the EU, the Nature Restoration Law, endorsed by the European Council in 2024, aligns with the European Green Deal and strengthens the environmental-science sector by establishing clear regulatory and investment frameworks, thereby fostering sustainable finance and climate-change mitigation.
