Why financing decarbonisation has become a smart investment

The podcast features Chris McLauchlan, who is a partner in the banking team at Womble Bond Dickinson, and also the firm’s Edinburgh office community engagement partner, plus Simon Crichton, head of nature, food and resource at Triodos Bank UK.

On the need to fund decarbonisation, Simon said: “It’s critical that we invest at pace and scale, given the degradation of biodiversity across the planet, the UK, and Scotland.“Triodos Bank is set up to address the challenges.”

Chris commented: “Financing decarbonisation is an absolutely critical element in the move to net-zero. Then, of course, there is energy security. Recent international events demonstrate how important this is at a macro-economic level, but also at the micro level in terms of energy bills, buying fuel, and the cost of things generally – particularly if inflation rises.

“We all have a role to play. Clean air, clean energy, climate change in our environment – these things don’t operate in a geographical vacuum.”

According to Simon, nature-based finance has evolved of late and continues to do so at pace. He explained: “In terms of how we are financing nature at Triodos, the biggest fact of all is that nature does not work in spreadsheets…It takes time to build these projects up. You don’t just plant trees and get results in carbon straightaway. Financing structures have to be flexible and tailored. They are not off-the-shelf products.”

On the podcast, Chris discussed Womble Bond Dickinson’s financing decarbonisation campaign that runs in Scotland and across the UK.

“We want to play our part in delivering a sustainable future,” he said. “The campaign is designed to highlight legal support that we offer to Scottish and UK clients, including cross-border clients, investing in projects that make a real contribution to decarbonisation.

“It’s about highlighting the work we do to facilitate investment in projects that drive environmental impact and, sustainability, which very much aligns with our own values as a law firm. We work with clients like Triodos and other lenders, borrowers, developers and operators.”

An example of financing decarbonisation covered in the podcast centres around Triodos Bank UK, advised by Womble Bond Dickinson, providing two-term loan facilities to Oxygen Conservation. These funded the purchase of properties from Buccleuch Estates for a nature-based conservation project – at the time believed to be the largest conservation-focused commercial debt package ever made in the UK.

On the Oxygen Conservation project, Chris said: “There are Scottish and UK cross-border aspects. It involves rewilding and woodland and peatland restoration. It’s a brilliant deal to be involved in.

“We would like to see this type of project become mainstream, because it makes sense from an environmental and a social perspective, and also from a commercial perspective.”

Simon added: “This was a landmark project for us. It was really the first project where we transitioned from a more typical loan and debt repayment model based on monthly payments and capital and interest as we go, to one where we sought for the capital repayment to come from the carbon credits of the project. That was enabled by the clever structuring from Womble Bond Dickinson and by Oxygen Conservation themselves.”

Chris said: “We love working on projects like this that are good for society, good for the environment, but they also make business sense. This is a huge growth area and there’s so much going on. We are really pleased to be part of it.”

In terms of changes in the UK policy landscape aimed to encourage investment in decarbonisation, Chris would like to see the Scottish and UK governments investigate the use of better incentives to finance nature and to trade carbon credits. He is also keen for them to consider more planning reform.

“We need a more settled market in terms of carbon credits, documentation and pricing,” he explains. “This would encourage more people to do groundbreaking projects like Triodos and Oxygen Conservation have delivered.

Meanwhile, Simon is seeking consistency of policy to support the sector when it comes to both carbon and nature, so that communities will benefit and there will be more green investment.

Hear more in the Sustainable Scotland podcast