Evidence-Based Environmental Credit Pricing to Support Sustainable Housing Development
In many areas of the River Stour catchment, residential developments must demonstrate nutrient neutrality to secure planning permission. Purchasing credits is often the only practical way of doing so. Stour Environmental Credits (SEC) was established as a nonprofit company to provide mitigation credits and enable the delivery of these much-needed homes in the Stour catchment area. To deliver these credits to housebuilders, SEC is currently investing into a range of mitigation solutions such as upgrades to wastewater septic tanks and considering agricultural land reversion.
31ten was commissioned to build a bespoke model to support an evidence-based approach to credit pricing and business planning to achieve the operational needs of the non-profit company.
The Role
31ten created a bespoke financial model that adopted inputs including the cost and details of mitigation projects, demand for credits, company operating costs, contingency and investment returns. These assumptions were confirmed in partnership with the client, considering the best information available at the time.
The cashflows generated by the model could then be used to identify the impact of a range of pricing levels on SEC’s financial sustainability. Scenario modelling was carried out to ensure SEC could make an informed decision on how to approach pricing, recognising that future assumptions could fall within a range of possible outcomes.
The model was designed with sufficient granularity to model a wide range of future scenarios, while simplifying more nuanced details that would not have a material impact on the outputs. This approach ensured the model was as usable as possible and time could be spent where it would add the most value to the project.
31ten worked closely alongside SEC throughout the commission, also supporting on mitigation viability and business planning elements.
Key Outcomes
31ten successfully delivered the model and wider analysis that informed SEC’s business planning. Key outcomes included:
- A flexible business planning model, designed for ongoing use by the client
- Advice on the results of base outputs and scenario testing analysis, enabling informed decision making
- Ongoing support through mitigation viability assessments and business planning
31ten were engaged to undertake this work based on a recommendation from a previous client and did not disappoint. Following the initial engagement meeting 31ten set out clear objectives and delivery timelines which were achieved. In addition to providing the modelling, 31ten were really supportive in working with the Company in modelling and considering alternative scenarios and providing opinions on the appropriateness of decisions being considered. While the business modelling is complex, 31ten supported the Company in understanding the model and identified input fields to do our own modelling moving forward. I am happy we used 31ten to provide a robust effective business model to determine current and future pricing.
Lee Foreman
Director – Stour Environmental Credits Ltd
