ForestryBrief Professional #18 🌳💰📈

Hello,

Two months ago, FOREST EUROPE published the State of Europe's Forests 2025 report. It is the most authoritative continental forest dataset we have. Forty-five countries. 232 million hectares. Sixty-eight indicators.

In the Indicator 3.4 section, the report makes a striking admission.

The true value of forest goods and services remains obscured. Definitions vary. Marketed and non-marketed values are mixed together. Trade patterns are unclear.

Europe's flagship forest report still cannot put a clean number on what forests produce. That is the March 2026 state of play.

The marketed numbers are tiny. Non-wood goods sold across Europe: €6.5 billion a year. Marketed forest services: €1.26 billion. Both figures sum thousands of berries, mushrooms, game licences, recreation fees, and water contracts. Spread across 232 million hectares, that is about €33 per hectare per year captured by markets, on top of timber.

A European meta-analysis of 158 valuation studies tells a different story. The applied figure for Czech forests was around US$2,842 per hectare per year. Most of that came from regulating services. Water filtration. Soil retention. Climate regulation. Pollination support. The figure is country-specific and methodology-dependent. But the gap between "what markets pay for" and "what forests deliver" is at least one order of magnitude. Probably two.

This is the European forest investment opportunity many people now talk about. The "ecosystem services boom." Forests already do the work. Markets are catching up.

But "catching up" happens at very different speeds in very different places. This issue maps the three speeds. You will know what to underwrite today. You will know what to position for. You will know what to keep watching.

Carbon is out of scope here. That story has alredy been covered. Hunting leases, cork, and non-timber forest products are also out. They earn real money today. They sit on a different shelf. They deserve their own treatment.

What is left is the green stuff. Water. Biodiversity. Nature credits. Compliance demand. Air quality.

Three tiers. Different speeds.

The first tier is real. It pays money. In some cases it has done so for thirty years. But it is not a market in the trading sense. It is contracts.

Munich runs Europe's textbook case. Since 1992, Stadtwerke München has paid farmers in the Mangfall valley. The deal is simple. The utility funds the conversion to certified organic production. The farmers stop using synthetic fertiliser. The drinking water arrives at the tap clean enough to need no chemical treatment.

The numbers are stable. 185 participating farms. About 4,650 hectares under organic management. Roughly 80% of Munich's tap water flows from this catchment. Munich's 1.6 million people pay for the scheme through their water bills.

This has run for 33 years without disruption. Foresters around Munich participate too. They manage roughly 1,800 hectares of SWM-owned woodland under similar contracts.

The structure matters. One buyer. One catchment. Long-term contracts. No trading. No price discovery. No middlemen.

The French equivalent is Vittel. Nestlé Waters started paying Vosges farmers in 1989. The goal was to protect the aquifer feeding the bottled water business. The intermediary Agrivair was set up in 1992. Roughly €24 million was spent in the first phase on equipment, compensation, and land. The scheme today covers something like 10,000 hectares across the Vittel, Contrex, and Hépar catchments. Farmers receive around €200 per hectare per year. Capital support can reach €150,000 per farm.

Counterparty risk now hangs over the textbook case. In May 2025, Nestlé hired Rothschild to advise on selling its global water division. The package includes Vittel, Perrier, and S.Pellegrino. The valuation is about €5 billion. By January 2026, first-round bids were underway. Any sale transfers the Agrivair PES contracts to the new owner. The long-term stability of payments will depend on the buyer's strategy. Not on Nestlé.

This is the structural risk of every bilateral PES contract. The arrangement is only as durable as the buyer who funds it.

How widespread is water PES across Europe? The 2018 UNECE/FAO study Forests and Water catalogued 229 forest-related water PES schemes across 23 countries in the UNECE region. Around 70 were in the European Union. The figure is eight years old. Definitions of "true PES" versus subsidies vary. But it remains the most authoritative inventory in print.

Newer cases keep emerging. The Westcountry Rivers Trust in Cornwall runs a phosphate-reduction scheme on the River Camel. The CPES Interreg project piloted six catchments in southern England and northern France. Slovak Military Forests sell drinking water services to a regional utility under three-year regulated contracts. All small. All contract-based. All real.

The other working revenue stream is contract-based, but legally mandated. The UK's Biodiversity Net Gain (BNG) regime came into force on 12 February 2024. Major developments must deliver a 10% biodiversity uplift, secured for 30 years. If the developer cannot deliver it on site, they buy biodiversity units off site. Forest owners can sell those units from habitat banks on their land.

Two years in, the real numbers are smaller than the headlines suggest. A June 2025 academic preprint tracked the first 15 months of market activity. It found 286.77 habitat units sold across 234 transactions between February 2024 and May 2025. Only around 2% of registered habitat-bank area had actually traded. The DEFRA Biodiversity Gain Site Register held 112 registered sites by September 2025. Together those sites promise more than 4,000 hectares of restored habitat.

Pricing has settled into a workable range. Standard broadleaved woodland units trade between £25,000 and £35,000 per unit. That figure comes from the Biodiversity Units UK February 2025 pricing report. Strategic or rare habitats can fetch £45,000–£60,000. Watercourse units run £145,000–£160,000 because they are scarce. Government statutory credits act as a price ceiling. Buyers go to landowners precisely because the government's last-resort price is higher.

Three things matter for forest owners. Woodland units are scarce because woodland takes time to establish. They command premium prices. The 30-year management obligation needs financing. The upfront unit sale must cover decades of monitoring and maintenance. And the spatial multiplier system favours local supply. The geographic match between developer and habitat bank matters.

BNG is the only operating mandatory nature market in Europe. England has it. Scotland and Wales are watching. The EU does not yet have an equivalent.

That brings us to Tier Two.

Tier Two is where the most attention sits and the least actual money flows. Three things are happening in parallel. None has reached scale. All three matter for the next 24 months.

Verra runs the world's largest voluntary carbon registry. In October 2024, it launched the Nature Framework under its SD VISta programme. The method issues tradeable Nature Credits based on biodiversity outcomes. On 1 January 2026, Verra opened the framework to all project developers, ending the pilot-only phase.

Pilots had already begun. Rewilding Côa Valley in Portugal started submitting from April 2025. Verra set an expression-of-interest deadline of 31 January 2026 to plan reviewer capacity for the surge.

How much European supply exists? Honestly, very little visible yet. Verra has not released a project list filtered for European Nature Framework projects. Industry estimates suggest a handful of pilots and roughly 200,000 hectares globally enrolled by end-2025. A Verra senior director told Environmental Finance the first credits are expected to be issued in 2026 or 2027 "at the latest."

No widespread pricing data exists. Buyers are mostly corporates testing the waters. Contract prices are not public. BloombergNEF estimated global voluntary biodiversity credit sales would approach $3.5 million in 2026. That is the entire global voluntary biodiversity market. Smaller than a single mid-size carbon project.

This is the first real test of whether biodiversity can be a credit instrument. The next 12 months will tell us if buyers materialise and if prices form.

In parallel, the European Commission published its Nature Credits Roadmap on 7 July 2025. The Roadmap is a phased plan to design tradeable nature credits at EU level. The first expert group meeting was in December 2025. Methodology criteria are due by mid-2026. Governance principles are scheduled for 2027.

The Roadmap explicitly tries to mobilise private capital toward the EU's estimated €65 billion annual biodiversity financing gap. Pilots are running in Estonia, France, and Peru under EU Green Assist.

Two things to flag. First, the Roadmap is not law. It is a strategy document. Whether the eventual market will be voluntary, compliance-driven, or both is still undecided. Second, political pushback has already started. Environmental NGOs have called the Roadmap a "greenwashing shortcut." That tells you the design fight is live. Expect the final shape of the EU market to shift between now and 2027.

For 2026, the most concrete development is bundled. EU Carbon Removal Certification Framework (CRCF) carbon-farming methodologies are expected this year. They will require mandatory biodiversity co-benefits. Carbon farming becomes the de facto entry point for nature finance. That is more important than it sounds. A single forest project may soon generate carbon credits with biodiversity built in. Two credit streams collapse into one.

The most concrete driver of nature finance over the next three years is not a credit market. It is a law.

The EU Nature Restoration Regulation 2024/1991 entered into force on 18 August 2024. It sets binding targets. Restore 20% of EU land and sea by 2030. All degraded ecosystems by 2050. Move 30% of habitats in poor condition to good condition by 2030. Rising to 60% by 2040 and 90% by 2050. Rewet 30% of drained agricultural peatlands by 2030.

Forests are in scope. They are an explicit habitat target alongside wetlands, grasslands, rivers, and heath. Restoring biodiversity indicators in forest ecosystems is mandatory.

The next deadline is 1 September 2026. Member States must submit draft National Restoration Plans by that date. Final plans are due September 2027. The Commission's planning template was adopted in May 2025. The EEA's reporting system is being built now.

Member State plans will define which forest restoration activities qualify for EU support. That defines which projects will be eligible for future nature credits, CAP payments, and national subsidies. Forest owners who position assets aligned with their country's draft NRP will have first-mover access to whatever funding flows through.

This is the single most important deadline in the next 12 months for European forest owners thinking about nature revenue.

The third tier is the largest by economic value and the smallest by paid revenue. These are services everyone agrees are real. Nobody yet pays for them in any tradeable way.

Forests filter air. Trees capture particulate matter. They absorb nitrogen oxides. They scavenge ozone. The science is robust. Urban foresters across Europe have built careers on it.

The market is not. There is no functioning tradeable instrument anywhere in Europe for forest air-quality services. The EU Emissions Trading System covers CO₂. It does not cover PM2.5 or NOx. The revised EU Ambient Air Quality Directive from 2024 sets emission limits on polluters. It does not pay landowners for filtration.

Some adjacent activity exists. Urban greening policies in European capitals fund tree planting through municipal budgets. The EU JRC's INCA project produces ecosystem accounts that value air-quality regulation in statistical terms. None of this translates into a revenue stream a forest owner can underwrite.

For an investor, air quality remains what the academic literature calls a "piggy-backed service." Free for everyone. Paid for by no one. The EU's Corporate Sustainability Reporting Directive could eventually create corporate willingness to pay for verified air-quality improvements near manufacturing sites. That has not happened yet.

Recreation. Flood control. Soil retention. Pollination support. Cultural value. All real. All scientifically documented. All largely unpaid.

The marketed services number in SoEF 2025 — €1.26 billion across Europe — captures only what shows up on an invoice. Recreational visits to forests, when not gated by access fees, do not show up. Flood damage avoided does not show up. Topsoil retained does not show up. The "value" exists in modelling and in the absence of disasters that didn't happen. It does not exist on a balance sheet.

This is the bulk of the valuation gap. Closing it requires new public payments, new private payments, or new regulation forcing payments. None of those happens by accident.

The view that ecosystem services are about to boom is directionally right. The mistake would be to underwrite as if the boom is already here.

Here is the honest sequencing.

What pays you today. Bilateral water PES contracts in catchments with a downstream beneficiary willing to pay. UK BNG units, if you can hold UK woodland and absorb a 30-year management obligation. That is essentially it. Both are real. Both are contract-structured. Neither is a tradeable market. The Munich and Vittel models work because one buyer needs one service in one catchment. The economics scale where the geography fits. Not where the policy says they should.

What might pay you in 12–36 months. EU Nature Restoration Plans finalised in September 2027 will define eligible restoration activities at country level. Forest owners aligned with their national plan will access whatever public and blended financing flows through. Verra Nature Framework projects will start issuing credits in 2026 or 2027. Whether buyers materialise at meaningful volume is the open question. The EU Nature Credits Roadmap will produce methodology criteria by mid-2026 and governance principles in 2027. If you want to be early, this is the window.

What still will not pay you in three years. Air quality. Flood regulation as a standalone product. Soil retention. Recreation outside paywalls. Most cultural services. The valuation literature says these are worth more than everything else combined. The market infrastructure does not exist. No committed pathway makes it exist.

So what to do.

If you hold forest land in the UK, develop habitat-bank capacity now. Woodland units are scarce and priced accordingly. The NSIPs entering BNG in 2026 will pull demand. Southern England rewards local supply through the spatial multiplier.

If you hold forest land in the EU, scope Verra Nature Framework eligibility now that registration is open. Submit expressions of interest. Engage your national authority on the draft National Restoration Plan. Member State plans will define eligibility for everything that comes after. Being in the room before September 2026 matters.

If you hold forest land anywhere, watch three triggers. First, the first disclosed Nature Framework price for a European project. That will tell us if a market is forming or if this is still a corporate procurement game. Second, the EU CRCF carbon-farming methodologies adopting mandatory biodiversity co-benefits. That makes carbon farming the de facto entry point for nature finance. Third, the September 2026 National Restoration Plan deadline. Plans that arrive on time will set the tempo. Plans that slip will tell you political appetite has weakened.

The opportunity is real. The timing is uneven. Stack your projects to capture today's contract revenue while positioning for tomorrow's market revenue. Do not pay today for what tomorrow may not deliver.

The 10th Man reads the field this way because he wants European forestry to succeed. Success means capturing more of the value forests already create. That requires honest sequencing. What is real money. What is forming. What is still a piggy-backed gift to society.

The €1.26 billion in marketed services today is real. The multi-hundred-billion figure floating in valuation literature is the ceiling. Closing the gap between them is the work of the next decade.

The forests do their part already. The market needs to catch up.

Sources:

The next time someone asks what biodiversity credits actually are, you'll have thirty seconds to answer.

Right now — what do you say?

If the answer isn't ready, the Playbook is. Everything I know about forestry communication.

This analysis covers the landscape. But the landscape is not your portfolio. Exposure to ecosystem services revenue varies by country, species mix, asset structure, catchment geography, and how aligned your holdings are with draft National Restoration Plans you have not yet seen. ForestryBrief offers tailored intelligence briefings for institutional forest owners and investors. If you want to know what this means for your allocation specifically

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Until Tuesday!

Wish you all the best: Peter

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