Scotland’s net zero transition needs confidence, capital and clarity

This content is based on an article originally published by Scottish Business News.

Chris McLauchlan, Edinburgh-based Banking Partner at law firm Womble Bond Dickinson, considers how finance, natural capital and policy certainty can help Scotland turn net zero ambition into long-term economic value.

Scotland’s transition to a lower-carbon economy is no longer a distant policy ambition; it's a live challenge. With abundant natural resources, deep engineering capability, and a strong financial and professional services base, Scotland is well placed to lead in areas ranging from offshore wind and grid investment to emerging carbon and nature-based markets. The opportunity is significant: done well, the transition can strengthen energy security, unlock private capital, support skilled jobs and create long-term value in communities across the country.

But pace and policy direction matter. The next phase of decarbonisation will depend not only on technology, but on whether Scotland can create the right conditions for investment at scale. That means improving confidence for developers, lenders, and investors, ensuring that regulation and market frameworks keep up with innovation, and that the benefits of the transition are felt in Scottish supply chains and labour markets.

In that context, three areas will be particularly important: finance, natural capital, and the reform needed to unlock delivery.

Decarbonisation is no longer a niche sustainability issue; it's a mainstream investment question.

As the move to net zero accelerates, the role of advisers is to help remove legal and structural barriers so capital can flow into projects that deliver genuine environmental and social impact. That is particularly relevant in Scotland, where the scale of the transition requires investment in energy generation, land use, transport, buildings and infrastructure. The Aberdeen South by-election result in June this year also underlined the importance of public engagement. Policymakers and business leaders need to explain how the move to a low-carbon economy can be delivered in a way that is practical, sustainable, and clearly connected to jobs, investment and community benefit.

Womble Bond Dickinson’s Financing Decarbonisation campaign highlights that, in practical terms, financing decarbonisation is about more than funding individual projects. It is about building confidence across the wider ecosystem: lenders prepared to back new asset classes, investors able to assess risk and return, developers with access to workable legal structures, and public policy that supports delivery. In Scotland, that has a direct bearing on investment and jobs. If capital can be used with greater certainty, the benefits extend well beyond emissions reduction: into construction pipelines, rural diversification, community wealth creation and the growth of professional services that support the net zero economy. The wider Scottish market is already moving in that direction, with Transition Finance Scotland aiming to create up to £40 billion a year of green investment into Scottish projects in partnership with the Green Finance Institute.

Nature-based finance is a good example of both the potential and the complexity of this market. Scotland’s natural capital – including peatland, woodland and large rural estates capable of restoration at scale – creates real potential for projects that combine biodiversity outcomes with carbon sequestration and, in some cases, renewable energy generation and other commercial uses. But these are not conventional assets, and that affects how they are financed. There is no “standard” model, and so transactions often require a more bespoke, collaborative approach between lenders and borrowers.

Transactions are already showing how this could work in practice. Womble Bond Dickinson advised Triodos Bank UK on two term loan facilities for Oxygen Conservation to acquire land from Buccleuch Estates for a large-scale nature-based conservation project, described at the time as the UK’s largest conservation-focused commercial debt package. That project encompasses rewilding, woodland creation, peatland restoration, regenerative agriculture and carbon sequestration, showing how Scottish land can support both environmental change and new investment models.

What will transform this market is greater certainty. Carbon and natural capital projects often require more tailored financing structures than traditional real estate or infrastructure deals because revenue profiles can be longer-term, evolving and dependent on emerging markets like carbon credits. There is a need for a more settled market in carbon credits, including clearer documentation and pricing, while the value of co-location and blended land use models is also being increasingly considered. That matters in Scotland, where maturing natural carbon markets could drive additional private investment into rural projects, as long as investors have confidence in how those rights, revenues and risks are structured.

Legal reform should also help. The Moveable (Transactions) Scotland Act 2023 is expected to make it easier to take security over certain assets such as equipment, plant and machinery, and contractual rights. Over time, that should give funders greater confidence and make projects easier to finance.

At UK level, policy continuity will be critical. Investors need confidence that long-term programmes, including the government’s clean power and grid reform agenda, will continue to move forward. That certainty is especially important while the UK remains exposed to energy import pressures and some investment decisions are being delayed until there is greater clarity.

Grid reform remains one of the most important delivery challenges. The National Energy System Operator's process for reordering the connections queue has created administrative complexity with revised connection agreements needing to be issued across a large number of projects. The "windows" for new projects to apply, or existing projects to vary their agreements, have been delayed a number of times. As the system moves towards clearer application windows for new projects and variations, Scottish developers should have greater visibility over timelines and delivery routes.

For Scotland, the prize is not just decarbonisation in the abstract, but building a durable transition that supports domestic supply chains, attracts long-term capital and creates economic value. If public policy and market mechanisms continue to evolve in step with investor ambition, Scotland has the opportunity not only to lead the transition to a sustainable future, but also to shape the commercial models that make it bankable.

That is where financing decarbonisation, including nature-based finance, can make a distinctive contribution to Scotland’s net zero story – supporting Scotland’s net zero ambitions while creating lasting value for business, communities and the environment.