Total fund deposit and discount rate

Find out about the total fund deposit and the discount rate.

What is the Total Fund Deposit

Landholders can establish Biodiversity Stewardship Agreements (BSA) to provide for the permanent protection of biodiversity on their land and allow for the creation of biodiversity credits.

When Biodiversity Stewardship Agreements are established, biodiversity credits are created. These biodiversity credits are available to be sold on the Biodiversity Offset Market 

When Biodiversity Stewardship Agreements are negotiated, management actions based on the site’s ecological requirements required by the Biodiversity Assessment Method are agreed, as are the costs of implementing these management actions.

To make sure the cost of management actions at the stewardship site are enough to manage it into the future, the total cost is adjusted. This adjusted cost is called the Total Fund Deposit. It is the amount of money that needs to be invested in the present time for management of a stewardship site into the future. The rate that is used to adjust the calculation of costs to meet the necessary future payments is known as the discount rate.

When a landowner sells their biodiversity credits, a specified minimum amount from the sale proceeds is paid into the Biodiversity Stewardship Payments Fund. Annual payments are then made to the landholder from the fund.

Total Fund Deposit and the discount rate

To ensure the long term financial and environmental sustainability of stewardship sites, the total fund deposit must be calculated using a discount rate that reflects prevailing market conditions. Actuarial advice is secured as part of regular reviews of the discount rate. The most recent review was on 20 November 2018. At that review the discount rate reduced from 3.5% to 2.6%. A fall in the discount rate increased the amount of the Total Fund Deposit. The change to the discount rate only affected applications for stewardship agreements made after that date. 

The Total Fund Deposit Calculator

The Total Fund Deposit Calculator helps estimate the total fund deposit and payment schedule.

The costs of managing a stewardship site will vary according to its size, location, vegetation type, cover and condition, topography, fencing and possible boundary management issues. These factors determine the total fund deposit to cover the costs of managing the stewardship site in perpetuity.

This calculator breaks down specific management actions and plans into individual tasks for the short and long-term, and helps determine the frequency of the actions. Landholders can price each task based on the current costs of materials and labour. All estimated annual costs should be entered on the calculator.

The landholder should enter the costs at current dollar equivalents and the calculator then calculates the net present value, or in other words the amount that needs to be invested to account for future management requirements. 

Current and previous calculator spreadsheets

 

Visit the Biodiversity Conservation Trust for more information about stewardship sites