Biodiversity Credits: Emerging High-Integrity Market Update

Aug 16, 2023

Edit Kiss (Integrity Global Partners) and Daniela Monteiro (South Pole)

The path to establishing a high-integrity biodiversity credits market is rife with critical considerations and debates. Questions on whether to include offsets, the necessity of secondary markets, and the determination of a standard unit for measuring biodiversity credits are all being intensely discussed amongst stakeholders in the sector.

In a recent CPIC biodiversity credits working group session, the CPIC community convened to discuss this rapidly emerging market. Experts Edit Kiss from Integrity Global Partners, Frank Hawkins from IUCN, Jeremy Eppel from Nature Finance, Graham Prescott from The Biodiversity Consultancy (TBC), and Stuart Clenaghan and Paul Smith from Botanic Gardens Conservation International (BGCI) uncovered the market’s latest developments, trends, opportunities and challenges.

Latest advancements and initiatives

The CBD COP15 last December and resulting Global Biodiversity Framework (GBF) have given new momentum to the development of innovative finance mechanisms for nature, with biodiversity credits as one of the mechanisms available. Recent events, such as the One Forest Summit and the New Global Financing Pact earlier this year have been instrumental in fueling policy discussions and generating interest in a robust global market. The growing legitimacy of this market is clear from the involvement of diverse stakeholders worldwide, including project developers, institutional and private investors, regulators, and local communities.

Noteworthy advancements in the biodiversity finance space include the upcoming launch of the ‘game-changing’ Global Biodiversity Fund by the Global Environment Facility this August, as well as the final set of recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD) that will be launched in September in New York City. In parallel, tools for market regulation, such as the development of a Nature Investments Standards Programme by the UK National Standards Body (BSI) and the Department for Environment, Food & Rural Affairs (Defra), and the Science Based Targets Network (SBTN), that has recently launched methods for companies to set targets for ecosystem protection, restoration, and freshwater use and pollution, are on their way to enhance market transparency and consistency. Alongside this, several international and national standards, developer pilots, and working groups are collaboratively shaping the development of biodiversity credit markets. The UK and the French governments are leading the way in creating a global roadmap for a high-integrity biodiversity credits market and see it as an opportunity to crowd in other countries to take ownership of developing these markets. The first European biodiversity transaction with the purchase of a batch of Swedish biodiversity credits by a Swedish bank from a domestic forestry project in late May has also been observed.

Nature positive frameworks and emerging metrics

Recent market and policy discussions around biodiversity and nature impact are drawing on companies’ interest in understanding what it takes to make nature-positive contributions. Nature positive, as described by Frank Hawkins at IUCN, is the notion of bending the curve away from biodiversity loss towards being biodiversity positive.

Biodiversity credits, which are supplementary and additional to organizations’ mitigation hierarchies, provide organizations with a means to deliver on their nature and biodiversity-positive commitments. An upcoming Nature Positive Framework, developed by IUCN, will provide pathways for companies to deliver biodiversity-positive contributions to the GBF.

For organizations to contribute to nature-positive outcomes, an appropriate set of metrics must be available. Metrics such as the Species Threat Abatement and Restoration (STAR) metric by IUCN, will allow for the evaluation of biodiversity contributions not only at local scale but also can contribute to the global goals. The STAR metric evaluates species extinction risk within any polygon globally and is applicable at various levels. Ultimately, it allows for the addition of biodiversity contributions that can be made across different scales. In addition to the already existing data on extinction risk of terrestrial vertebrates, IUCN is working on adding a marine-style layer and a freshwater-style layer to the metric.

Graham Prescott at TBC, collaborating with Verra on their Nature Crediting Framework, which has recently launched a new call for pilot projects, discussed the use of ecosystem metrics in a crediting standard. The metric employs an ‘ecosystem condition,’ a standardized unit enabling comparisons across diverse ecosystem types while maintaining measurement flexibility. It assesses various ecosystem characteristics to determine their proximity to an optimal state and offers a standardized approach to quantify progress within a crediting framework. Nonetheless, developing such metric attributes does not fall short of several challenges including balancing validity, scalability, feasibility, and granularity of the metric. In the discussion, Graham outlined how different scales of ecosystem condition metrics may be used to assess biodiversity differently. While high-level metrics might be used to prioritize regions in need of investment, more specific metrics can measure gains and losses of ecosystem condition on the ground to generate credits.

And last but not least, Botanic Gardens Conservation International presented its newly established Biodiversity Impact Credit (BIC) methodology that offers a simple metric for saving endangered tree species. The metric is designed to measure the negative footprint of organizations’ species extinction risk, for which a positive contribution credit is proposed as a compensation mechanism. While recognizing the limited use of offsets for biodiversity credit markets, nearly every organization has an unavoidable impact on species extinction for which a relatively simple metric and solution is proposed in the form of the BICs with a global project pipeline of over $100m ready to be implemented. BGCI estimates that the 17,500 tree species threatened with extinction could be saved with as few as 0.5 million USD each. Saving key species like trees could have a wide-ranging positive effects on the broader ecosystem services and species.

Ultimately, though the development of metrics presents numerous challenges, they are crucial in ensuring that biodiversity credits align with the goals of the GBF and contribute to a net-positive impact on nature.

Challenges and considerations for developing a high integrity market

NatureFinance, convener for the Taskforce on Nature Markets, urges the community to go beyond merely designing standards and metrics. Instead, they emphasize the importance of adopting a comprehensive set of key governance principles. These principles, encompassing purpose, integrity, regulatory oversight, price setting, and equitable reward distribution, among others, are instrumental in laying the groundwork for a well-governed high-integrity biodiversity credits market.

The establishment of this market is a collective endeavor that requires co-creation by all stakeholders involved. The UK and France governments are spearheading this effort through the creation of their roadmap through a new high-level, multistakeholder Advisory Panel. They will have to work with existing initiatives such as the Biodiversity Credits Alliance, CPIC, and the World Economic Forum to build on gaps and synergies, forging a cohesive and unified strategy. Tackling challenges related to measurement, reporting, and verification, scaling demand, fostering high-integrity supply, and ensuring tangible impacts on nature and communities are pivotal to our shared success.

A way forward with CPIC

CPIC has also embarked on mapping various initiatives including international standards such as Plan Vivo, Verra, and Global Biodiversity Standard, domestic standards such as the Swedish, UK, and Australian voluntary schemes, as well as bottom-up project developer initiatives such as Rebalance Earth, ValueNature and Nature Credits, among others. Please get in touch if you are working on a new methodology/pilot and would like to be featured in one of the upcoming biodiversity working group sessions. The working group is aiming to launch an ecosystem map and associated guidance on the various metrics during Climate Week NYC.

Register here to join the upcoming CPIC biodiversity credits working group session during Climate Week NYC.


Watch the webinar recording below: