The buzz around biodiversity credits was evident at Bloom 24 and UN COP16 in Colombia. Rooms filled and queues formed for events when they topped the agenda.
Biodiversity credits are gaining attention, but for many sustainability leaders they remain a mystery. How do they work? Are companies buying them? And, if so, why? I spoke with project developers, standards bodies and industry experts to find answers.
An emerging market
Biodiversity offsets are well-established in national and international environmental governance. The Convention on Biological Diversity released draft principles in 2009 for biodiversity offsets and Germany has had biodiversity offsetting regulation since 1976. But voluntary biodiversity credits — the sort a CSO might consider as part of their company’s nature strategy — are still emerging, as a concept and as a market.
“Nobody’s sure whether there are enough corporates out there willing to fund conservation or restoration through the purchase of credits,” said Jo Anderson, CEO of Level, which helps local conservation initiatives find funding and is exploring biodiversity credits as a way to fund its work.
Still, the voluntary space is expanding. According to Simas Gradeckas, author of Bloom Labs, a biodiversity finance newsletter, 53 biodiversity crediting projects are either already active or under development, and some established carbon credit standards bodies are creating alternatives for biodiversity projects.
“We used principles from the carbon markets, such as quality, additionality and no double-counting, for our biodiversity standard,” said Alex Saer, CEO of Cercarbono, a certification program based in Colombia.
As standards operationalize, project developers will seek independent verification for their biodiversity conservation and restoration work. Standards bodies will only issue credits to a project if it fulfils certain quality criteria. This review process can be lengthy.
Yet credits are expected soon. Savimbo, a project conserving jaguars in Colombia, has recently been verified by Cercarbono. and Plan Vivo, a carbon and nature standard, is reviewing about 10 biodiversity projects and expects to issue credits next year.
What are biodiversity credits?
The Biodiversity Credit Alliance, a group working to establish a biodiversity credit market, uses this definition: “A certificate that represents a measured and evidence-based unit of positive biodiversity outcome that is durable and additional to what would have otherwise occurred.”
Experts I spoke to offer other descriptions: an “alternative method for measuring the value of ecosystems,” a “unitized biodiversity gain or avoided loss” and a “percentage change per hectare” of species abundance.
“A typical biodiversity credit might represent a one-percent increase in biodiversity metrics over one year, for one hectare of land,” said Gradeckas.
Credit: Simas Gradeckas
How they differ from carbon credits
The term “biodiversity credit” is a bit misleading. Its similarity to “carbon credits” implies that biodiversity credits are simply the same concept repackaged for plants and animals. This is not the case; nature is not carbon and must be valued differently.
Carbon credits are interchangeable, with each theoretically representing one metric ton of carbon that has been removed from, or prevented from entering, the atmosphere. This uniformity allows companies to claim to compensate for one tonne of emissions released in, say, the U.S. by buying a carbon credit representing one tonne of emissions sequestered elsewhere — in Kenya, for example.
Biodiversity credits are not so interchangeable. If a company destroys five hectares of habitat in the U.S., it cannot compensate by paying for the conservation of five hectares in Kenya, because the geology, soils and plants are unique to each location.
Why spend money on this?
Given the geographic specificity of biodiversity credits, it will be rare that a company can use them to directly compensate for their environmental damage. The market is therefore dependent on other business use cases — and these will likely evolve.
Right now, regulation, self-preservation and influence are the biggest reasons a company would buy biodiversity credits.
Companies might voluntarily support biodiversity projects in anticipation of the time when doing so becomes mandatory. Indeed, with the EU’s CSRD regulation and the rising prominence of the Taskforce on Nature-Related Financial Disclosure’s guidance, companies are already facing pressure to report and mitigate their biodiversity impacts.
And as companies seek to eliminate vulnerabilities from their supply chains, they could buy biodiversity credits from projects that conserve and restore the specific ecosystems upon which their operations rely.
“If companies wait to figure out their full [nature] impacts around supply chains or value chains, then they are putting themselves at risk in that waiting period,” said Toral Shah, biodiversity coordinator at Plan Vivo, the carbon and biodiversity standard-setting group.
“One of the big reasons to engage now is actually to develop the biodiversity credit market. That is going to result in a better space that is designed to meet corporate needs,” said Keith Bohannon, CEO of Plan Vivo.
What can a company claim?
Although positive publicity could provide another incentive to buy biodiversity credits, companies are rightfully cautious of greenwashing and associated reputational damage. Particularly given the nascency of the market, sustainability teams will need to conduct extensive due diligence before purchasing biodiversity credits and understand what environmental claims can and can’t be made.
The types of nature claims a company can promote depend upon which standard issued the biodiversity credits it has purchased. At the moment, companies can make either a “contributory claim” (we’ve funded a project that has protected 1,000 hectares of jaguar habitat in Colombia) or a “compensation claim” (we destroyed 1,000 hectares of habitat and have tried to make amends by restoring 1,000 hectares of a comparable ecosystem).
“In our protocol, we are pretty clear that these credits cannot be used for compensating … what you can do is claim you are funding and making efforts to restore or to conserve certain areas,” said Saer.
To keep up with developments in the biodiversity credit market, follow the International Advisory Panel for Biodiversity Credits, the Biodiversity Credit Alliance and the World Economic Forum’s Biodiversity Credit Initiative.
