Biodiversity credits, an emerging financing instrument that seeks to bring in private capital for the conservation of endangered species and natural ecosystems, are “very different” from carbon credits and should not be internationally traded, says The Nature Conservancy’s chief executive officer Jennifer Morris.
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While “like for like” regional biodiversity credits from the same ecosystem could work, Morris said that an “internationally traded certificate” does not make scientific sense for nature preservation – a view that other environmental groups have echoed.
She was speaking on a panel at Singapore state investor Temasek’s annual Ecosperity conference on Tuesday.
As a nascent asset class, biodiversity credits have seen growing interest from governments seeking to meet the global biodiversity goals they signed on to at the COP15 biodiversity summit, as well as corporations embarking on nature-related risk reporting.
This building momentum has led the World Economic Forum to predict that the biodiversity credits market could reach US$2 billion by the end of the decade – the current size of the voluntary carbon market – and nearly US$70 billion by 2050.
“Basically, what’s happening now with biodiversity is what happened with carbon 15 years ago, only much bigger,” said former investment banker Frederic Hache, who is also a lecturer in sustainable finance at the Paris Institute for Political Studies and founder of think tank Green Finance Observatory (GFO).
“We’re about to see the launch of a biodiversity offset market comparable to the carbon offset market with the same flaws but only worse, because the environment integrity issues are magnified by the fact that instead of having six greenhouse gases, you have millions of species that you are trying to standardise and oversimplify into a liquid asset,” Hache said.
Last June, France and the United Kingdom started work on a blueprint for a global biodiversity market through the International Advisory Panel on Biodiversity Credits, which they aim to unveil at the COP16 summit later in October.
In February, the UK launched a national biodiversity credit scheme dubbed the “biodiversity net gain”, which requires all new developments – from housing projects to roads and railways – to deliver at least a 10 per cent gain in biodiversity. While developers are encouraged to improve affected local habitats, they are allowed to purchase offsets from preserving biodiversity elsewhere to meet the mandatory commitment.
In Asia Pacific, Australia legislated the country’s first voluntary biodiversity market last December to reward landowners – including First Nations people, conservation groups and farmers – for their efforts in protecting biodiversity. The market will allow registered projects to generate tradeable biodiversity credits that can be purchased by organisations to meet their “nature positive” targets.
While the United Nations-backed Biodiversity Credit Alliance has rejected the use of biodiversity offsets by corporations to make “nature positive” claims, the difference between biodiversity credits and offsets remains unclear. In response to the alliance’s draft proposals, GFO has argued that “biodiversity credits and offsets are identical” and has rejected “preposterous and politically naive claims that credits will not be used for offsetting.”
GFO welcomed the alliance’s draft statement that “incentivising land speculation by creating financial assets out of Indigenous peoples’ and local communities’ lands… should be avoided” and its call for due diligence to be carried out to ensure business partners do not seize control of these occupied territories.
To guard against “rich industrialised countries” using biodiversity credits from cheaper land abroad to offset their nature degradation back home, GFO recommended banning international credits to force offsetting to take place domestically.
Gopalasamy Reuben Clements, a Malaysia-based sustainable finance specialist at conservation charity Zoological Society of London, concurred that logically, there should be region-specific biodiversity credits since, for instance, a tiger might face different levels of threat depending on whether it is a Malayan tiger or a Bengal tiger.
Among carbon offsetting projects, Morris said that a lot of buyers are still not willing to pay a premium for “co-benefits” in addition to reducing or avoiding emissions, such as water or biodiversity conservation.
But Morris noted that there are “increasingly sophisticated buyers” valuing nature-based assets in a holistic manner and who recognise that this improved resilience can be reflected in carbon prices. “Not always, but we are seeing that it is moving more in that direction,” she said.
