A soil database for small farmers would help financial institutions scale up the nascent biodiversity credits market, an expert at French investor Mirova has said.

AgriStack, an Indian government platform aiming to enable more agricultural technology innovation through the provision of farm-level data, is an example of such a database, Hadrien Guadin-Hamama, an impact and ESG specialist at Mirova, said on a webinar.

India has a strong precision agriculture policy through AgriStack, which enables a measure of the state of nature on farms across the country through indicators such as soil test results, said Guadin-Hamama, during a webinar organised by the Transformative Pathways (Transpath) project in partnership with the EU Business & Biodiversity Platform.

“It would be very interesting for financial institutions to benefit from such a database, to better deploy new asset classes, such as biodiversity credits, for small farmers.”

Finance could invest in pre-purchasing of biodiversity credits from farmers, soil testing, and agricultural technology, he said.

“In Europe, there are definitely barriers to deploy new innovations and biodiversity credits in agriculture. There are plenty of innovating agricultural technology firms, but few are scaling up.”

To incentivise the uptake of biodiversity credits, governments could allow corporates to use them to achieve targets under EU nature laws, while the Science Based Targets Network could permit them for nature target contributions, he said.

“Banks can generate profits from the sale of these new credits through their existing portfolio of farmers”, with smallholders standing to benefit, he said.

Large EU companies will have to publicly report on their biodiversity activities between 2025 and 2029, depending on their type.

Mirova is one of the more active financial institutions in biodiversity credits, with its CEO Philippe Zaouati among the 21 members of a UK-France panel aiming to galvanise international markets around them.

Earlier this month, Mirova said the quality of each biodiversity project was more important than every initiative being tradable for the market to operate. In December, Mirova invested $6.5 million in Terrasos, an early mover in the biodiversity credits market.

EU COMMISSION

Kevin Flowers, head of the biodiversity unit at the Directorate-General for the Environment of the EU Commission, said companies need to focus on tackling nature issues in their supply chains.

“As we look to the next perhaps two-four years … we can expect some focus on coherence and usability of the existing instruments that have been put out at the EU level. And I think a continuing push and focus on implementation and mainstreaming,” Flowers said during the webinar.

He suggested approaching transition finance by asking what it can do to provide the best support for nature, rather than simply increasing investment.

“One of the things the financial sector can do, and have great effect … is actually in its engagement strategy with companies in the key sectors, the ones with the big footprints.”

The EU is taking a central role in environmental degradation in policies and directives, such as its taxonomy of sustainable activities, Corporate Sustainability Reporting Directive, and Sustainable Finance Disclosure Regulation, said Franciso Alpizar, a professor at Wageningen University in the Netherlands and project coordinator of Transpath.

However, nature-related initiatives often have “very little mention of actually changing the sector from within, and we believe as part of the Transpath project that we need to dig deeper, beyond short-term practices”, said Alpizar.

“We need to move into a vision of shaping the market, and let the financial sector then lead change – within a market that has been shaped to account for nature. This implies changing the rules to a level to produce a level playing field.”

Transpath is an EU-funded initiative that aims to tackle the biodiversity crisis by triggering transformative change.

By Thomas Cox – t.cox@carbon-pulse.com

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