The carbon offset controversy at Science Based Targets initiative (SBTi) has detrimental consequences for the nascent voluntary biodiversity credit markets, which are paralysed by confusion, a legal expert has said.

Biodiversity markets should use terms other than ‘credits’ to distance themselves from the reputational issues plaguing carbon, said biodiversity and climate risk lawyer Zaneta Sedilekova.

In April, SBTi staff called for the organisation’s CEO to resign and to immediately reverse a decision set to allow companies to use voluntary carbon credits to meet Scope 3 emissions targets.

Sedilekova, biodiversity risk advisor at Commonwealth Climate and Law Initiative (CCLI), told Carbon Pulse the negativity surrounding SBTi’s carbon offsets issue will translate to biodiversity markets due to the shared terminology.

“The vocabulary we are using is not transferable, but we are transferring the understanding from one market to another – and that causes a lot of confusion. A biodiversity credit is actually very different from a carbon credit.”

“There are so many calls for regulators to actually install some sense of uniformity or certainty.”

Biodiversity credits are often said to differ from biodiversity offsets, by not implying harm to nature in another location while boosting ecosystems. On the other hand, carbon credits imply permitting the harmful release of greenhouse gas emissions elsewhere.

However, the definitions are often blurred in biodiversity. Last month, a think tank said Indigenous Peoples should reject biodiversity credit proposals as they would promote offsetting.

Many initiatives have embraced terms other than biodiversity credits, such as certificates, in a bid to avoid confusion while indicating uplift.

“I think the best way to do it is just to come up with different terminology so that people are not subconsciously transferring the negative legacy to the biodiversity markets,” Sedilekova said.

MARKET PARALYSIS

As a result of terminology confusion, Sedilekova’s clients are “completely paralysed” in their engagement with biodiversity markets. Carbon players do not yet have the confidence to engage with biodiversity, Carbon Pulse reported last month.

“The risk of doing it wrong, because of the lack of integrity in the market, means that my clients are frozen in space,” she said.

“They are seeking this trust relationship they could build with somebody. But it’s very hard, because there is nobody trustworthy on the market, or they are few and far between.”

Companies feel they have to do an overwhelming amount of research to engage with reputationally risky biodiversity markets, she said.

Sedilekova said she hopes biodiversity markets will move away from offsets, sticking with nature-positive practices, while cutting out intermediaries to improve transparency.

Part of the reason for paralysis is companies face “massive greenwashing risk” from biodiversity. Not only from misleading marketing, but also from directors’ duties of vigilance – an issue set to trigger more lawsuits in the coming years following greater scrutiny of nature-related disclosures, she said.

Disclosures in strategic reports on the overstated impacts of biodiversity offsets could be said to mislead investors, she said.

Large EU companies will have to publicly report on their biodiversity activities using European Sustainability Reporting Standard (ESRS) between 2025 and 2029, depending on their type, while organisations around the world are increasingly adopting the voluntary Taskforce on Nature-related Financial Disclosures recommendations.

English and Welsh company board directors could be personally liable for breaching their duties by failing to consider relevant nature-related risks, leading to employment termination with financial consequences, a legal opinion co-commissioned by Sedilekova’s CCLI said in March.

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

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