Two German companies have purchased nearly 20,000 biodiversity credits generated through a domestic forest conservation project, Carbon Pulse has learned.

Fintech company Wundertax and baby products manufacturer Emma & Noah bought the first batch of credits at an undisclosed price from a project led by developer Planted in collaboration with tech company Hula Earth.

Under the initiative, aimed at protecting a 10-hectare endangered beech forest in the Sauerland region in northwestern Germany, Planted will ensure the area is conserved, while Hula Earth will monitor ecosystem and species health, and issue the biodiversity credits.

“Wundertax and Emma & Noah are true role models and have already been committed in the past to aligning their business models with preserving nature,” Florian Geiser, co-founder and CEO of Hula Earth, told Carbon Pulse.

“We are glad they have already committed to protecting almost 20,000 square metres in one of Europe’s highly endangered natural beech forests.”

A unit corresponds to one square metre of land protected for 20 years, and a notarial contract signed with the landowner will ensure permanency, Geiser said.

To assess the effectiveness of the project, Hula Earth will leverage satellites and IoT sensors, monitoring both the project area and a monoculture spruce plantation close by.

However, project achievements are not verified by an independent third party.

MONITORING FRAMEWORK

“We monitor the project by using the data layer for nature investments we have built over the last months, leveraging the strengths of an IoT sensor network for continuous onsite information, blended with different satellite data layers,” Geiser said.

“By doing so, we assess an initial baseline that updates continuously, thanks to the real-time data we produce throughout the project’s lifetime.”

Indicators include birds as keystone species, spatial and spectral diversity, species abundance, ecosystem vigour and productivity, habitat connectivity, and ecosystem services.

“In addition, we monitor microclimate, changes in vegetation, and human activity to detect risks,” he added.

Since its launch, Hula Earth has focused on developing an accurate and scalable data layer for nature investments.

Once deployed, the sensor network used to monitor biodiversity no longer needs human interaction, as it is self-sufficient and streams data to the company’s servers worldwide, Geiser said.

“In combination with remote sensing, it becomes highly scalable. The Biodiversity Credit Alliance and the Technical University of Munich help us  recognise valuable indicators for biodiversity and push boundaries in showing what is possible from a technical perspective.”

Hula Earth’s biodiversity credits are intended to enable companies to document their commitment to protecting nature while complying with the EU Corporate Sustainability Reporting Directive (CSRD), the bloc’s environmental, social, and governance (ESG) regulation.

The CSRD applies to large, medium, and small enterprises in the EU, as well as foreign companies that generate over €150 million in the EU market, with reporting requirements set to take effect in 2025.

“Our biodiversity credits are designed for the CSRD-driven market in Europe, with first companies already recognising their chances when showing positive impact, like better access to capital,” Geiser said.

“To be compliant and benefitting from such upsides, data proving the generated impact is required, either within the value chain or for additional biodiversity projects.”

FINDING THE BALANCE

While Geiser preferred not to disclose the price of the units, he said it is challenging to find the right balance between fair returns for landowners and attractive pricing for purchasers.

“We believe it will get easier soon, once the rapidly growing biodiversity market is more settled with significant demand and supply sides,” he said.

Attention to the voluntary biodiversity credit market has ramped up after the 2022 Kunming-Montreal Global Biodiversity Framework, which carved out a role for nature-based solutions to help close the biodiversity financing gap, though most companies have not yet translated their interest into actual transactions.

At the same time, many carbon developers set sight on the nascent market but are still reluctant to foray into the biodiversity space, with some stressing the need for more robust information on the reference price of biodiversity credits.

“We are confident that biodiversity credits will eventually replace carbon credits for nature-based solutions, seeing the growing demand for a more holistic approach beyond rewarding and optimising nature for just carbon,” Geiser said.

“Also, more streamlined and efficient processes will unlock projects beyond mega-sized plots and lots of expensive overhead, more suitable for regions like Europe.”

Last year, Stockholm-based Swedbank acquired 91 biodiversity credits generated through a forestry project in central Sweden, marking the first transaction of its kind in Europe.

A high-level expert group on sustainable finance advised last week the EU Commission to scale up the biodiversity credit market, saying that it has the potential to encourage investments in natural capital.

Although the bloc’s executive body supported the recommendations, they do not represent an official position or confirm any commitments.

There is as yet no market standard for what a biodiversity credit represents, though Australian developer Wilderlands are selling units similar to those of Hula Earth, representing the long-term protection of 1 sq. m of land.

By Sergio Colombo – sergio@carbon-pulse.com

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