A business case for voluntary biodiversity credits is not there yet, as companies prefer to engage in the carbon market with biodiversity co-benefits due to a lack of trust in a stand-alone market, experts have told Carbon Pulse.
Even if corporates are becoming increasingly aware that investing in nature is crucial, biodiversity itself is not a big enough revenue source at the moment, Tim Duehrkoop, CEO and co-founder of Swiss tech firm Xilva, told Carbon Pulse during the HackSummit in Lausanne, Switzerland.
“The question is: can you take the biodiversity benefit from a product and sell it independently as a credit? At the moment, I don’t think so,” he said.
Xilva mainly focuses on assessing biodiversity and carbon projects on behalf of investors, and is also part of the Biodiversity Credits Alliance (BCA), a coalition seeking to contribute to shaping the development of and building confidence in the emerging market.
Duehrkoop said that, as far as they can see, companies still don’t see biodiversity as a single asset, but as an add-on.
“The best chance to push biodiversity in projects is currently through carbon projects with biodiversity co-benefits, such as nature-based solutions,” he said.
That’s also because investors are increasingly looking for carbon projects that are not harmful to nature due to the reputational risks they will face.
“Companies know that if they invest in a carbon project harmful to nature, they will create a negative reputation.”
In April, data analytics firm AlliedOffsets published an analysis of 64 methodologies informing nearly 6,000 restoration projects worldwide, which generated approximately 380 million carbon credits. Results showed that 67% of these units were issued for projects with methodologies that have biodiversity requirements.
“I can’t say that the voluntary biodiversity credit market is not gonna happen, as it’s an emerging space and maybe someone will figure out how to make it scalable,” Xilva’s CEO said.
“But companies will need to invest in nature monitoring anyway to be sure that no harm is done within carbon projects, and they will do it even if there are no biodiversity credits around.”
NO BUSINESS CASE
Johan Attby, general partner at Stockholm-headquartered impact investor Norrsken Accelerate, also told Carbon Pulse that there’s no business case for nature at the moment.
Attby said that the company’s portfolio previously included biodiversity-related investments. However, upon evaluation, Norrsken Accelerate removed the biodiversity credits from the business plan.
“There were too many uncertainties, and the market doesn’t really exist,” he said.
John Rogers, CEO of asset manager Invest Conservation, also believes credits could not be the solution for channelling investments towards conservation.
“As corporate nature-related disclosure frameworks are rising, companies are increasingly looking for a way to make claims on nature, but biodiversity credits are difficult to scale,” he said.
“You need to figure out how to define a baseline for measuring uplifts, which is far more complicated than with carbon.”
The biodiversity credit market was estimated at around $8 mln last year, according to a report published by the World Economic Forum (WEF).
If a radical transformation in valuing nature happens, the demand could reach $180 billion annually by 2050, WEF said.
However, two years after the Kunming Montreal Global Biodiversity Framework listed biodiversity credits among the innovative solutions to increase private funding towards conservation, most companies are still reluctant to translate their interest into transactions.
In April, voluntary nature credit suppliers told Carbon Pulse they are exploring strategies to spur companies’ appetite for units, as players in the carbon space do not yet have the confidence to step into the market.
By Giada Ferraglioni in Lausanne – giada@carbon-pulse.com
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