FEATURE: Where’s the biodiversity market at and where is it headed?

Published 03:07 on December 4, 2022  /  Last updated at 07:10 on December 5, 2022  / Stian Reklev /  Biodiversity

Businesses and conservation groups are increasingly talking about a voluntary biodiversity credit market as a potentially significant future source of nature protection funding, and while the market itself is barely even taking baby steps at the moment, a number of processes are ongoing whose outcome will help determine whether the approach will succeed or not.

Businesses and conservation groups are increasingly talking about a voluntary biodiversity credit market as a potentially significant future source of nature protection funding, and while the market itself is barely even taking baby steps, a number of processes are ongoing whose outcome will help determine whether the approach will succeed.

‘Some say this can become even bigger than the carbon market’ is getting to become an oft-repeated phrase when the subject of biodiversity credit trading comes up in webinars, op-eds, and private conversations involving people active in the climate change and biodiversity space.

While it is usually not clear exactly who, if really anyone, is saying it, there is no doubt the concept is getting greater attention, from conservationists, investors, big business, and regulators.

When the Association for Financial Markets in Europe and consultants EY this week released a report on nature-related finance, analysis of opportunities and obstacles for the emergence of a biodiversity market featured prominently.

On the ground, though, not much has happened so far.

Ekos in New Zealand, South Pole in Australia, and Terrasos and Climate Trade in Colombia have developed biodiversity-related products, but the scale is small for the time being.

Trading platform Climate Trade said in an update in August that just over 100 credits had traded on the exchange, each representing a modest 10 square metres of nature for 30 years.

Activity is picking up, however. In August, Australia became the first national government to launch a public stakeholder process on setting up a regulatory framework for a voluntary biodiversity market.

Last month, Australian developer GreenCollar Group followed up with a new type of units, NaturePlus, developed along with accounting standard Accounting for Nature, that the company says is already drawing global interest.

More will come too, with carbon offset standards Verra and Plan Vivo among those drawing up biodiversity methodologies of their own.

Also, the World Economic Forum is curating a project focussed on how a voluntary biodiversity market might emerge, which includes big names like BlackRock, Citi, the European Investment Bank, HSBC, IFC, SwissRe, and the World Bank.

At the COP15 UN biodiversity summit in Montreal, which kicks off next week, a voluntary crediting market will not be part of official negotiations, but is set to figure prominently at the side events.

Those talks, as well as ongoing initiatives to push companies to report on their impact on nature and set nature-related performance targets are essential in forming what will in time become the demand side of the market.

“Initiatives like the Taskforce on Nature-related Financial Disclosures (TNFD) and Science Based Targets for Nature (SBTN) are driving companies to assess their dependencies and impacts on nature, set targets, and disclose data,” said Pajani Singah, co-founder of the London-based Amazonia Impact Ventures (AIV), which this week launched a $25 mln funding round to protect Amazon biodiversity and land use.

“I think we should go one step [further] to implement a framework for biodiversity loss and to pay for the credits as part of undertaking business.”

Meanwhile, Radha Kuppalli, managing director for impact and advocacy at Sydney-headquartered sustainable forest management firm New Forests, said the processes identified by Singah would be further strengthened if COP15 succeeds in achieving a global goal for nature, similar to how ‘net zero’ has emerged in the climate space.

“If we get that, it will mean even greater importance for TNFD,” she told Carbon Pulse.

“As that gains importance in national regulations we are going to see more moves [towards market-based activities]. But it is going to take time to evolve,” she added.


Exactly what it is that will evolve remains highly uncertain, though.

Most involved parties appear to agree that voluntary biodiversity credits should not be allowed to be used for offsetting purposes, despite there being some local offsetting schemes around, as the concept of protecting life in one location to justify destroying it in another is not an attractive one.

“It should not be seen as an offset for the damage caused. Companies should avoid, reduce, restore, and regenerate as first principles and not access cheap and easy way to get credits or offsets,” said AIV’s Singah.

Instead, the units can be seen as companies’ or investors’ contribution to the process of restoring nature, some observers say, perhaps especially in the period when the aim is to add to existing biodiversity rather than simply stopping the loss.

“Biodiversity credits could be acquired by those wanting to drive positive biodiversity outcomes,” said Edward Pollard, strategic director at UK-based the Biodiversity Consultancy.

“There is a lot we can learn from the evolution of carbon credits, and a lot of discussions to be had on what high-integrity biodiversity credits looks like, and how we can ensure they deliver positive outcomes for nature and for people,” he added.

That process is unlikely to be entirely painless, though, according to Sebastian Thomas, climate and environment lead at QIC, an investment company owned by the Queensland state government in Australia.

“You’re seeing markets try and rapidly embrace nature, and so you’re taking systems that have not previously interacted in particular ways and finding new ways for them to mesh together. It won’t be perfect, not for a very long time. There are going to be things that are really positive, there are things that will be less so,” he said.

“The important thing for me is that the markets are saying this matters.”


Beyond a general anti-offsets sentiment, there aren’t many details about biodiversity credits that have been agreed upon.

Even which metrics that are appropriate to use is under discussion.

The credits available in the market currently all use area-based approaches, ranging from 1.5 square metres to a hectare, but with GreenCollar’s NaturePlus to add results-based indicators to the equation.

UK-based Wallacea Trust has presented a radically different approach, based on the consumer goods index, which uses a standard ‘basket of goods’ to measure price levels on regular intervals.

It has been trying to define a standard framework for how to determine a ‘basket of goods’ for biodiversity credits regardless of whether it is a wetlands project in the Netherlands or a marine ecosystem scheme off the coast of Chile.

Last month the UK’s University of Nottingham began a project to standardise a biodiversity project approach, funded by the UK government, though it will be some time until any conclusions emerge.

As for learning from carbon markets, early market participants back the underlying criteria of projects having to deliver measurable, independently verified, and permanent results in order to qualify for crediting, but the concept of additionality – essential for the credibility of carbon credits – should not apply in the same manner for biodiversity, some argue.

“There is little to no money” in biodiversity projects, said New Forests’ Kuppalli.

“In biodiversity you are trying to protect, enhance, and restore nature. An additionality test does not apply in the same way,” she said, indicating that protecting nature is rarely a profitable business idea in itself, so would not often have taken place regardless of whether the project has access to revenue from credits or not.

Greenwashing scrutiny in the biodiversity market, she said, will likely emerge around which claims credit buyers make rather than arguments that the projects would have gone ahead anyway.

Pretty much every other market building block, from how to determine permanency to who regulates the market and issues the credits, also remain undetermined and up for discussion.

“It is important that over the next two, three, four years, that all these different methodologies and their adoption get trialled and tested,” said Kuppalli.

“That way we will get some experience. I think there will be a lot more transactions in the second half of the decade.”


The voluntary carbon market, after 15 years in the doldrums remaining entirely insignificant, has emerged quickly as an attractive investment for the private sector in the past two years.

There is now a flourishing secondary market – even though with a certain patchiness to both demand and supply – attracting interest from a large number of companies in a wide range of sectors across all continents.

Will the same ever happen for biodiversity credits?

If so it’s likely to take some time, but the biodiversity market will likely at least be able to more than match carbon when it comes to complexity and fragmentation.

In carbon it theoretically does not matter whether a tonne of CO2e is reduced in Panama or Tuvalu, as the atmospheric impact will be the same.

That’s not the case for biodiversity, as most proponents agree that a company whose main negative natural impacts are on wetlands in a specific region, any credits they buy should also be from wetlands projects in that same region.

But there are a great number of companies with global supply chains, multinationals with biodiversity impact in a large number of countries and different biomes, and as those are also likely to be the biggest movers in the market it will probably be at least a global angle to biodiversity trading, according to market participants.

Sectors such as financials and agribusinesses with global reach, for example, could generate credit streams from either single or multiple global projects, according to New Forests’ Kuppalli, creating de facto globally sourced supply streams of units.

That would bring with it biodiversity-related financial products attractive for third-party investors, whether they want to make a positive contribution to nature, or make a quick buck.

The idea is attractive to some, but certainly not all.

“Biodiversity credits must be transparently generated and priced. In my opinion these credits should be retired and not allowed to create a secondary market that generates no additional biodiversity gains, so that questions around this could make the industry very speculative and lose its credibility,” said AIV’s Singah.

In the short-term, the market focus will likely remain on adding biodiversity aspects to carbon credits projects, such as under Verra’s CCB standard.

According to New Forests’ Kuppalli, regulatory moves could be expected to strengthen this trend, with Australia an early mover again, piloting a combined carbon and biodiversity opportunity for land-holders in some specified areas across the nation.

*** Click here to read our COP15 preview ***

By Stian Reklev, Roy Manuell, and Mark Tilly – news@carbon-pulse.com

***Click here to sign up to our weekly biodiversity newsletter***