Anchoring high-level principles that will underpin voluntary biodiversity credits is needed before more technical details can be ironed out, according to a panel of experts that spoke Wednesday about the barriers to market scale.
Speakers at the Corporate Investments into Forestry and Biodiversity Summit taking place in New York on Wednesday and Thursday discussed the use case for nature and biodiversity credits, including agreeing and disseminating principles that can help ensure the best possible route to finance and impact for the nascent market.
“[We’re] trying to create these overarching principles that will allow this market to scale at the right rate, and to achieve what it needs to be able to achieve in the right time,” said Simon Morgan, co-founder of biodiversity credit developer ValueNature.
“Setting those [principles] right upfront – and with a little bit of patience and understanding to give us time to create those as a starting point – will allow us to then create these various units,” he added.
High-level principles will also help define what a biodiversity credit actually is meant to achieve, paving the way to more technical discussions on issues such as the interchangeability of one credit for another and providing clarity to guide technical issues down the line.
Experts said that ensuring agreement and understanding around these core aspects is fundamental before targeting market growth.
“There are some very key questions and design principles that we need to answer soon, and we need to get those right,” said Sinclair Vincent, director of sustainable development innovation at carbon and sustainability standard Verra.
“As a global community, we have to first accept that we’re applying very human economic concepts to nature and that feels funny. But if we’re going to do it, let’s do it right,” she added.
Vincent noted that beyond reaching agreement on high-level principles, ensuring communication and disseminating advice is also key.
“I guarantee you that the standards bodies want their [nature] credits that they issue to be high integrity, genuine credits, representing real impact on the ground,” she said.
“But we just want to make sure that everybody involved understands what they represent and what they don’t represent,” she added.
High-level principles can help define what a biodiversity or nature credit actually represents, with Verra’s Vincent adamant that credits should not be viewed or conflated with offsets.
“I want to start with what [a credit] is not. It is not meant to be an offset for negative impacts on nature,” she said.
“Instead, biodiversity credits are meant to allow for a positive investment in nature – looking into restoration or conservation activities that result in positive impacts on the ground,” she added.
Many experts have been clear from the get-go that biodiversity credits should leapfrog lessons learned in the voluntary carbon market, which has faced criticism towards buyers who purchase credits in order to continue business-as-usual polluting.
For this reason, many experts have been clear that biodiversity credits should not be used to negate or counterbalance negative impacts on nature, a concept underpinning biodiversity offsets administered under several global government-led schemes.
But other experts have noted that the biodiversity community should not be so quick to rule out this type of use, and that leaving the door open to future links to regulated systems may be beneficial to ensuring demand.
Another high-level concept that will need agreement is the interchangeably of credits, or “fungibility”.
Speakers noted that each biodiversity credit is likely to represent different outcomes given the complexities of nature and the fact that projects will vary wildly from one region to another.
“We aren’t going to have a tonne of CO2 equivalent – which is maybe the only fungible part with a carbon credit,” said Vincent, noting that there is no single way to measure an improvement to biodiversity outcomes.
“So, we won’t have that in this space, and that’s okay,” she added.
Even in the carbon market world there are arguments on whether nature-based credits are truly fungible across projects, particularly given their varying impact on local communities and co-benefits to ecosystem services.
“You can’t just go out and buy a nature-based carbon credit and think that one is the same as the other,” ValueNature’s Morgan said.
“So when we think of biodiversity credits, we can present them in a similar manner, and even though we might have a single unit … there’s going to be a lot of variation and diversity amongst those.”
But despite the challenges with fungibility, experts all agreed that biodiversity improvements are absolutely something that can be measured and quantified, with various approaches emerging that have already seen the first nature credits begin to materialise.
“If you are intended to develop landscape investments, do consider biodiversity in that topic, and not only as a co-benefit that you can describe, but something that you can measure from a baseline perspective and start to quantify the enhancements or net gains,” said Victor Giraldo, carbon technical director at commodity trading company Trafigura.
Better understanding and trust of high-level principles can set a robust foundation for more technical details, including data and transparency requirements.
“To scale, we need to develop that trust, traceability, and transparency,” Morgan said.
In this respect, speakers pointed to the importance of robust data and verification, including noting the importance of data collection using advanced technologies such as remote sensing, and presenting that data though techniques such as distributed ledgers.
“If you invest in anything, whether it’s a house or a company, you will first need to do your due diligence, and you will need data to first see what is the actual value of that,” said Stefanie Kaiser of NatureMetrics, a firm providing data for investors on impacts related to soil biodiversity and animal species from projects.
“The issue here is we need to be sure that [nature credits] actually represent positive changes on the ground, and most importantly that they represent a positive impact that is due to the project that you’re investing in,” she added.
Kaiser pointed to work ahead on ensuring consistent data that is standardised and complete to a degree that it can be audited by third parties.
She noted that when biodiversity was simply a co-benefit to carbon projects, it was less important to have detailed measurements and that many developers used anecdotal data based on field interviews.
“There’s nothing against that. but it’s really difficult to quantify those and have that level of confidence that we need to build a market,” she said.
By Katherine Monahan – email@example.com
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