The burgeoning biodiversity market should be given more flexibility around the measurement and reporting of impact as it grows, compared to voluntary carbon, and also starts further along the development process, according to a senior member of standard body Verra, speaking at an event on Tuesday.

Sinclair Vincent, director of sustainable development innovation at the body, suggested that there were many lessons for biodiversity markets to learn from the history of the carbon markets, mainly around transparency.

“We are starting with a lot of key market infrastructure that has only recently come into place or is about to come into place for the voluntary carbon market – that’s a huge advantage,” she told the event organised by ratings agency BeZero Carbon.

“We have a more advanced starting point and that will hopefully be to the benefit of nature and its protection over time,” she added.

Verra is developing a biodiversity methodology as part of its Sustainable Development Verified Impact Standard (SD VISta) under which project developers will be able to quantify the biodiversity benefits of their conservation and restoration activities, slated to be launched by the end of 2023.

Vincent provided a limited update on the process during Tuesday’s event, stating that the standard was “working with a number of organisations on the development of the framework and the resulting methodologies”, confirming prior Carbon Pulse coverage of the plans.

Generally, she added, the various different standards developing methodologies, including Verra, were now each working towards creating a unit which represents a biodiversity improvement so that investors could start to channel capital towards the market.

“The goal is to have a reliable accounting unit,” Vincent said.

KEEP THINGS FLEXIBLE

She did provide some detail on the direction she felt the biodiversity market should take, underlining that in order to meet the extremely wide global finance gap for nature, the market must be easy to scale, especially on the measurement, reporting, and verification (MRV) of impact.

“This has to be practical on the ground for projects to meet these requirements. If not, it becomes too burdensome for projects to participate and the finance can’t flow – that is absolutely not what we’re aiming for,” she said.

“We can have more flexibility in this market than we may have in the voluntary carbon markets. These aren’t offsets and so that changes how we might think about additionality, providing a bit more flexibility for projects, as well as on the metrics that they have to track.”

Due to the hyper-localised nature of biodiversity, with one hectare of land in Europe vastly different to one in South America, as an example, many see the need for many different metrics to account for different types of ecosystem, unlike in carbon where a tonne is considered by the market as a tonne.

“The reality is there is not going to be a single metric, there is going to be a basket of metrics,” commented Jesamine Bartlett, lead scientist at oil and gas firm Equinor.

This means that the market should embrace a relatively strong variation in price across different types of credits which emerge, the audience heard, and it was the responsibility of standards and regulators to ensure that there was enough safeguards in place to then let the market determine what different impacts would be worth.

“I envisage a day where you have astute traders who are tracking the performance of a particular fig wasp, and are really able to value and understand the nuances that an ecosystem can provide in terms of holistic quality and biodiversity gains,” said Bartlett, when asked what an ideal market would look like in five years’ time.

She added that due to the challenges of measuring biodiversity impact, it was very likely that this would factor into cost of projects, making the price of a credit highly project-dependent.

Equinor had already made an investment into a biodiversity project, Bartlett confirmed, stating that it was with “who we think are the best in the game”, she added without naming any further details.

CREDITS NOT OFFSETS

Critics of biodiversity markets generally focus on potential integrity issues as seen in carbon offset markets, such as over-crediting and distracting from the need to make real changes to a company’s value chain.

In this vein, speaking at an event in Brussels on Tuesday, Frederic Hache, director of the Green Finance Observatory think-tank, ripped into biodiversity markets.

“Simplifying and standardising tradable biodiversity assets is incomparably more difficult [than carbon offsetting] and creates infinitely worse environmental integrity issues,” he told the Beyond Growth 2023 conference.

“Now the real question is: does biodiversity offsetting work? Well first it is important to note that biodiversity offsetting does not aim at curbing destruction, it merely, at best, displaces destruction.”

But speakers at the BeZero event in London pointed to the need to distinguish between offsetting and crediting.

“What’s really important to emphasise is that a biodiversity credit cannot be treated as an offset, and so a negative action cannot be offset by purchasing a credit,” said Torrey Sanseverino, natural capital research manager at credit rating service BeZero.

Vincent of Verra also said that this distinction “could not be stressed enough”.

By Roy Manuell and Rebecca Gualandi – roy@carbon-pulse.com