A strong wave of demand for biodiversity credits is expected within the next couple of years, experts speaking at an event in London on Monday predicted while urging standard-setting bodies to ensure rules exist to allow the market to scale with integrity.

Panellists at the Biodiversity and Nature Markets Summit 2023 became the latest to point to surging momentum behind the nascent biodiversity market in the wake of the historic agreement of the Global Biodiversity Framework (GBF) at COP15 talks in Montreal, which includes several calls to action for the financial sector to channel greater investment flows towards nature positive outcomes.

One means of doing this will be via crediting restoration and protection activities, with multiple companies and standards now working on methodologies and initiatives to enable the issuance of resulting units.

“Whether you like it or not, biodiversity credits are here,” Helen Crowley, managing director at advisory firm Pollination, told the event in London organised by City & Financial Global.

She added that while there remained “huge challenges”, stakeholders had now learned “a great deal” about how to properly build the market, namely in the wake of lessons learned from carbon markets which have been around for decades.

The demand surge, which experts said at the conference was now imminent, referred to several specific targets outlined in the GBF as providing a catalyst for the sector to act now.

Among the 23-target framework, Target 15 in particular, encourages governments to mandate large companies and financial institutions to regularly monitor, assess, and transparently disclose their risks, dependencies, and impacts on nature.

“I am seeing these incredible waves of potential demand coming down the pipe which will be realised in the next, let’s say in 12 to 18 months, and I’m really interested in how that’s going to create not just a massive demand for this kind of credit, but also what that means for actual change on the ground,” Vian Sharif, founder at analytics firm NatureAlpha, said.

KEEPING INTEGRITY

But in the face of such expected demand for biodiversity credits, it is crucial for regulators and standard-setters to put in place frameworks to protect the integrity of the market, the audience heard, a challenge carbon markets are still trying to overcome.

Several negative media reports in the last year, for example, have taken aim at the over-crediting of carbon projects and fraudulent practices in the market, which has spurred the work of new initiatives, such as the ICVCM, to try to ensure that credits actually achieve the climate impacts they claim.

Responsible regulation for nature markets from the outset would be very important to scaling, given this context, the event heard.

“We want to keep up with the demand but we have to not get it wrong, because we’ll get into big trouble and it will just make it worse,” Crowley said.

Giulia Carbone, director at the Natural Climate Solutions Alliance, agreed, arguing that demand-side integrity would need to be really “well-managed”.

“It is not about offsetting the company footprint … so the word additionality is really, really important,” she said.

Carbone suggested that some lessons could be drawn from work already having been done on carbon to ensure additionality.

“This [principle] is also very much aligned with how we must see the voluntary carbon credits being used, not as a replacement to an abatement within your value chain, but in addition to abatement,” she said, suggesting that the biodiversity market needed to “create that space for nature” whereby beyond-value chain impact is measured, in the way the Science Based Targets initiative (SBTi) has tried to do for emissions.

Others have also pointed to the need to firmly distinguish between crediting and offsetting in biodiversity markets, with many slamming the potential use of the latter form of units due to greenwashing fears.

On the topic of claims and how best to make them, Carbone suggested that the goals of biodiversity and carbon markets were in “synergy”.

“The two things are not in contradiction. They should really work together,” she told the event.

In this vein, the draft recommendations created by the Taskforce on Nature-related Financial Disclosures (TNFD) was based on work already done by the TCFD on climate, enabling an easier transition for firms wishing to report on both.

Final TNFD recommendations are to be published during the New York Climate Week in September, the body’s co-chair David Craig confirmed on Monday during the conference.

Carbone, meanwhile, also referred to work being done by the Voluntary Carbon Markets Integrity Initiative (VCMI), a cross-stakeholder run set of guidelines for company claims in the carbon space, which she said should also be developed for biodiversity claims.

OVERCOMING HURDLES

While not all are convinced credits are the solution to narrowing the nature finance gap and meeting the goals of the GBF, even proponents of markets have pointed to the challenge of measuring biodiversity, due to its complex and highly localised nature.

However, Craig of the TNFD stated that a lack of data or technological advancement to monitor risk or impact was not a barrier.

“New innovations in nature-based data analytics, measurement, and satellite data … challenge the myth that there isn’t enough data to manage nature,” he said.

“There are tonnes of data on nature. What is missing is that comprehensive standard baseline on how we bring it together,” he added, calling on regulators and standards bodies to act as soon as possible to put this in place.

He urged firms to act now to sign up to the TNFD if they had not already, as the sooner companies act, the easier it will be to transition.

Meanwhile, UK government minister Richard Benyon outlined the country’s plans to become a global hub for such finance by moving early to “hit the sweetspot of regulation”.

“We’re working on a shared vision for the emerging high-integrity climate and nature markets that have the potential to help us do more across the UK and around the world,” he told the conference in London.

“We’re committed to making sure that we are the front runners who want to go further, as a global baseline for taking account of biodiversity begins to cohere,” he said.

The UK government earlier this year published details on mandatory nature positive planning policy and biodiversity credit use, with the policy due to come into effect by the end of the year across most of the country.

It has also readied a metric ahead of the scheme’s launch, becoming one of the first lawmaking bodies to have done so.

By Roy Manuell – roy@carbon-pulse.com

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