The story has been updated with details around the methodology used to generate the credits.

A Swedish bank has acquired a batch of biodiversity credits generated through a domestic forestry project, the first time such units have been created and transacted in Europe.

Swedbank bought the credits from Orsa Besparingsskog, a Scandinavian-style forest cooperative in central Sweden, applying on a pilot basis a methodology developed by a team of experts from the Swedish University of Agricultural Sciences (SLU).

“Preserving biodiversity and restoring ecosystems is crucial. As a bank, we can be involved in developing innovative financial solutions and methods to promote biodiversity, and see that the system of biodiversity credits is a way forward,” Ulf Moeller, the bank’s head of forestry and agriculture, said in a statement.

“Biodiversity credits create economic incentives for forest owners to preserve and develop forests with high natural values. They can act as an alternative source of income for forest owners, where they receive yields from the forest without harvesting it or managing the forest using other methods compared to conventional forestry,” he added.

The Orsa forest covers an area of 75,000 hectares, of which some 60,000 ha is run as a production forest. Another 3,500 ha are protected as reserves.

WHAT’S IN A BIODIVERSITY CREDIT?

The project from which Swedbank bought the credits covers an area of 13 ha, and was implemented last year to pilot three methodologies developed by the SLU team for the protection of boreal forests.

Swedbank bought 91 credits from the project at an undisclosed price. According to Aleksandra Holmlund, a PhD researcher at SLU, the credits represent conservation of high natural value areas, restoration of biodiversity, and improved forest management using continuous cover forest management methods.

Holmlund presented the methodologies behind the credits later on Wednesday at the World Forest Forum in central Sweden.

The three methodologies, specifically developed for Swedish circumstances, referred to restoration of open natural old pine forest with old growth qualities, production forests, and forest management.

Under each methodology, the developers set a series of goals and actions that will be pursued throughout the project’s life, such as increasing the amount of deadwood and sunshine to help meet the overall objective of conserving or restoring biodiversity values.

During verification, biodiversity points on a scale of 1-50 were awarded to pre-selected stands depending measurements of the presence of various species, specific structures, and so on.

Those points were then added to two other score sets – one for strategic value points, based on how rare the species involved are, and another for project type points, ranking restoration highest, conservation second, and improved forest management third.

Based on that approach, credits will be generated per hectare of project area.

“Restoration is most expensive, most difficult, and most needed,” Holmlund explained.

At the Orsa project, that approached resulted in a total score of 91 credits, for which there is no set market price, leaving the land-owners to negotiate price based on the project cost and their desired margins.

Under the SLU approach, land-owners will self-report on progress annually, but every five years the project will be subject to third-party verification, and the results of that will generate a new round of issuance.

Swedbank has committed to such an approach for the 20-year duration of its contract, with another 91 credits, more, or fewer due to be created in 2028, depending on the project’s achievements.

SPREADING

According to a recent report by BloombergNEF, the eight most developed biodiversity crediting schemes globally so far covers more than 800,000 hectares with $8 million in funding pledged so far.

The majority of projects are located in the Global South, primarily in Central and South America.

Terrasos in Colombia and Wilderlands in Australia sell credits based on fairly small plots of land – 10 and 1 square metres, respectively – and mostly have individual buyers.

Developers like ValueNature and RePlanet have bigger financial backers in place, though their identities have not yet been published as that is being saved for the announcements of the first credit issuances, expected within the next few months.

That makes Swedbank among the world’s first publicly known commercial buyers of biodiversity credits, in what still very much remains a highly nascent market.

“Through the research project, we were able to show that there is a genuine interest from companies and financial institutions in biodiversity credits,” SLU’s Holmlund told Carbon Pulse.

“I believe that we are currently looking at a strong global market trend building up. It will be exciting to see how quickly the market will scale.”

There is a lot of initial interest among some commercial actors in the fledgling nature market, though the question of where sufficient demand might come from to drive a significant scale-up remains a guessing game.

The Biodiversity Credit Alliance (BCA), a UN-backed forum consisting largely of project developers, is working on a demand concept for biodiversity credits which is expected to be released by August.

By Stian Reklev – stian@carbon-pulse.com

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