The City of London Corporation has called for the UK to include marine biodiversity in its nature credits market as a “matter of urgency”, as part of its ambition for the country to become a global nature finance centre, it has said.

Government agency City of London and PricewaterhouseCoopers recommended the country lead the way in developing high-integrity nature markets, as part of eight actions for the UK to take to become an international leader in nature finance, in a joint report.

The UK needs to “accelerate its efforts to address marine biodiversity as a matter of urgency” as part of its biodiversity net gain (BNG) policy, the report said.

The BNG law, which comes into force in November, requires new developments in England and Wales to prove a 10% net gain in biodiversity. So far the policy has not included marine impacts, although the government consulted on the issue in 2022.

The UK government could assess making BNG requirements mandatory for high-impact sectors like energy, chemicals, and transport, the report said. Such a move could boost nature financing, as has been seen in Colombia’s biodiversity offset and credit markets programme, it said.

“Although the UK has made credible progress in establishing compliance-driven nature credit markets, other jurisdictions are more advanced in their market design and have incorporated broader elements of nature within their markets,” it said.

For example, work around reef credits in Australia and soil carbon in the US is ahead of the UK’s plans in those areas, it said.

The UK is three years away from having nature credit markets at the level of maturity required for a global centre for nature finance, the report estimated.

Emma Boyd, chair of the Green Finance Institute, said: “The nature credit markets need a lot of detailed work to make sure we’re creating markets with integrity, making sure that communities are involved.”

“There’s a lot of cynicism, there’s a lot of trust lacking, but you can build new forms of trust. It needs to be done in a way that brings in all those relevant organisations so that everyone feels listened to. Not everybody sees finance as the answer to everything,” she said in response to a question from Carbon Pulse.

The report set out recommendations for the nature credit market including:

• Expand and develop the regulatory market for nature credits, for example, by broadening the scope of BNG to include additional high-impact sectors outside of property development, e.g. mining, hydrocarbon, infrastructure, electrical and maritime, as is the case in Colombia.
• Consider integrating nature-based carbon credits into the UK Emissions Trading Scheme, provided appropriate monitoring and verification requirements are included to ensure integrity.
• Lead the development of voluntary demand for biodiversity credits, including appropriate standards and claims guidance.

“A voluntary credit market could assist businesses to deliver on targets to create and restore local habitats,” the report said.

“Such a market could create a sustainable source of finance to incentivise the development of nature restoration and protection projects.”

Keith Bottomley, deputy policy chair at City of London, said: “We can harness our leading sustainable finance ecosystem and position ourselves as a global centre for nature, finance, that’s very much the aim, the objective, and the opportunity.”

“Part of that change is for the financial world to think of nature as an asset or as natural capital. This change will require a lot of effort but will also bring about significant opportunities,” he said during a webinar.

Key recommendations for becoming a centre of nature finance include policy certainty, supporting the development of a pipeline of investible opportunities, and deploying regulation, the report said.

Mark Manning, strategic policy advisor of sustainable finance at the UK’s Financial Conduct Authority, said his organisation had been “ramping up” its activities around nature including developing a dedicated guidance report that should be published in the next few months.

“We will build capacity across supervision, authorisation, and enforcement to make sure nature-related considerations are embedded across the FCA.”

By Thomas Cox – t.cox@carbon-pulse.com

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