The UK national standards body has launched a consultation on a set of overarching principles for domestic nature markets including units representing biodiversity.
Developed by the British Standards Institution (BSI) with funding from the Department for Environment, Food, and Rural Affairs (Defra), the initiative aims to unlock financing while bolstering integrity across nature markets.
“A strong policy framework will boost investor confidence in nature markets, creating the foundation for these markets to grow,” said Richard Benyon, the UK minister for climate, environment, and energy.
“These newly agreed principles offer an essential foundation to help to guard against greenwashing, [and] encourage investment into an important, emerging market,” added Scott Steedman, director-general for standards at BSI.
The standard outlined requirements for designing high-integrity nature schemes, as well as best practices for issuing and trading units.
LOCAL COMMUNITY ENGAGEMENT
Under the framework, transparency should be ensured through disclosing the management plans for delivering environmental outcomes, providing details on monitoring, and specifying whether “nature units” are sold bundled or stacked.
Nature units represent tonnes of carbon dioxide equivalents for greenhouse gases, or biodiversity units, it said. Stacking focuses on monetising the diverse array of services provided by a particular piece of land separately, while bundling involves combining these services into one unified offering.
“If project developers plan, ex-ante, to stack and sell different units from the same supply area, this shall be stated to all market participants before the first units of any type are sold, recorded on the units’ registry, and stated in trading contracts,” said the document.
Market participants must engage with local communities, providing information on:
- Actions to manage supply areas, including whether guidance on good practices for environmental management has been followed
- Trading and ownership of units
- Impacts on local communities
- Any benefit-sharing arrangements in place
“Sellers shall provide an accessible means for local communities to communicate with the managers of the supply area and the managers of the actions to supply units,” said the document.
“They should state the time period within which they respond to communications from local communities, and publish any correspondence, including its timing.”
TESTING ADDITIONALITY
The standard also emphasised that nature units should represent additional environmental outcomes.
Additionality tests must be carried out to demonstrate that claimed environmental benefits would not have happened without the project.
These tests include:
- Ensuring the actions to supply units are not required under a legal or statutory mechanism
- Assessing whether revenues are needed for a project to be financially viable
- Assessing if actions are already part of business-as-usual environmental management
“Sellers are responsible for the integrity of units sold, and for demonstrating that integrity to market stakeholders,” said the document, emphasising that “additionality is vital in nature markets”.
Unit suppliers must demonstrate that a project’s positive environmental outcomes are lasting, and outline validation and verification procedures as well as results on market registries.
Verification bodies need to be “independent of other market participants”, and “state the skills and knowledge that make them competent to” validate the projects, the document said.
LAST RESORT
On the demand side, purchasing units as compensation should be seen as a last resort. Claims should include the units’ status – ex-ante (before the event), pending, or verified.
“Once claims of environmental performance have been made against units bought in a nature market, those units shall be permanently retired.”
Demand for nature-based investments is gathering momentum, as highlighted by recent studies.
Last year, advisory firm Pollination surveyed 557 institutional investors across the UK, US, Australia, France, Singapore, and Japan, revealing that two-thirds of respondents said they were planning to increase their investments.
UK investors have reported higher exposures to nature-related investments than peers in other countries, Pollination said.
By Sergio Colombo – sergio@carbon-pulse.com
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