The Biodiversity Credits Alliance (BCA) on Monday released an issue paper delineating the process of developing a review mechanism for the emerging biodiversity credit market in a bid to quell concerns over nature risks related to credited projects.

Amid persistent concerns that a crediting approach to address biodiversity loss could cause more damage than good if done badly, the BCA’s second issue paper stressed the need to ensure that monitoring nature gains is highly reliable and that Indigenous Peoples’ rights are respected, while calling for an independent assessing body to be tasked with overseeing the market.

Starting from the experience of the carbon markets, the BCA stated that building a transparent and rigorous assessment process for credit standards and methodologies is a crucial step.

“BCA work streams are initiated to address the need for equity, quality, and integrity early on in the development of the biodiversity credit market to help lay a foundation for its long-term sustainability and success,” Manesh Lacoul, BCA global coordinator, said.

“Only with strong foundations will the market contribute effectively to global biodiversity conservation goals while upholding ethical standards and promoting social equity as outlined in the Kunming-Montreal Global Biodiversity Framework.”

The review mechanisms working group was co-led by the University of Nottingham and the BCA Secretariat.

“In this BCA issue paper, we surveyed comparable review mechanisms to inform the key review steps and overall approach to ensure quality and integrity,” said Richard Field, professor of biodiversity science at the University of Nottingham.

“The experience of the carbon market has clearly highlighted the importance of independent review mechanisms in potential nature markets. The BCA aims to tackle this challenge head on.”

Launched in a bid to advance the emerging market for voluntary biodiversity credit trading, the body is expected to release its third issue paper titled “Definition of a Biodiversity Credit” by the end of May.

KEY STEPS

The alliance’s efforts to shape a review mechanism are based on already published documents from several organisations proposing high-level principles. Those include the World Economic Forum, the Plan Vivo Foundation, and the British Standards Institute.

“BCA is working with partners to build on these efforts and crystallise an agreed set of principles, similar to the Core Carbon Principles put forth by ICVCM, that can be adopted and widely recognised in the market,” the paper said.

The establishment of a solid review process develops through seven key steps:

• Adopt high-level principles to be widely recognised in the market
• Undertake a scoping exercise for a potential review and oversight mechanism
• Produce a detailed scoping proposal outlining the need for a review mechanism entity
• Produce a detailed concept note on an assessment framework, including purpose, scope, and users
• Develop an assessment framework
• Establish an independent review mechanism with the governance, capacity, resources, and mandate to conduct a review process applying the assessment framework
• Define an assessment process

To ensure high quality and high integrity biodiversity credits, several aspects need to be considered, including evidence of outcomes that are measurable and can be monitored, BCA wrote in the paper.

In light of the quantification of biodiversity being more complex than that of carbon, BCA stressed that biodiversity credit markets would require clarity on the dimension of biodiversity being measured, as well as a solid scientific method to quantify complexity into units that are consistent, stable, and comparable.

“One key aspect for ensuring the quality and integrity of biodiversity credit products is the scientific quality and robustness of the methodology used to quantify changes in biodiversity and/or ecosystem integrity,” the paper said.

Furthermore, assessing the impacts and benefits for Indigenous Peoples and local communities is a key aspect to ensure clarity and transparency in the process.

“A review should be based on clear principles, guidelines, and criteria. Such criteria must include considerations related to the role of Indigenous Peoples and local communities as rights holders and custodians of a majority of the world’s biodiversity.”

According to the BCA, once clear high-level principles and quality and integrity criteria have been defined, an independent assessing body – such as the ICVCM for the carbon market – must be established.

“This organisation/body will require relevant capacity, with the necessary governance structure and resources to fulfil an oversight mandate,” the paper said.

The assessment mechanisms should also be integrated with globally recognised and credible standards such as the International Standards Organization (ISO) or International Sustainability Standards Board (ISSB), the paper noted.

Last week, the ISSB announced it will include biodiversity research in its priorities for the next two years, paving the way for potential new requirements on nature for investors.

POTENTIAL CHALLENGES

Among the challenges with defining a review process for biodiversity credits, BCA mentioned the fact that there is not yet a comprehensive understanding of the demand side.

As several experts told Carbon Pulse earlier this month, players in the carbon space do not yet have the confidence to foray into the market – an uncertainty that is holding back the nature credit market development.

“Until this is better understood, it would be difficult to define a detailed review process because the review process or assessment framework must be closely aligned with the demand-side view of the value proposition,” the paper said.

Furthermore, existing biodiversity credit methodologies do not provide information on potential purchasers and investors, BCA stressed, and questions remain about whether there is an ethical, ecological, or social justice basis in selecting investors and credit buyers.

“Current biodiversity credit approaches are not clear about whether they are positioned as competition, or as a complementary mechanism, to other conservation strategies, such as civil society natural reserves, environmental services payment projects, and even voluntary carbon projects.”

Moreover, the review process might face other challenges, including balancing standardisation with flexibility and involving experts with geographically specific ecological knowledge to assess Indigenous priorities and rights.

The BCA’s Indigenous-led Community Advisory Panel (CAP) released a set of recommendations on biodiversity credits last month in a bid to bring attention to Indigenous Peoples and local communities’ rights in the emerging market.

According to US-based project developer Savimbo, market interest in biodiversity projects led by Indigenous Peoples is surging, as local leaders in the Amazon rainforest strive to scale up funding through voluntary credits, its CEO and co-founder told Carbon Pulse early this week.

By Giada Ferraglioni – giada@carbon-pulse.com

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