The High Integrity Forest (HIFOR) investment initiative backed by the Wildlife Conservation Society (WCS) released on Thursday its methodology to identify and issue units that could fit the nascent biodiversity credit market.

Under the methodology, HIFOR units are defined as assets that buyers can use to make claims about their contributions to protecting forests and biodiversity.

Each HIFOR unit represents a bundle of both biodiversity and climate benefits associated with one hectare of a well-conserved and high-integrity tropical forest.

This bundle includes the amount of CO2 sequestered by one ha of forest in a HIFOR programme area and the levels of biodiversity associated with the site.

The HIFOR initiative aims to mobilise finance for the protection of high-integrity tropical forests with a high level of biodiversity.

“What we’re trying to do is to address a financing gap in the climate and biodiversity spaces, and provide a link for market-based investment into these forests,” Daniel Zarin, executive director for forests and climate change at WCS, said during an online launch event on Thursday.

“HIFOR provides an opportunity for market investment in protecting nature. It’s ‘preventive care’ which, from the human health care analogy, we know is a high-value and cost-effective means to avoid the need for more expensive urgent care down the road.”

On the biodiversity side, Zarin said that HIFOR does not promise biodiversity uplift, so it’s not relevant for any kind of offsetting mechanism.

“It is a payment for ecosystem services approach that includes maintaining biodiversity and nature in the world’s most biodiverse ecosystems, with the units representing stewardship at the ecosystem level,” he said.

Currently, HIFOR is piloting several programmes to test the methodology, including one in the state of Amazon, Brazil, which encompasses both Mamiraua and Amana reserves and covers around 3.6 million ha.

ELIGIBILITY

To identify eligible forest areas that can generate HIFOR units, the methodology utilises the Forest Landscape Integrity Index (FLII), developed for evaluating the ecological integrity within the world’s forests.

For each unit assessed with the index, the term ‘well-conserved’ means that high ecological integrity – associated with an FLII score of more than 9.6 – is maintained over 10 years of monitoring activities.

Eligible projects under the methodology must be at least 30 years up to a maximum of 100 years. During the monitoring period, four integrity criteria are measured:

• The total forest extent must be equal to/higher than 80,000 ha.
• The proportion of the high-integrity forest, as determined by the Index scores, must be equal to/higher than 80%.
• The proportion of the low-integrity forest must be equal to/lower than 5%.
• The proportion of the anthropogenic non-forest land cover (such as agricultural land, intensively managed pastureland, mining, urban land, and deforested but unused open lands) must be equal to/lower than 5%.

After the first monitoring event, two additional criteria have to be met: the annual deforestation rate – which must be equal to/lower than 0.20% of forest area per year, and the annual rate of decline in high integrity forest – which must be equal to/lower than 0.75% per year.

“Projects that fail to meet either of these conditions at the end of a given monitoring period are deemed ineligible for the issuance of HIFOR units for that monitoring period and shall remain ineligible until the project proponent has demonstrated that the conditions are met again in the future,” the document said.

TRADABLE UNITS

During the online webinar, Ashley Camhi, director of Innovative Finance, Forests, and Climate at WCS, stressed the corporate urgency for ESG reporting, as well as the increasing interest in monitoring the impacts and dependencies on biodiversity.

In light of that, HIFOR initiative seeks to provide an investment opportunity for companies to demonstrate their contributions to climate change mitigation and biodiversity conservation through mandatory and voluntary reporting and disclosures.

“Companies are really starting to map out their impacts and their dependencies on nature, and there’s a huge and growing interest in this idea that nature stewardship can be linked to biodiversity credits in the nascent market,” Camhi said.

“There’s definitely an interest in being an early mover in the space, and I think that companies will purchase HIFOR units with the idea that as the market scales, the units will be tradable.”

As companies step up their efforts to assess impacts on nature across their value and supply chains, biodiversity credits could gain traction as a go-to solution to address risks and dependencies.

Frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations are slated to play a critical role in boosting the corporate demand for units, Carter Ingram, managing director at advisory group Pollination, recently told Carbon Pulse.

The corporate risk management data generated by TNFD uptake could represent a foundation upon which a high-integrity nature credit market can grow, a report by Australian firm Clayton Utz said after last year’s launch of the TNFD recommendations.

By Giada Ferraglioni – giada@carbon-pulse.com

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