A Swiss-headquartered non-profit has released a set of recommendations to bolster Africa’s biodiversity credit markets, including setting minimum price floors for units and establishing an independent body tasked with determining project outcomes.

NatureFinance mapped over 30 biodiversity credit projects across Africa between September and March, and outlined a number of actions that it said have the potential to establish market trust while ensuring fair compensation.

“[Biodiversity credits] can represent the potential of a non-traditional revenue stream for both conservation and restoration, and denote nature gains, offering investment prospects for a larger range of conservation efforts across ecosystems and species,” said NatureFinance.

Recommendations cover six key areas – quality of biodiversity credits, market incentives, equitable market access, fair price, regulations, and stakeholder engagement.

NatureFinance stressed the need to set up an independent body or standard to determine the outcomes and integrity of biodiversity credits, as well as a sellers club aimed at setting price floors for units.

“A transparent and consistent pricing framework helps establish a minimum compensation level for nature’s stewards,” it said.

DRIVING DEMAND

While the study acknowledged that biodiversity credits could drive businesses towards nature-positive behaviours, it warned against the risks related to offsetting, pointing out that safeguards must be put in place to avoid negative outcomes.

“Offsetting and insetting remain an area of ongoing debate locally and internationally, which improved market governance needs to address by creating the right incentives and removing the potential damage and risks that bad claims can bring,” it said.

As demand in the emerging biodiversity credit market struggles to expand, regulation has a critical role to play in helping scale transactions, said NatureFinance, suggesting that no-net-loss or net-gain frameworks could be mandated across supply chains, key sectors, or even at a national level.

At the same time, tax incentives may be promoted as a way to enable people safeguarding threatened ecosystems or species to deduct all expenses related to their conservation efforts from their taxable income, it added.

The study also urged financial institutions to step up and incorporate nature into their strategies, including through introducing biodiversity-linked financial products and nature-positive requirements into lending criteria.

As well, NatureFinance said derisking measures should be developed to encourage investment in biodiversity credit markets, and proposed that a commodity exchange authority provides guidance for trading units.

“AGREED BENEFITS”

Furthermore, it called for adopting requirements that ensure Indigenous Peoples and local communities are properly involved in and benefit from the projects.

“Project initiation [should] only take place once proof of negotiation and consultation on agreed benefits has taken place, with local and Indigenous communities having access to financial and legal support in decision and agreement making.”

Africa’s biodiversity credit markets have suffered so far from poor demand from Global North, with European and North American companies more keen to invest where their supply chains have an impact.

In a report released earlier this month, the Biodiversity Credits Incubator recognised the biodiversity credit market as an opportunity to scale investments in the region. Yet, speaking to Carbon Pulse, one of its early members advised caution since it is “still a young emerging market with several key challenges facing it before it is fully adopted”.

In April, the African Natural Capital Alliance said it plans to establish a comprehensive nature data platform for the continent, in a bid to drive investment into nature-based solutions.

By Sergio Colombo – sergio@carbon-pulse.com

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