Biodiversity credits worth over $14 million in total across two projects could be sold within the next three months to multiple-buyer groups, according to the head of credit developer RePlanet.

A rewilding project on the Scottish island of Taransay and an avoided grassland loss initiative in Transylvania, Romania could soon forward sell all their biodiversity credits under development, said Tim Coles, CEO of RePlanet.

In the next “three months, we will have the official launch” of ‘special purpose vehicles’ (SPVs) from the two projects – enabling groups of buyers, rather than individual companies, to purchase the credits, Coles told Carbon Pulse.

Organisations working in investment, banking, energy, and pharmaceuticals are interested in investing in the SPVs, to contribute to nature rather than offsetting, following conversations with RePlanet, he said.

SPVs are usually created as separate companies with their own balance sheet to isolate financial risk. Groups of investors can use them to pool their assets to make a single shared investment.

Under RePlanet’s SPV, shares will entitle buyers to a proportion of the total biodiversity credits in each area. Developers have struggled to sell voluntary biodiversity credits so far as demand is limited due to a lack of confidence in the market.

The Scottish initiative aims to supply 236,000 biodiversity credits at $30 each, while the Romanian project could sell 420,000 credits at $18 each, totalling $14.64 mln in sales if the transactions go to plan, Coles said.

The transactions would mark a shift in the market, which has only seen relatively small sales so far.

MULTIPLE BUYERS

Since the price of a voluntary biodiversity credit in 10 years is unpredictable, the units are unlikely to sell at all to individual buyers, Coles said.

“It seemed to us that the only solution to that problem was to have multiple clients. There is a demand in the marketplace for biodiversity credits, we know that because we’re constantly being asked about it.”

The SPV will enable multiple buyers to engage who want to make a smaller, shared investment because they think it could be a realistic proposition to resell the credits, he said.

However, most of the SPV investors are likely to buy the credits for philanthropic reasons rather than commercial ones, he said.

Credits should start to be generated following biodiversity uplift in about two years from the Scottish and Romanian projects, following them having been sold in advance, he said.

In Romania, RePlanet is collaborating with local NGO Fundatia Adept on protecting over 4,000 hectares of grassland in the Tarnarva-Mare region of Transylvania.

Meanwhile in Scotland, RePlanet is supporting an initiative to plant rowan, willow, and birch trees, following damage from sheep grazing, over an area of 1,475 ha on the uninhabited island of Taransay.

The biodiversity credit claims, which use the methodology of RePlanet’s sister organisation Wallacea Trust, will be verified by peer reviewer process the Biodiversity Futures Initiative before being monetised by Integrity Certificates.

In February, RePlanet said five of its projects – including the ones in Transylvania, Romania and Taransay, Scotland – could generate $10 mln each under rough estimates. The SPV marks another possible step towards large-scale sales of these voluntary biodiversity credits.

UK-based company Environment Bank has also marketed voluntary biodiversity credits under a shares-based system, but has yet to announce any sales.

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

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