Credits tied to single ecosystem services have the potential to drive corporate action in the emerging biodiversity market, as they could help companies effectively address their dependencies on nature, a consultant has told Carbon Pulse.

Rather than using biodiversity as the core unit at a time when the market is not yet mature, Eric Wilburn, founder and principal at US-headquartered environmental consultancy NatureBridge, suggests shifting the focus to ecosystem services to spark corporate interest.

“Many players in the market are working towards standardised biodiversity credits, seeing them as the Holy Grail, but the truth is this model is a bit disconnected from reality – we need to meet companies where they’re at,” Wilburn told Carbon Pulse.

“Since corporates are incentivised to act where they have major dependencies that affect their operations, we should try a different approach and build the constituent parts of what might form that Holy Grail, starting to see and show people how this works with only one ecosystem service. Then, we can increase complexity over time.”

Defined as the benefits people – and businesses – derive from nature, ecosystem services range from water quality and pollination to air filtration and flood prevention.

Some could prove more suited than others for crediting schemes, such as water quality and quantity, due to fewer challenges with monitoring and the large number of companies relying on them.

“Water is definitely the easiest to measure because we have very clear units and metrics already established, though some components, like storage capacity in the subsurface, are more challenging, as it’s hard to do with remote sensing and you largely need in situ sensors,” Wilburn said.

In recent months, Colombian non-profit Fundacion Cataruben and Franco-Mexican environmental company Nat5 have launched separate water crediting programmes to improve ecosystem services such as water supply and regulation as well as nutrient control.

Early initiatives have also emerged to develop nutrient credits aimed at increasing nutrient availability in soils, including the project kickstarted in the US by the Virginia Nutrient Bank, which generates units by converting croplands in pristine lands.

“There are many other ecosystem services that we just haven’t tried that hard,” Wilburn said.

“For example, storm surge protection wouldn’t be that difficult to measure with some buoys. As well, pollination hasn’t been explored a lot in terms of crediting schemes, but it’s definitely one that you could build mechanisms around.”

PIVOT TO ECOSYSTEM SERVICES

Wilburn said nature-based project developers could play a critical role in consolidating this trend, with many ready to pivot to ecosystem service-related activities.

“A lot of developers will start to say, ‘hey, we’re actually within the watershed of this major company’ and specialise in a specific kind of projects. Companies may even start to reach out to them more. But mainly around water outcomes, for example, rather than broad biodiversity outcomes,” he said.

“We’ll see demand flowing naturally towards ecosystem service-related projects, because that’s what the private sector needs the most.”

As companies take steps to adopt frameworks to assess their risks and dependencies on nature, the increasing amount of data generated by disclosure uptake could support the development of ecosystem service-focused crediting schemes for managed lands.

“On managed lands, you need to look at incremental changes in water, nutrient availability, and other ecosystem services because there are so many different ways to slightly shift management to achieve better outcomes,” Wilburn said.

“Conversely, biodiversity might make more sense in an intact ecosystem as the best indicator, as it could be enough to get governments with 30×30 goals moving.”

PROFITABLE OR NOT?

Wilburn expects that for most corporates with a strong land footprint in the agricultural, mining, and extraction sectors, between 30-40% of nature-positive investments will be profitable.

For the remaining 60-70%, he argued there would not be a business case to take immediate action, though this would have a huge impact on other entities and the broader public within particular regions.

“That’s where governments need to step in. They will have to create mechanisms and incentives for corporates to take action in biodiversity for biodiversity’s sake, as companies will not do it naturally in the vast majority of cases,” Wilburn said.

Regulation is regarded as the strongest driver of corporate demand for biodiversity credits, as recently pointed out by Carter Ingram, managing director of the advisory group Pollination.

Although attention to the biodiversity credit market has ramped up after the 2022 Kunming-Montreal Global Biodiversity Framework, which carved out a role for nature-based solutions to help bridge the biodiversity financing gap, most companies are still reluctant to translate their interest into transactions.

Last year, a report by Hague-headquartered ASN Bank said putting a value on ecosystem services could help bolster corporate action by showing the profitability of investments in conservation and restoration activities.

However, according to a study led by a University of Hamburg academic and published earlier this year in Science, governments have so far fallen short of assessing the actual monetary value of ecosystem services by up to 180%.

By Sergio Colombo – sergio@carbon-pulse.com

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