A conservation finance group has held discussions on the measures needed to scale the emerging biodiversity credit markets, stressing the importance of advancing government efforts to regulate transactions at a global level.

The cross-sectoral initiative Coalition for Private Investment in Conservation (CPIC) established a working group to explore the steps that have the potential to drive demand for biodiversity credits.

Founded in 2016 by the International Union for Conservation of Nature (IUCN), Cornell University, investment bank Credit Suisse, and non-profit The Nature Conservancy, the CPIC brings together public and private investors, asset managers, project developers, and conservation NGOs.

According to reports released on Thursday, during a June meeting, its biodiversity credit working group underscored the need for governments to step up and contribute to expanding compliance markets.

“Designing the conducive legal frameworks and systems could enable transacting biodiversity credits across borders, creating more cost-efficient solutions for achieving nature-positive goals,” said the experts leading the working group session.

“Without government interventions and regulation, [biodiversity credit] markets will be very hard to scale.”

STANDARD ALIGNMENT

Furthermore, biodiversity credit standards should align with target-setting bodies, such as the Science Based Targets Network (SBTN), as well as corporate disclosure frameworks, like the Taskforce on Nature-related Financial Disclosures (TNFD), they said.

“An overarching framework is required that sets out the rules for using high integrity biodiversity credits credibly as part of an overall nature-positive strategy.”

Disclosure uptake is poised to enhance companies’ understanding of their impacts and dependencies on nature, added the authors, arguing that this will help create a business case for using biodiversity credits.

These could enable companies to invest in the ecosystem services they depend on, such as water quality, pollination, air filtration, and flood control, as also suggested by Eric Wilburn, founder of environmental consultancy NatureBridge.

“In most of the cases, where direct investments in supply chain resilience are not practical or well understood, biodiversity credits could be designed to enable the management of risks and dependencies,” said the CPIC experts.

“These investments can operate in parallel with a company’s direct efforts to minimise their impact on nature. However, risks and dependencies are location-specific, so location and biome data would need to be retained if credits were to be used to manage a specific risk or impact.”

HIGH EXPOSURE

The group also pointed out that financial institutions are set to play a critical role in supporting the market, as they’re highly exposed to nature-related risks, and are also significantly regulated, which could lead them to engage in the market.

“Such demand from the financial sector, coupled with regulatory pressures, could create significant impetus for the biodiversity credit market,” said the authors.

Over the past few months, several initiatives have emerged to investigate the feasibility of using biodiversity credits to promote biodiversity-positive activities at a time when corporate demand has yet to pick up.

The World Economic Forum and consultants McKinsey & Co have initiated a coalition of companies and financial institutions this year aiming to contribute to shaping the development of and building confidence in the market.

As well, the UN-backed Biodiversity Credits Alliance, primarily consisting of project developers but with advisory groups spanning multiple types of organisations, has recently issued a set of recommendations to enhance the integrity of biodiversity credits.

Meanwhile, the International Advisory Panel on Biodiversity Credits, established by the French and UK governments, has carried out stakeholder consultation ahead of the planned launch of a market framework during the UN COP16 biodiversity summit, due to be held in Cali, Colombia over Oct. 21-Nov. 1.

By Sergio Colombo – sergio@carbon-pulse.com

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