The Science-Based Target Network (SBTN) and the Taskforce on Nature-related Financial Disclosures (TNFD) should integrate biodiversity credits into their frameworks to help unlock corporate demand, according to an executive board member of carbon exchange Climate Impact X (CIX).

Mikkel Larsen, who led Singapore-based CIX as a CEO for three years before stepping down in March, said this move would contribute to scaling the voluntary biodiversity credit market at a time when companies’ interest has not yet translated into actual transactions.

“TNFD and SBTN have the potential to be important drivers of demand for biodiversity and carbon credits given the support not least TNFD has received. Hence, guidance from TNFD to explicitly acknowledge that credits are part of the actions that a company can take is valuable,” he told Carbon Pulse.

“More important, perhaps, [would be] guidance from SBTN in terms of the ability for credits to count towards the targets. How credits can be shown matters.”

SBTN, a global initiative working to establish scientific objectives for biodiversity conservation and restoration, released a report this week outlining the outcomes of its first corporate pilot for nature targets, with some companies gearing up for adopting their drafts.

Observers largely agree that enabling organisations to develop high-quality scientific targets for their impacts on nature is poised to drive demand for nature credits, while the corporate risk management data generated by TNFD uptake could represent a foundation upon which a high-integrity biodiversity market can grow.

Yet, Larsen argued that explicit guidance would be more effective in the short term.

“For SBTN, it would be statements around how biodiversity and carbon credits could be used to meet the targets,” he said.

“For TNFD, [it should] acknowledge that the use of credits can be an important part of the mitigation efforts, and they could reflect that in the Metrics and Target disclosures.”

UNCLEAR GUIDANCE

TNFD has no stated position on the use of biodiversity credits, while SBTN offers some guidance on its website suggesting that when designed correctly, they have the potential to deliver key benefits for nature and help companies achieve their targets.

However, the guidance is unclear on whether the credits could be used only for insetting or also outside the value chain, according to Larsen.

“I do not have insights to suggest why TNFD and SBTN have not given clear guidance on biodiversity credits,” he said.

“If it is due to the ongoing controversy in the carbon market, it is understandable but ultimately unhelpful.”

The voluntary carbon market over the past couple of years has suffered setbacks following a series of research reports and newspaper articles focusing on overissuance of credits and projects that make little or no difference to emissions.

Larsen pointed out that not all biodiversity credits should be allowed under the TNFD and SBTN frameworks, and offseting should also be ruled out.

“In the same way that not all carbon credits are of high quality, not all biodiversity credits will be,” he said.

“It is too early to tell which of the standards will have the required rigour, and the biodiversity market does not yet have the equivalent of the Integrity Council for the Voluntary Carbon Market (ICVCM) that many look to, [though] it may come.”

CLAIM ISSUES

The decision of integrating credits into TNFD and SBTN frameworks would also bring more clarity around the claims that companies can make after purchasing units, among the main concerns for corporate boards when it comes to investing in the biodiversity market, according to Larsen.

“Corporates … need to understand that if they invest in nature-based solutions and hence improve biodiversity by buying credits of high quality, which is a challenging term for biodiversity, they are not seen as [doing] greenwashing – or the equivalent term for biodiversity – and can credibly make statements about the positive impact they are having,” said Larsen.

“If corporates use credits of high quality and in a thoughtful way, they should be proud of it.”

In June, the Organisation for Biodiversity Certificates, among the first movers in the biodiversity market, launched a survey to gather views on the potential claims associated with investments in biodiversity credits.

Sonja Stuchtey, founder of Germany-based tech startup Landbanking Group, and Simon Morgan, co-founder and CEO of project developer ValueNature, recently joined the call for more clarity on the matter.

Over the past few months, several initiatives have emerged to investigate the feasibility of using biodiversity credits to promote nature positive activities, including the World Economic Forum and consultants McKinsey & Co initiating a coalition of companies and financial institutions this year aiming to build confidence in the market.

Meanwhile, Japan is piloting ‘nature coexistence support credits’ that are being specifically designed by the government in a way that companies can use them in their TNFD reporting, though they are not usable as offsets and cannot be traded in a market.

By Sergio Colombo – sergio@carbon-pulse.com

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