Three international organisations on Wednesday released a set of 21 high-level principles (HLPs) for biodiversity credits in a move designed to encourage the multitude of global market initiatives to align with a set of collective fundamentals.

The guidelines, released by the Biodiversity Credit Alliance (BCA), the World Economic Forum (WEF), and the International Advisory Panel on Biodiversity Credits (IAPB) at the ongoing COP16 UN biodiversity summit in Cali, Colombia, apply to both regulatory and voluntary biodiversity credits, addressing matters such as ensuring robust outcomes, demand integrity, and protecting Indigenous Peoples and local communities’ rights.

However, the trio did not go into detail on the highly debated issue of offsetting, putting off dealing with the thorny subject for now.

The newly announced HLPs build on the high-level governance and integrity principles for voluntary biodiversity credits that were launched by WEF at COP15 as a consultation document.

Since then, the market has expanded, with a proliferation of credit methodologies, standards, and pilot projects being developed, amid growing concerns over market credibility.

“A sustainable market requires large-scale adoption, which in turn will require widespread confidence that biodiversity credits are effective and aligned with societal goals for nature,” said the document.

“Therefore, it is crucial that the market has an agreed-upon framework to establish what a high quality and high integrity credit is, and how they can be used to generate high integrity claims.”

The process has been closely watched by major actors in the biodiversity space, as the guidelines will underpin the long-awaited market framework for biodiversity credits developed by the influential IAPB, due to be presented next week at the UN conference.

POSITIVE OUTCOMES

Developed through engagement with a variety of organisations, including NGOs and Indigenous People groups, as well as the private and public sectors and academics, the HLPs were grouped in three categories – verified positive outcomes for nature, equity and fairness for people, and good governance for high-integrity markets.

The first category includes 10 principles:

• Defining clear project objectives and activity types
• Ensuring demand integrity
• Regulating credit issuance
• Distinguishing between outcome-based and activity-based credits
• Ensuring additionality
• Setting out credible baselines
• Guaranteeing durability
• Preventing leakage
• Establishing robust monitoring, reporting, and verification frameworks
• Carrying out third-party audits

Under the guidelines, project developers must clearly outline their planned activities and the type of outcome they’re pursuing – uplift, avoided loss, or maintenance – while also disclosing the indicators used to track progress.

The first principle also set out limits to stacking – whereby different types of environmental units are created and sold from the same land – and bundling, which combines diverse nature-related uplifts from the same area into one unit.

“Stacking and bundling … should only be allowed if adequate transparency measures can be put in place to safeguard against double counting,” said the document.

Biodiversity credit schemes should define strict rules around corporate claims so that potential buyers are aligned with the mitigation hierarchy. As well, they should disclose the methodologies informing the quantification of units and make sure that issued credits are listed on digital registries.

The guidelines strongly encouraged the use of outcome-based credits over activity-based ones, as the former allows for robust verification of project achievements.

“However, at this early stage of market development, it is important not to restrict options to support early stage project funding too much,” said the document.

“It is therefore important to ensure that any claims or communications regarding those ex-ante purchases or investments are transparent and clearly differentiated from ex-post, verified credits.”

Predictions of biodiversity gains under activity-based credit methodologies must be conservative, in order to avoid inflated estimates, added the guidelines.

To ensure credibility, project achievements must be measured against a robust baseline.

Baselining remains one of the biggest challenges in nature markets, as scientists still have a relatively narrow knowledge of the existing species and limited funds to analyse the environment.

Under the guidelines, the key role of additionality is particularly emphasised within restoration projects aiming to generate biodiversity gains or avoid nature loss.

“Additionality is fulfilled by improved biodiversity outcomes, including those relating to the conservation of a species, habitat, or ecosystem under threat that would not have happened in the project’s absence,” the document said.

As for conservation initiatives, additionality is considered achieved if the protection of a non-threatened ecosystem is maintained and financed in the long-term, with the document also mentioning durability among the core principles.

As well, the document required developers to involve third-party auditors, leverage robust monitoring, reporting, and verification (MRV) process, and minimise the risk of “biodiversity leakage” into areas outside the project.

EQUITY AND FAIRNESS

The second category of HLPs addressed the issue of land ownership and human rights protection, as voluntary biodiversity credit projects are often located in Indigenous Peoples and local communities’ territories. It included seven principles:

• Protecting legal and customary land and water rights
• Respecting human rights and the rights of Indigenous Peoples
• Respecting free, prior, and informed consent (FPIC)
• Involving Indigenous Peoples and local communities in governance
• No harm
• Benefit sharing
• Grievance mechanism

As for the benefit sharing mechanism, guidelines said it must be co-designed in partnership with Indigenous Peoples to be fair, equitable, and transparent.

“Biodiversity credit projects should provide appropriate capacity building and support to Indigenous Peoples and local communities prior to the co-design of the benefit sharing agreements,” the document said.

“The proportion of benefits distributed to Indigenous Peoples and local communities should be maximised, ensuring that project management and monitoring requirements are commensurate with the nature of the project.”

GOVERNANCE

The third and last category identified four principles to ensure good governance for high-integrity markets:

• Transparent governance structure
• Data sovereignty
• Alignment with frameworks
• Tradability

BCA, WEF, and IAPB said the guidelines intend to safeguard the data sovereignty of Indigenous Peoples and local communities.

“Data pertaining to Indigenous Peoples’ ways of life, knowledge systems, customs, or lands, waters, seas, territories, and resources is owned by Indigenous Peoples,” they said.

The document pointed out that biodiversity credit schemes should align with national and international frameworks, such as National Biodiversity Strategies and Action Plans (NBSAPs), and with the Global Biodiversity Framework targets where possible.

Notably, the guidelines did not exclude the possibility of a secondary market for biodiversity credits, arguing that there must be clear and accurate attribution of the originator of the credits and full details of safeguards covering claims, with double counting showcased in the publicly available registry.

By Sergio Colombo and Giada Ferraglioni in Cali – news@carbon-pulse.com

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