Scaling the voluntary biodiversity credit market, including through establishing a global framework to ensure integrity, will be among the core topics of discussion at the upcoming COP16 in Colombia, as standards and early movers see the summit as an opportunity to unlock corporate demand.

The UN biodiversity summit, to be held in Cali over Oct. 21-Nov. 1, will see a number of organisations, such as the International Advisory Panel on Biodiversity Credits (IAPB), the Biodiversity Credit Alliance (BCA), and the World Economic Forum (WEF), launch initiatives aimed at boosting confidence in the market.

This comes after COP15 in 2022 carved out a role for nature-based solutions, including biodiversity credits, in plugging the annual financing gap on nature, estimated at $700 billion.

Despite increasing interest, demand has struggled to pick up so far, in part due to a lack of trust in the space as well as clarity around metrics and corporate claims.

That’s why, according to Manesh Lacoul, global coordinator at the UN-backed BCA, ensuring that biodiversity credits generate positive outcomes should be paramount at the summit.

“There is much work needed to raise awareness on biodiversity credits, including on the principles of integrity, inclusion, equity, and innovation, and COP16 will provide this opportunity,” Lacoul told Carbon Pulse.

The Cali talks represent an opportunity for BCA also as the summit is set to be one of the first biodiversity COPs in terms of business participation, as pointed out by Alessandro Valentini, innovative finance for nature lead at WEF.

“There will be a lot of space for companies to engage in discussions on biodiversity credits, and we will work with them to build their understanding of the market,” he told Carbon Pulse.

Some of the major environmental standards that have ventured into the biodiversity space in recent months agree that promoting dialogue with companies will be among the top priorities for market players during the summit side-events.

“I see this COP as an opportunity to strengthen the relationships both with the project developers and the companies that could buy the credits,” Alex Saer, CEO at Colombia-based environmental standard Cercarbono, told Carbon Pulse.

“So far, biodiversity credits have largely suffered from a lack of visibility, and the conference in Cali has the potential to bridge this gap,” added Clara Morales, biodiversity officer at standard BioCarbon.

STANDARDS IN CALI

COP16 comes at a time when several piloting initiatives are being developed worldwide, especially in Latin America, paving the way for market uptake.

“I believe we will see and hear about new transactions in the market during COP16,” said BCA’s Lacoul.

For example, BioCarbon, which had the first biodiversity credit project under its framework listed in August, will hold talks in Cali on Oct. 23 with Colombian corporate cohort Environmental Business Corporation (Corporacion Ambiental Empresarial, CAEM), hoping to turn companies’ curiosity into action, Morales told Carbon Pulse.

Cercarbono also plans to make several announcements to spark attention to the market development, including the registration of a first project by US-based Savimbo under the company’s Biodiversity Certification Programme Protocol (CBCP), first published in March.

“We are going to put the seed at COP16 in order to catch the eye of those who are still not into the debate,” Saer said.

“Our aim is to generate a critical mass of people that are talking about biodiversity credits and analysing whether this is an option for financing biodiversity projects or not.”

Furthermore, the standard will announce the signing of a Memorandum of Understanding (MoU) with a project developer in Africa to test the methodology that underpins the CBCP and explore biodiversity credit opportunities.

“The market is evolving, and I’m confident these announcements will help build trust,” said Saer.

“The same goes for the global initiatives that will be presented in Cali, such as IAPB’s framework.”

UPCOMING FRAMEWORK

IAPB, a high-level advisory committee set up in 2023 by the UK and France, is poised to release on Oct. 28 a set of final recommendations with practical and actionable outcomes for the emerging market.

In June, co-chair Sylvie Goulard told Carbon Pulse that one of the conclusions of the IAPB initiative appears to be that several markets will co-exist and develop, reflecting the diversity of ecosystems, jurisdictions, and solutions.

The panel will also launch 30 pilot projects worldwide to test their findings, co-chair Dame Amelia Fawcett announced at the Climate Week NYC last month.

Informed by a more than a year-long process, the framework will be underpinned by 21 high-integrity principles developed by IAPB, BCA, and WEF, which will be presented in Cali, and build on the high-level governance and integrity principles for voluntary biodiversity credits that were launched at COP15 as a consultation document.

“There has already been some work done around high-integrity biodiversity credits, but this initiative, endorsed by three influential organisations such as WEF, IAPB, and BCA, will create a more coherent framework and positively affect how buyers feel about the market,” WEF’s Valentini told Carbon Pulse.

“We have been coordinating, collaborating where possible, and complementing each other,” added Lacoul of BCA.

“We’ll see how we can build on the framework in our joint efforts to send a unified signal to the actors and establish a credible, trustworthy, and transparent global market in biodiversity credits.”

BCA will also release at COP16 a discussion paper on a comparability framework, to support market participants in navigating the differences between existing types of biodiversity credits, so that they can identify those that meet their business needs.

Meanwhile, WEF will present a roadmap to help businesses understand how they can gear up for using innovative financing instruments for nature, such as biodiversity credits.

The guidelines will address a number of steps, ranging from selecting the right instruments and units to communicating the purchase of credits to relevant stakeholders.

CALL FOR GOVERNMENTS

While these initiatives are set to have a positive impact on the market, creating demand at scale will require increased effort from regulators, such as governments and regional political bodies, as well as major corporate disclosure standards, according to Valentini.

“Regulators must step up and deploy rules for the market to start creating trust. We need a signal … that the market is moving forward, even if it’s just to clarify which standards will be accepted,” he said.

“Governments can play a critical role in fostering the adoption of biodiversity financing mechanisms such as credits,” added Morales.

Overall, Lacoul believes COP16 will contribute to raising awareness of biodiversity credits among countries.

“There is increased interest among parties to explore biodiversity credits as one of the tools in their respective Biodiversity Finance Plans, under National Biodiversity Strategies and Action Plans (NBSAPs),” he said.

While Valentini does not expect many countries to openly endorse biodiversity credits in Cali, he argued the summit could help lay the groundwork for future national schemes, following in the footsteps of existing or upcoming frameworks.

These include the Nature Repair Market (NRM) in Australia, currently under public consultation, the Green Credit Scheme in India, and the biodiversity net gain (BNG) policy in the UK, which entered into force in February.

“Many countries will be very interested in learning, especially from the examples of others,” Valentini said.

EYES ON TNFD

With nature-related corporate disclosures widely cited as another key driver of demand for credits, observers closely look at possible moves from the Science-Based Target Network (SBTN) and the Taskforce on Nature-related Financial Disclosures (TNFD).

“TNFD will announce updates on its guidelines at COP16, and I expect it to at least mention the existence of biodiversity credits, which they haven’t done yet. It would be a big step forward,” Valentini said.

Currently, 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.

As experts have pointed out in recent months, enabling organisations to develop high-quality scientific targets for their impacts on nature could drive demand for credits, while the corporate risk management data generated by TNFD uptake could represent a foundation upon which a high-integrity biodiversity market can grow.

More importantly, the decision to integrate credits into TNFD and SBTN frameworks would bring more clarity around the claims that companies can make after purchasing units.

Even if biodiversity credits were to be included in the TNFD and SBTN guidelines, their use would likely be allowed as a “last resort”, in line with the mitigation hierarchy.

“Having some clarity from corporate frameworks such as TNFD and SBTN would go a long way in helping companies gain confidence that they can operate within this market with integrity and bring it back to their own corporate impacts and dependencies,” said Valentini.

“We need information around how credits can fit into these frameworks for them to actually be high integrity, also from the demand side.”

POLARISING OPINIONS

In the lead-up to the summit, biodiversity credits have increasingly polarised opinions, with some perceiving crediting as a promising solution to channel private financing into biodiversity while others fear that there are too high risks of unintended outcomes.

Still others believe there would be no difference between biodiversity credits and offsets, despite emerging frameworks typically distinguishing between contribution and compensation for negative impacts.

Last week, over 270 civil society organisations and academics from around the world penned a statement against the use of credits, warning parties not to be “fooled” by such mechanisms that could harm local communities and Indigenous Peoples.

“At COP16 we should … highlight and recognise the critical role that Indigenous Peoples and local communities must play in the market,” Lacoul said.

“We hope that stakeholders will come together to further support the responsible development of the market.”

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

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