Under $1 million has been spent on purchasing biodiversity credits globally, despite surging supply, with the figure dwarfed by that of biodiversity offsets, BloombergNEF said in a report set to launch at conference COP16.
The credits number is “extremely low” given the attention the instrument has received over the last couple of years, researchers BloombergNEF said in its Biodiversity Finance Factbook.
“Biodiversity credit markets and certificates are becoming more established, but do not yet account for a major portion of finance,” it said.
“While biodiversity credit supply is flourishing, driven by schemes in Latin America, few buyers have committed to purchases.”
Inconsistencies across variations in unit size, conservation periods, and monitoring regulations are slowing the market, it said.
Map of biodiversity credit schemes:
In the long run, supply could become a limiting factor due to challenges in scaling, measurement, transparency, and monetisation, the report predicted.
Last year, BloombergNEF said developed biodiversity market schemes had seen $8 mln pledged for credits.
The findings came in a report that suggested the gap between current biodiversity finance and future needs has widened to $942 billion annually, $112 bln more than estimates published last year.
The increase in investment annually by $48 bln, over the last couple of years, has failed overall to keep pace with rising inflation.
“Some $1.15 trillion in biodiversity financial flows will be needed in 2030 to restore and maintain biodiversity. That’s five times the $208 bln per year flowing to biodiversity right now.”
The report is due to launch at an event on Thursday at UN biodiversity summit COP16. Biodiversity credits split the opinion of market actors in the run-up to the conference. Last week, a non-profit warned biodiversity credits would be a distraction at the event, while others expect the meeting to boost demand.
OFFSETS TO HIT $160 BLN
Biodiversity ‘credits’, also known as biocredits, biodiversity certificates, or nature credits, differ from ‘offsets’ as the former implies conservation outcomes without harm to nature elsewhere.
“Biodiversity offsets markets attract $6-9 bln in annual financing, and are expected to reach over $160 bln by 2030,” BloombergNEF said. Most offsets come from projects like wetland and stream mitigation banks, developed under various regional compliance schemes around the world.
Despite their widespread use, biodiversity offsets face criticism for ineffectiveness, the report said.
Many schemes fail to achieve “no net loss” or biodiversity net gain, partly due to challenges in measuring equivalence between biodiversity loss in one area and uplift in another.
SUPPLY CHAIN REACHING $8.6 BLN
Investment in conservation initiatives around corporate supply chains is also growing, reaching approximately $8.6 bln annually, said the report, citing a 2023 UN Environment Programme report.
However, this figure “pales into insignificance compared with overall market value” for the end products.
Private financing for certified sustainable supply chain practices reached $3.3 bln for forestry products in 2023, $2.9 bln for organic agricultural goods, and $1.6 bln for seafood, it said.
“Companies have varying levels of influence and resources to invest in sustainable supply chains. Involved in 80% of global trade, multinational corporations have significant sway over the suppliers and producers.”
Food and agriculture companies in particular are leaning on regenerative practices as a primary strategy for addressing their environmental impacts, the report said.
Few companies in the sector have set explicit investment targets, although five have pledged a total of $2.4 bln toward sustainable agriculture.
By Thomas Cox – t.cox@carbon-pulse.com
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