The state of the global Biodiversity Credit market
Welcome back to part two of our biodiversity series! In this installment, we’ll dive deeper into the current state of the biodiversity credit market. We’ll explore existing methodologies, key players and industries, highlight initiatives fostering nature positive outcomes, and discuss how consumer demand for sustainability creates a ripe opportunity to catapult the voluntary biodiversity market forward.
There are nine planetary boundaries that enable the Earth system to self-regulate and sustain life as we know it. As of September 2023, we have already breached six of these boundaries and must identify ways to get back on track. Biosphere integrity is one of the six limits we have surpassed. As we discussed in a previous post, an estimated $598-$824 Billion per year is needed to protect nature and restore biodiversity to levels that will support sustainable life on earth for generations to come. Biodiversity credit schemes are one of the many tools that can serve as a partial solution to close this financing gap.
Although the voluntary market is in its early stages, credit schemes are gaining traction globally. Buyers from various industries, supported by policies and growing consumer interest in sustainability, are driving the demand for biodiversity-aligned products and services.
To our knowledge and at the time of publication, the schemes discussed in this piece are exclusively for voluntary credits, not offsets for compliance (with the exception of Australia’s scheme). However, these conditions are subject to change as the dynamics of the market evolve.
As of May 2023, $8 million has been committed to the eight most developed crediting schemes, according to BloombergNEF. Five of these schemes hail from the private sector — ValueNature, rePLANET, Terrasos, Ekos, and South Pole — and three are overseen by government entities — Australia, Gabon, and Niue. This is good progress to channel much needed capital towards biodiversity action, but it is quite small compared to the number of carbon methodologies in practice to fund emissions reductions and removals.
Although the voluntary market is still nascent, biodiversity credits have the potential to generate between $18 — $43 Billion in annual revenue by 2050, according to research by Inevitable Policy Response. BloombergNEF is more optimistic and expects the market to reach over $160 billion by 2030 (taking into account demand for both voluntary credits and offsets).
Overview of current biodiversity schemes and methodologies
The private sector is currently leading the development of biodiversity credit schemes and initiatives. 26 are currently active: 8-international; 4-Australia; 4-Colombia; 2-New Zealand; 1-U; 1-South Africa; 1-France; 1-Switzerland; 1-Sweden; 1-Scotland; 1-Brazil; and 1 in the African continent.
Source: This figure is based on desktop research by Pollination (as of September 2023).
Pollination’s review of these 26 initiatives indicates that the majority failed to establish requirements for obtaining free, prior, and informed consent (FPIC) and did not incorporate co-ownership, partnership, or benefit-sharing models with Indigenous Peoples and Local Communities (IPLCs).
This is not the case of Savimbo, an entity focused on the fair-trade of biodiversity credits. Savimbo’s biodiversity methodology was co-developed by IPLCs in the Colombian Amazon, with plans for global adoption. Working closely with local stewards and leveraging their profound local knowledge, Savimbo’s indicator-species-based scheme is currently under review and is to be adopted by IPLCs in 20 nations across North America, South America, Africa, Oceania, and East Asia. The pre-sale of these credits commenced in the summer, with Cercarbono expected to certify them by the year’s end, followed by a launch on Senken. Savimbo’s approach heralds a paradigm shift, demonstrating how to construct a more inclusive and ethically sound landscape for biodiversity credit trade.
South Pole is also working with IPLCs to generate EcoAustralia credits that support the Mount Sandy project, an area of native vegetation for the Ngarrindjeri people. EcoAustralia credits combine carbon and biodiversity benefits through a composite credit that represents 1 tCO2e of avoided emissions certified by Gold Standard plus 1.5 m2 of government-accredited, permanently protected Australian vegetation (also known as 1 Australian Biodiversity Unit).
Another leader in the space is Terrasos, based in Colombia, who have developed the Habitat Banks approach, a nature-based solution through which quantifiable gains in biodiversity are generated. Terrasos is currently working on the El Globo Cloud Forest Habitat Bank, the first to conserve the Cloud Forest in Colombia.
With regard to government-led programs, there are currently six initiatives at various stages of development. All of these are voluntary credit schemes, except the first example in Australia.
Australia initiated their Biodiversity Offset Scheme in 2016. In 2022, they created a Credits Supply Task Force to oversee the $106 million Biodiversity Credits Supply Fund and implement reforms to improve landholder participation in the Offset Scheme.
New Zealand is exploring the possibility of launching its own voluntary biodiversity credit scheme and commenced a public consultation in mid-2023.
In September 2023, the self-governing island state of Niue introduced its Ocean Conservation Commitments, aiming to sell 127,000 conservation units, each representing 1 km2 of ocean, with the goal of generating over $18 million for the long-term protection of its sovereign waters.
Gabon is in the early stages of developing a biodiversity credit market, although the status remains uncertain since a military coup led to a transition of power in August of 2023.
India is set to launch its Green Credit Programme, which will initially focus on water conservation and afforestation.
Scotland is also working on the development of its biodiversity market and has enlisted the services of CreditNature to lay market foundations.
The role of industry
Consumer awareness and demand for sustainability are helping to drive change within consumer goods industries. Conversations around nature loss on Twitter have surged by 65% since 2016, and from 2016- 2020 there was a 71% increase in searches for sustainable goods. In the fashion and textile industry, 65% of businesses are committing to source sustainably produced raw materials, reflecting a shift in supply chain practices. The cosmetics industry, represented by the Union for Ethical BioTrade (UEBT), reveals that top industry priorities include contributing to conservation projects for high biodiversity value species and ecosystems, creating an opportunity to link major cosmetics brands with the biodiversity credits market.
Business for Nature, alongside WEF and WBCSD, has provided sector-specific guidance for 12 industries to foster a nature-positive economy. The ACT-D framework (Assess, Commit, Transform, Disclose) guides businesses in recognizing nature’s value, setting targets, and taking actions to address dependencies. The guide includes roadmaps that highlight key opportunities for industries to engage with the biodiversity market. In the energy sector, for example, there are direct opportunities for restoration and compensation, while the built environment sector emphasizes biodiversity gains in urban development and infrastructure. The chemicals roadmap suggests using biodiversity credits to mobilize resources for nature-positive initiatives.
The agri-food sector, responsible for ⅓ of GHG emissions and close to 90% of deforestation, is uniquely positioned to address climate and biodiversity challenges. The sector’s potential to utilize nature-based solutions, including those funded by biodiversity credits, is highlighted in the Business for Nature guidance. However, the 2023 Nature Benchmark indicates a gap in commitments, with only 15% of companies committing to zero ecosystem conversion and just 1% seeking to obtain free, prior, and informed consent (FPIC) from IPLC’s.
A glimpse into buyers and sellers
Various registries have started to incorporate nature and biodiversity credits into their portfolios. These include: BioCarbon, BNG, CarbonZ, Regen, GreenCollar, Cercarbono, Plan Vivo, Vegetation Link, Gold Standard, Verra, and more. For more information, Bloom Labs has compiled a database of biodiversity credit schemes.
On the supply side, projects are spearheaded by individuals on the ground, such as farmers, graziers, and landholders. Corporate buyers from industries such as construction, automotive, manufacturing, oil, energy, academia, and finance have already begun participating in these markets:
In Australia, Wilderlands sells biodiversity credits to buyers such as Lendlease Group and Monash University, while South Pole’s EcoAustralia™ credits attract buyers like Porsche Australia, the University of Melbourne, and CareSuper.
In Colombia, Terrasos’ Banco del Hábitat Meta has secured commitments from various players, including oil pipeline operators OCENSA and Oleadoucto de los Llanos, Grupo de Energia de Bogota, transportation firm CENIT, and electric power transmission company ISA Intercolombia.
Swedbank in Sweden acquired 91 biodiversity credits from Orsa Besparingsskog to finance a 13-hectare domestic forestry project over a period of 20 years.
Profile Group in New Zealand purchased Eko’s Sustainable Development Units from the conservation site Sanctuary Mountain Maungatautari for the conservation of 83 hectares.
While corporates and industrial actors are key buyers, just as critical are the government agencies that can generate demand for biodiversity credits to achieve policy goals. While like-for-like compensation is not deemed viable based on scientific studies (see our previous post), the Biodiversity Credit Alliance indicates a set of options governments may opt to use to preserve their environment through biodiversity credits. This includes, for example, establishing fee-collecting systems where developers purchase permits, the proceeds of which are used to buy credits. Additionally, governments can leverage biodiversity credits to replace subsidies or implement existing nature-positive policies. The World Bank calculates environmentally harmful subsidies for agriculture, fisheries and fossil fuels exceed $7 trillion globally, which could be repurposed to protect ecosystems that are vital to supply chains. In this way, investing in biodiversity credit systems could serve as an alternative tactic for economic development.
Many businesses are still in the early stages of considering how to fund nature conservation, and meanwhile the majority of the private sector has yet to assess the broader impacts and dependencies on nature across their operations and supply chains. As industries adapt to the growing call to protect biodiversity, there is a clear opportunity to bridge consumer demand, corporate commitments, and policies to the growing biodiversity credits market.
Stay tuned for the next installment of our series, where we will dive into the supply and demand drivers of the voluntary biodiversity credit market, and touch on some policies behind them.
Alison Filler, Leslie Chao, and Anna Lerner Nesbitt contributed to this piece.
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