Biodiversity credits are quickly becoming part of the policy agenda for increasing the flow of private sector financing into projects that will halt and reverse nature loss. They are a new, emerging instrument, and this means we have the chance to shape the market to ensure credits truly create nature-positive results – and that they do so sustainably and equitably.
In our COP15 wrap, we noted how the conversation around voluntary biodiversity credit markets has shifted swiftly from an exploratory initiative launched by the World Economic Forum (WEF) a year ago, to a potential solution backed by governments worldwide.
Target 19 of the Global Biodiversity Framework agreed at COP15 recognised biodiversity credits as an innovative mechanism for biodiversity financing. Crucially, biodiversity credits were identified as one of the key ways to reach the goal of mobilising at least $200bn a year by 2030 for implementing countries’ biodiversity strategies, and they were one of the most talked-about solutions among the summit’s record number of private sector attendees.
Support from governments continued to build at the One Forest Summit held jointly by France and Gabon earlier this month. The Summit was focused on the challenges faced by the three tropical forest basins of the Congo Basin, the Amazon forest and the forests of South-East Asia, which each play a key role in regulating the climate, and are home to exceptional biodiversity. The Summit concluded with the establishment of a €100 million fund for “positive conservation partnerships”. The fund will provide a financial incentive for countries to protect the most vital carbon and biodiversity reserves through biodiversity credits.
As momentum for voluntary biodiversity credit markets builds, so does the imperative for public and private sector organisations to reach a consensus on the governance and integrity principles that will ensure trust and transparency in this new market. With the funding shortfall to halt and reverse biodiversity loss estimated at more than US $700bn a year, building confidence among stakeholders is urgent and essential.
What does integrity look like?
The WEF published its High Level Governance and Integrity Principles for Emerging Voluntary Biodiversity Credit Markets paper earlier this year, acknowledging that achieving legitimacy for biodiversity credit markets will require “strong and collaborative public-private partnerships, and a dialogue across all stakeholders involved in the protection of nature, from biodiversity conservation organisations, businesses and investors to civil society, academia and Indigenous peoples and local communities.”
Pollination worked with the WEF on the paper, which is currently out for consultation, and the recommendations fall into three categories: transparent and sound governance, equity and inclusion, and verification.
Good governance for example, requires project proponents to have the legal rights and consent to the biodiversity credits from every group with an interest in the biodiversity asset the credit is linked to, including owners, lessees and First Nation peoples. This may be difficult to achieve in jurisdictions where there is no legislation in place on land rights or rights to biodiversity as an asset.
Equity and inclusion means causing no harm through the biodiversity project, and not only respecting the rights of Indigenous peoples and local communities, but including them as active stakeholders in projects from the outset.
Verification must take the form of rigorous measurement, reporting and checks to ensure credits have achieved the positive biodiversity outcomes they claim to. The question of which organisations will perform this function is not yet settled, although many new industry-led standards and approaches are emerging, and governments are also beginning to consider their role in this. For example, the Australian Government has proposed a new Nature Repair Market scheme.
The opportunity for a broader view
NatureFinance has also published its guidance on the governance of biodiversity credit markets. The paper recommends eight key building blocks: purpose; integrity principles; product specification; transparency and accountability; taking in the voices of all stakeholders; price setting and distribution of rewards; policy incentives and regulation, and regulatory oversight.
The paper also points out that:
“Governance is not just about how markets work when they are up and running – it is also about who gets to decide on the shape of those markets in the first place. This is often the critical determinant of how markets turn out in practice.”
This is where we find ourselves now – with an opportunity across the private and public sector to get the rules for voluntary biodiversity credit markets right from the start. If we do so, we can ensure that they achieve nature positive and equitable outcomes, and that the market can scale up fast enough to protect and start to repair our life-sustaining ecosystems and habitats.