Biodiversity Credits: A Primer

Biodiversity is the vibrant heartbeat of our planet, bringing together life in all its forms to create a resilient, thriving world. Maintaining biodiversity enriches ecosystems, bolsters economies, secures our food and health, mitigates climate change, and preserves cultural heritage.

Aligning economic activities with nature positive goals

The historic Kunming-Montreal Global Biodiversity Framework (GBF), signed by 196 parties in December 2022, sets ambitious targets to halt and reverse biodiversity loss by 2030 and achieve harmony with nature by 2050 globally. Achieving these goals necessitates a fundamental transformation in our economic and societal models including bridging the $711 billion annual financing gap for biodiversity conservation identified by the Paulson Institute.

Slender giraffes abound in the Masai Mara wilderness landscape in Kenya. *

Biodiversity credits, or bio credits, emerged as a promising market-based solution in this context. These credits are payments for measurable and scientifically verified positive impacts on biodiversity. Although the credits market is in its infancy, their creation, sale, and acquisition are governed by principles and standards aimed at ensuring conservation outcomes that are real, measurable, and that have additionality.

Objective: Biodiversity credits focus on conserving and restoring biological diversity. They represent positive conservation actions that benefit ecosystems, species, and genetic diversity beyond just carbon sequestration.

Use: They are used to offset the negative impacts on biodiversity from development projects or other activities, encouraging the protection and enhancement of natural habitats and ecosystems. Purchasers can invest in conservation projects that improve or protect biodiversity.

Regulation: Biodiversity credits are voluntary markets where companies or individuals compensate for their impact on biodiversity as part of their corporate social responsibility or conservation commitments.

Why businesses might invest in biodiversity credits

There are many reasons for a company to invest in biodiversity credits including:

1. Mitigating environmental impact. Companies involved in activities detrimental to biodiversity can purchase credits to mitigate these impacts — especially when they are difficult to quantify or address directly within their supply chain.

2. Securing nature-dependent supply chains. Enterprises reliant on natural ecosystems for their raw materials or products want to ensure the long-term viability of these ecosystems.

3. Regulatory compliance. In regions with stringent environmental laws, businesses such as mining operations want or need to comply with legal requirements for environmental restoration.

4. Enhancing sustainability credentials. Companies looking to appeal to environmentally conscious consumers can enhance their sustainability profiles by purchasing biodiversity credits, thereby bolstering their reputations for environmental stewardship.

5. Fulfilling Corporate Social Responsibility (CSR) goals. Organizations committed to contributing positively to environmental conservation can support nature-positive projects through the purchase of biodiversity credits, aligning with their CSR objectives and potentially gaining a competitive edge in eco-conscious markets.

However, it is important to keep in mind that specific activities (such logging by a furniture company or palm oil extraction by a food processing company) that are fully or largely under a company’s control do not currently qualify for voluntary credits. Such companies can only offset their activities with equivalent biodiversity offsets designed specifically for that purpose. There are many organizations aiding companies to think through their nature-positive strategy and understand their impact.

Migrating pelican spotted in the Palo Alto Baylands.*

Potential benefits and challenges of biodiversity credits

If designed and implemented with integrity, biodiversity credits can offer tangible benefits for nature, ecosystems, and communities. They provide a mechanism for economic activities to account for environmental externalities, mitigate disruptions, benefit local communities and Indigenous peoples. They also offer value to businesses by reducing nature-related risks, aligning with consumer preferences, and supporting regulatory compliance, among other advantages.

However, the biodiversity credit market faces challenges; notably, the need for greater corporate engagement in setting and pursuing biodiversity targets. While many top companies have climate objectives a mere fraction (5% of the top 500 have articulated biodiversity goals). The system must build on the increased corporate awareness of environmental footprints, differentiating itself from carbon credits by addressing the unique and complex aspects of biodiversity conservation.

While the development of this market and frameworks is under way, many companies are figuring out their own ways to mitigate biodiversity loss by investing of their own accord in biodiversity projects. These is also the added challenge of declining demand for voluntary carbon credits and increased litigation risks, causing many companies to pause. At the time of writing this blog, I could not find clear evidence of companies actively investing in biodiversity credits. There seems to be a lack of clear demand, even though it seems like several companies had previously participated in pilot biodiversity credit programs.

Carbon credits vs. biodiversity credits: Key differences

Biodiversity credits have been around almost as long as their better-known cousin ‘carbon credits but have taken a backseat because of their many challenges. A good way to understand bio credits is by comparing them with carbon credits.

• Focus: Carbon credits target climate change mitigation through reduced emissions, whereas biodiversity credits aim to preserve and enhance ecosystem diversity.

• Measurement: Carbon credits are quantified by CO2 reduction or sequestration, making them relatively straightforward. Biodiversity credits, however, require more complex metrics that account for habitat quality, species conservation, and ecosystem services.

• Market Maturity: The carbon credit market is well-established with clear standards, unlike the emerging biodiversity credit market which is still defining its measurement and verification protocols.

Banana slugs in Northern California Redwoods are an essential part of the ecosystem.*

Biodiversity credit developers

Organizations developing credible biodiversity credit programs include the Biodiversity Credit Alliance (BCA) and Verra. BCA aims to facilitate the transition to a nature-positive economy through an integrated, efficient, and scaled voluntary biodiversity credit market. BCA is working on digital architecture based on Distributed ledger technology to enhance the transparency, traceability, and scalability of biodiversity credits.

Verra, a well-known carbon credit verifier, is developing a nature crediting framework under its Sustainable Development Verified Impact Standard (SD VISta) Program. This framework aims to drive financing toward high quality nature conservation and restoration activities, supporting the goals of the GBF.

The development of the biodiversity credit market is urgent and it’s encouraging to see a growing interest alongside carbon markets. These credits should complement, not replace, ambitious corporate action toward positive environmental outcomes. Every available tool can and must be leveraged to ensure a sustainable future for all to meet our goals by 2050.

ReWorld is a non-profit dedicated to conserving our planet’s biodiversity. Reworld empowers climate NGOs to protect and conserve the Earth’s biodiversity. One of the projects that ReWorld works with is Proyecto Titi, which aims to restore thousands of acres in the Santa Helena Preserve. Through public education and engagement, community empowerment programs, and industry-leading field research this project also ensures the survival of critically endangered species like the cotton-top tamarin.

*All photos are the author’s own, clicked during travels and local hikes.