Biodiversity Credits

Biodiversity Credits

Context: In a recent article in DTE magazine, the author was found quoted talking about Biodiversity credits and how 2024 may see more action on it thus prompting regulations.

What are Biodiversity credits?
• Biodiversity credits or biocredits are increasingly being pushed as a means for financing work on the various targets set under
the Kunming-Montreal Global Biodiversity Framework (KMGBF) adopted in 2022 at the 15th Conference of Parties (CoP15) of Convention on Biological Diversity (CBD).
• KMGBF has 23 targets to meet the core goals of CBD — conservation of biodiversity, its sustainable use and fair and equitable benefit
sharing of the profits arising from its use.
• While biocredits are similar to carbon credits used to control greenhouse gas emissions, they are not designed to offset or compensate for actions with negative impacts on biodiversity. Instead, proceeds from the sale of biocredits are used to protect and restore biodiversity where it exists.

Key aspects:
• To promote biocredits, the Biodiversity Credit Alliance was also launched at CoP15. Through 2023, efforts were made to promote them at different fora. They were discussed at CoP28 of the UNFCCC in Dubai in December.
• In September, the Taskforce on Nature-related Financial Disclosures (TNDF) released recommendations to help businesses shift global financial flows away from nature-negative outcomes and towards nature-positive outcomes.
• Industry can meet TNDF recommendations by purchasing biocredits, which businesses and investors can use to fund restoration and conservation projects.

Implementation initiatives:
• Wallacea Trust, a biodiversity and climate research organisation based in the UK, has financial commitments for 5 million biodiversity credits. “At least 60 per cent of the issuance price of the credit is set to be paid to local stakeholders (owners, users and managers of the site).
• Other schemes to look out for are biocredits sold by Besparingsskog, a forest cooperative in Sweden — Swedbank has invested an undisclosed amount to protect 13 hectares of forested area over a period of 20 years.
• Similarly, pharma major GlaxoSmithKline has purchased biocredits from rePLANET to protect Cusuco National Park in Honduras.

Challenges:
• Regulatory Frameworks: The biodiversity credit schemes being developed have very different approaches and objectives. This can create confusion in the marketplace.
• Pricing Structures: Ensuring fairness for both buyers and sellers is a challenge.
• Genuine Conservation: There’s a risk that these mechanisms may serve corporate interests rather than genuinely conserving biodiversity.
• Standard Methodology: There isn’t currently a standard methodology for assessing and reporting on biodiversity. Biodiversity is much more complex than carbon, making it difficult to measure.
• Marketplace Confusion: If schemes do not deliver, both for biodiversity and for people, there is a risk of tarnishing the entire concept, as arguably happened previously for carbon credits.