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Restore

— Towards a biodiversity credit exchange market

In light of the observed erosion of biodiversity, it is urgent to reverse this trend, not only by putting an end to it but also by contributing to the restoration of biodiversity and, more generally, ecosystems.

Many initiatives and projects that aim to fulfill the commitments made by both states and companies exist, but they often lack funding.

Discussions about the concept of biodiversity credits began before the COP 15 Biodiversity and the Global Biodiversity Framework (GBF), and various international summits and initiatives have since made significant progress.

Biodiversity credits (or biodiversity units) represent a new value that recognizes the funding of actions favorable to biodiversity.

The Global Environment Facility and IIED (2023) define credits as « units of biodiversity that finance nature conservation and restoration and provide funds for local communities living in and amongst nature ».

Financial actors are being called upon to bridge the financial gap (an annual shortfall of $600 billion still exists out of the $700 billion necessary to hope to curb the biodiversity crisis – Paulson Institute, 2020).

A biodiversity credit is therefore a standardized unit that quantifies and certifies a positive action for biodiversity.

It allows organizations that wish to act for the restoration and/or protection of biodiversity to finance project leaders. They address two major objectives of the Global Biodiversity Framework (GBF)

Restoration

Target 2 of the GBF aims to restore 30% of degraded terrestrial and aquatic ecosystems.

Financing

Target 19 aims to mobilize $200 billion annually, of which $20 to $30 billion is intended for developing countries. It explicitly mentions credits as a potential financing solution to achieve this objective.

Biodiversity credits have gradually become central to North-South exchanges.

Initially based on voluntary commitments and directed at large organizations, companies, and financial institutions, they have started to be traded outside regulatory frameworks.

About
Ursula_von_der_Leyen_2024-modified copie

« We have to get nature on the balance sheet.” Ursula Von Der Leyen, President of the European Commission, September 13, 2024.

Thus, Swedbank acquired credits developed by Orsa Besparingsskog related to Scandinavian forests for an undisclosed amount, while Terrasos and Savimbo have respectively priced credits at €29.50 for 10 m² (over 30 years) and $5 for 1 hectare (over 2 months).

At the same time, regulations are evolving. For instance, Target 15 establishes the foundation for biodiversity reporting for companies and financial actors on a global scale and initiates the question of aligning private actors with the ambitions of the Global Biodiversity Framework (GBF).

This target also echoes recent regulatory pushes in Europe and France (Sustainable Taxonomy, Corporate Sustainability Reporting Directive or CSRD, Sustainable Finance Disclosure Regulation or SFDR, etc.): financial institutions and companies are, similar to efforts against climate change, invited to contribute to the achievement of biodiversity preservation and restoration goals through their reporting and the redirection of financial flows.

Under the “effective development” scenario, demand for biodiversity credits in the market could reach $2 billion per year by 2030 (and $69 billion by 2050).

In the less ambitious “limited development” scenario, demand could reach $1 billion per year by 2030 (and $6 billion by 2050).

Towards a Market for Biodiversity Credit Exchange?

Markets for biodiversity credit exchange are not yet established: this is, in fact, the goal of the France-UK roadmap led by Sylvie Goulard and Dame Amelia Fawcett (Non-Executive Director of State Street) as part of the International Advisory Panel for Biodiversity Credits.

On their part, the Biodiversity Credit Alliance (BCA), the Coalition for Private Investment in Conservation (CPIC), and the World Economic Forum are providing research and benchmarking tools to contribute to the emergence of credit markets.

Such markets must ensure the integrity of the projects involved, be structured by standards and governance bodies that are independent and scientifically credible, and ensure a sufficiently large flow of funding to observe enough gains to help reverse the current trend of biodiversity loss.

A biodiversity credit is therefore a standardized unit that quantifies and certifies a positive action for biodiversity.

The World Economic Forum produced three scenarios in 2023 illustrating different levels of demand for biodiversity credits. This enables organizations that want to act for the restoration and/or protection of biodiversity to finance project leaders. They address two major objectives of the Global Biodiversity Framework (GBF).

Scenarios analysis

For the first two scenarios, “limited development” and “effective development,” market growth rates are based on observations from related markets. Demand for biodiversity credits in the market could reach $2 billion per year by 2030 (and $69 billion by 2050) under the “effective development” scenario, and $1 billion per year by 2030 (and $6 billion by 2050) in the less ambitious “limited development” scenario.

 

The third scenario, “transformational development,” fundamentally shifts away from business as usual, featuring a profound transformation of biodiversity’s role in our societies, marked by significant commitments from consumers, businesses, and public authorities. Under the “effective development” scenario, demand for biodiversity credits in the market could reach $2 billion per year by 2030 (and $69 billion by 2050). In the less ambitious “limited development” scenario, demand could reach $1 billion per year by 2030 (and $6 billion by 2050).

Mapping the Biodiversity Credit Ecosystem

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