Without clarity, experts worry that voluntary biodiversity credits, too, will offer companies yet another opportunity for virtue signaling, without actual positive impact. The governments of England and Australia, for instance, recently announced their own biodiversity credit schemes, while India has put out rules for a new green credits program — in all the schemes, credits can partly be used as offsets.
So, in January this year, Campaign for Nature, a U.S.-based advocacy group, came out with a report critiquing this new scheme. “We wrote this paper because we didn’t see enough concerns being raised in civil society,” says Mark Opel, finance lead at Campaign for Nature.
Who are the buyers?
Biodiversity credits are meant for the private sector to voluntarily increase their funding for nature conservation. But there is a lack of such a clear demand from companies, the Campaign for Nature report notes.
“I think you have to ask the fundamental question of why a company would buy biodiversity credits?” says Opel. “If they can’t claim it as an offset, what are they buying? If they’re going to make limited claims, and say that we’ve made this contribution, then they can just put it into their philanthropy bucket. And our point is, you don’t need to buy credits to make that philanthropic contribution.”
In fact, The Wall Street Journal reported in September 2023 that “no major companies have confirmed their interest in purchasing biodiversity credits.” Giants such as Unilever and Nestlé even declared they weren’t exploring biodiversity credits but were focusing on their own nature-positive supply chain measures instead.
The voluntary carbon market, which has been in the works for more than two decades, amounted to only under $1.9 billion in 2022. Even if the biodiversity credit market managed to scale up to that amount — existing biodiversity credit schemes have seen about $8 million in funding pledges, per a report in May 2023 — it’s unlikely to make a dent in the $700 billion annual nature funding gap, the report notes.
Recent trends in the voluntary carbon market don’t look rosy either. Companies such as Nestlé, Shell and others are pulling out of the market after its credibility hit a wall in recent years. Several reports have found that carbon credits often overestimate carbon reductions, count reductions that would have happened even without the project and can harm the Indigenous peoples and local communities whose lands are often at play in the carbon projects — several Indigenous groups and researchers have even called for a moratorium on the carbon trade. Companies such as Delta Air Lines are also being sued for “false and misleading” claims of carbon neutrality through the use of carbon credits.
With declining demand for voluntary carbon credits and increased litigation risk, Opel says he doesn’t see a big enough demand for voluntary biodiversity credits arising, either.
“I’m a capitalist; I spent 30 years of my career in that world,” Opel said at the launch of their report. “But at the end of the day, it’s important to keep in mind what capitalists are in business for, and that is to generate a return on capital and to maximize risk-adjusted returns for their shareholders. They are not going to invest in public goods that do not generate those returns without government policies that either require them to, or that provide a financial incentive.”
The value of a credit
The carbon market has a common currency. One unit of carbon credit equals one ton of CO2. That makes the credit tradable and fungible in a market; that is, the units are thought to be interchangeable and equivalent. A company that buys five carbon credits can emit an extra 5 tons of CO2 in exchange. But biodiversity is inherently complex—is a hectare of a tropical forest with two tigers equal in monetary value to a hectare of desert with two great Indian bustards, for example?
For decades, researchers and economists have tried and failed to come up with a universal measure of nature. Moreover, the way scientists, governments and businesses value plants and animals or an ecosystem can differ vastly from how communities view them. Placing a monetary value can also be morally problematic for certain communities. “We see our territories as our mother that can provide us with anything,” says Monica Ndoen, an activist from Indonesia’s main Indigenous alliance, AMAN. “When these schemes of carbon and biodiversity credits come into our territories, we monetize our own mother.”
In short, opponents say an agreed universal unit for biodiversity credit might not work. But there are around 26 private-sector biodiversity credit schemes already out there, creating their own methodologies for calculating what a biodiversity credit is.
Colombia’s Terrasos, for example, has developed a formula based on factors like how rare and degraded a habitat is, whether it offers an increase in connectivity with other habitats and its potential for preservation or restoration. For U.S.-based company Savimbo, its methodology was co-developed with Indigenous peoples and local communities in Colombia’s Amazon. One biodiversity credit represents photographic or video evidence of a pre-decided indicator species, such as the jaguar, on a 1-hectare (2.47-acre) piece of land within a critical ecosystem. The continued, documented presence of the animal is meant to act as a proxy for the ecosystem’s health. On the other hand, The Wallacea Trust, a conservation research organization, is more outcome-focused: It defines a biodiversity credit as a 1% improvement in nature or loss avoided in a hectare of the project site compared with a reference site.
Demand for these biodiversity credits is still emerging, says Drea Burbank, founder and CEO of Savimbo. “You have to make your supply side solid before you can sell it, but I see so much interest,” Burbank adds. “Lots of people love the idea and it’s a really cool way to contribute to nature.”
To prevent greenwashing, as in the carbon credit market, the IIED report recommends coming up with a set of principles and screening tools for buyers of these credits. These include demonstrating how the buyer is minimizing and avoiding biodiversity damage on its own and showing that the credits won’t be used to offset damage elsewhere.
How these checks and balances come into play, however, remains to be seen.
Moreover, some experts worry that other issues of the voluntary carbon market, such as additionality (showing that the outcomes of conservation wouldn’t have happened without the buyer’s investment) or permanence (demonstrating that the positive changes to nature will last for a long time), will continue within the biodiversity market as well.
Who decides?
It’s estimated that 80% of the world’s remaining biodiversity lies within regions where Indigenous peoples and local communities live. Many of the world’s carbon credit projects have targeted these lands because they are vast carbon sinks. Several communities have also actively supported forest protection-related carbon projects and the financial flows they receive through them. However, there are many fundamental problems with the carbon credit market that need fixing if the biodiversity credit market is to succeed, they say.
One of these problems is that despite being the stewards of much of Earth’s biodiversity, many Indigenous peoples still lack legal recognition of rights to their lands. Without land rights, the areas they manage can quickly be taken over by governments or companies to sell carbon or biodiversity credits. And so, as with carbon credits, biodiversity credits can become a new form of land-grabbing of Indigenous territories, says Ndoen.
“What we’ve been asking for is that our lands and territories are in our hands, and that we’re allowed to govern it the way we want to govern it,” adds Carling.
Carbon credit schemes have also brought in an influx of middlemen, those who connect big companies looking to buy carbon credits with Indigenous communities or people who have forests or farms that can act as carbon sinks. This process can often be iffy, experts say, sometimes treading on the rights of people, creating conflicts within communities and diluting the fund that actually reaches the community members. In Indonesia, for example, Ndoen says that companies approaching members of Indigenous communities have brought in “money politics,” pitting families against each other and creating disharmony.
In South America, too, companies try to bypass “pre-informed consent” by getting the consent of only the Indigenous leaders in lieu of the entire communities, says Ñawi K. Flores, a thought leader of the Andean and Amazonian Kichwa, Kutakachi Nation.
“We select a leader to represent us in the public, but he doesn’t make the entire decision for us — we, the community, need to vote,” Flores says. “So, a lot of these carbon credits, biodiversity credits that are in existence, they’re buying off Indigenous leaders and claiming that they have pre-informed consent.”
Then there are issues with contracts and funds. Some companies such as Shell and ONE Amazon, for example, have been accused of coercing communities into signing corrupt and inequitable 30-year carbon credit contracts. Moreover, reports suggest that only about 17% of international conservation funding actually reaches organizations led by Indigenous people and local communities.
To counter these issues, companies and organizations emphasize the need to “equitably engage” with Indigenous peoples and local communities in the design and delivery of the credits, and to ensure that financial benefits reach them.
So far, Pollination Group, a climate change investment and advisory firm, has reviewed existing voluntary biodiversity credit schemes and found that “the majority of schemes do not establish comprehensive requirements for obtaining free, prior and informed consent (FPIC) and do not require co-ownership, partnership or benefit-sharing models with IPs and LCs.”
A different model?
One company attempting to take a different route is Savimbo.
“It is the only for-profit, biodiversity credit company that has been bringing Indigenous people to sit down in internal private meetings that are just between us and Savimbo to think about what biodiversity credit looks like for us, and how we should be doing it,” says Flores.
On its website, Savimbo notes, “The carbon market hasn’t been fair. The biodiversity market can learn from that.”
One of these learnings, the company’s CEO Burbank says, is that the carbon credit projects involved complicated science, calculations and bureaucracy to measure carbon that was either too difficult, or Indigenous and local communities did not have the time to do. Instead, Savimbo worked with Indigenous conservationists and leaders, as well as smallholder farmers, to co-design a simple methodology: Pick one key species to monitor.
The idea is that many Indigenous communities rely on certain species to check on the health of their intact or threatened ecosystems. For some communities in the Colombian Amazon, for example, that indicator species is the jaguar. “For us, the jaguar is magical,” says Flores. “So, the species has been selected, one, because the scientific community has found it to be an indicator of healthy ecosystems; but the animal is also important from our cultural perspective.”
The science, validated by multiple scientists, is kept simple enough for anyone to do, Burbank says. To earn a voluntary biodiversity credit, community members must have 1 hectare of land — they don’t need to necessarily own that land but must demonstrate that they have been managing the area. Then, they deploy camera traps on their land. Every recorded sighting of a jaguar earns them a credit, valid for two months.
“The first day they get a jaguar video, they have a biodiversity credit on their balance sheet,” says Burbank. “It’s automated. And the minute they upload it and we validate it, they have credits on the balance sheet.”
These are pre-certified credits, Burbank adds, and they are currently being sold on Savimbo’s website for $5. Once a third-party certifier like Cercarbono validates that the projects adhere to their set of principles, the credits are sold for $7. Selling pre-certified credits gets money into the communities’ bank accounts quickly, and buyers get a price discount for purchasing credits early.
“The reason we do this is because the communities are constantly getting approached by mining and logging companies, and for some community members, that’s easy money,” says Burbank.
“Our contract is also short-term,” adds Flores. “So, Indigenous people, by using their free and pre-informed consent can test it out for one time only, and then decline to join the next cycle. It will be their own self-determination.”
Other ways
For several other experts, though, the voluntary biodiversity credit market isn’t a sustainable solution at a global scale. It’s more of a distraction for governments, Opel says.
“The developed-world governments especially are distracted by this shiny object, so they don’t have to write the checks,” he adds.
The increase in private sector investment into conservation, Campaign for Nature notes, needs to happen through governmental policies, regulations and incentives, and not on a voluntary basis. Moreover, they advocate for increased public funding for nature through long-term changes such as reforming harmful subsidies — the GBF calls for reforming $500 billion of harmful subsidies by 2030, for instance.
“That’s where, arguably, the biggest potential is because if you can reform and redirect subsidies, then you don’t need to come up with new money,” Opel says. “But that’s really hard and complicated, and there are people benefiting from them, who are probably not going be thrilled with the changes.”
For others, unless the basic drivers of biodiversity loss are addressed, no amount of innovative finance can be nature-positive.
“If we don’t address industrial agriculture and how it has expanded to cover really extraordinarily remote and unsuitable habitats, if we don’t work on addressing how trade affects destruction of ecosystems, if we don’t work to meaningfully do something about the extraordinary increase and levels of inequality within countries, these small financial flows to address gaps in biodiversity financing are not going to make much difference,” Agrawal says.
