The World Economic Forum and McKinsey have published this comprehensive outline of how companies can engage in the emerging voluntary biodiversity credits industry with integrity.
Another piece in Nature Finance industry puzzle is falling into place, in the form of Biodiversity Credits. It’s still early days but to support this evolution, the World Economic Forum and McKinsey have published two reports on the topic. With the potential for global demand of voluntary biodiversity credits reaching $2 billion in 2030 and $69 billion by 2050, the first report – Biodiversity Credits: Demand Analysis and Market Outlook – explores the drivers, and maps out an overview of the market. Meanwhile, the second report – Biodiversity Credits: A Guide to Support Early Use with High Integrity – which our Founder, Paul Chatterton, contributed to, is a practical guide for companies who are interested in incorporating biodiversity credits into their strategy with high integrity, whilst standards and advice are established.
Key messages
Arguably, the biodiversity crisis is larger and more advanced than the climate crisis – and much harder to see. The finance world is creating the conditions for a nature repair industry. Bankers don’t understand nature and conservationist don’t understand finance – but working together they are building this new world of nature positive investment. Here are a few observations:
- Nature is now part of doing business: The new global accounting rules under the IFRS now demand companies to report on nature impact. This is a big change and barely understood, but it’s already flowing down.
- Smart companies are working out how to remove nature risk: The Taskforce on Nature-related Financial Disclosures (TNFD) has been drawing the big crowds at the global finance and business conferences I’ve attended in recent months. TNFD provides simple guidance for companies to report on nature impact and determine how to move towards nature positive. If your COO is not already looking at nature risk, they’re not doing their job.
- Contributing to restoring nature can be an income stream: Companies who are actively shifting their supply chain to positively restore nature can obtain credits for biodiversity contributions and make this an additional income stream.
- Credits help bridge the gap where nature risks can’t be fully removed: If your assessment of nature risk shows that you will still have residual impact then biodiversity credits offer a way to fill the gap.
- Forget offsets: Offsets don’t make sense with biodiversity. You can’t restore nature by destroying it. And while some offset markets still continue in England and New South Wales, evaluations are suggesting they’re not so successful. Both the Science Based Targets initiative and TNFD now challenge offsets. All future nature investments have to add to nature.
- The most credible nature credits will be at landscape scale: Nature operates in scales of millions of hectares. We have to think about water flows, migration corridors, and pollination systems. Only landscape-level action allows for this. So look for biodiversity credits that contribute to landscape efforts. And they come with the added advantage of ensuring greater social license and shared value.
