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Investment interest in biocredits continue to grow

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Biodiversity and its conservation has become one of the leading risks for investors. Image credit: Leon Louw for WhyAfrica

Investment interest in biocredits continue to grow    

Biodiversity is degrading at alarming levels and people living in biodiversity-rich areas often bear the heaviest costs of biodiversity loss and inequitable conservation efforts.  

Biodiversity credits, or biocredits, are emerging as a tradeable unit of biodiversity that can incentivise nature conservation and restoration to benefit marginalised groups living with nature.

Biocredits can complement carbon credits but are most effective as their own new asset class.

As a purely positive investment in nature, biocredits are distinct and are preferred to biodiversity offsets, which can cause net damage to biodiversity.

Demand for biocredits is growing among private investors, individuals and governments who want to invest in the conservation and restoration of biodiversity.

Biocredits supplied by indigenous peoples and local communities can create an innovative way to fund locally-led action.

According to a report by Anna Ducros and Paul Steele titled Biocredits to finance nature and people: emerging lessons, a biocredit represents a unit of biodiversity that is being restored or preserved.

“Biocredits are being developed to be bought and sold, and when designed carefully, they can channel financial flows towards effective biodiversity conservation and directly support locally-led action to ensure Indigenous Peoples and Local Communities (IPs & LCs) can fully participate in and realise the benefits of the mechanism.

“As biocredit schemes develop and become more common, biocredits are being applied broadly in three ways: to avoid biodiversity loss; measure improvement; or reward successful management of pristine sites (Ducros, A., Steele, P. (2022).

Contextual applications (Investment interest in biocredits continue to grow)Envi

Each of these approaches has appropriate contextual applications as outlined below. Notably, the approaches are not exclusive and one biocredit scheme can provide benefits across more than one application (Ducros, A., Steele, P. (2022).

  • Preserving or avoiding loss: Biocredits are applied to an ecosystem, landscape or seascape that already has high levels of biodiversity and that is under threat. They are sometimes measured against a reference site, to correct for biodiversity loss caused by external factors such as changes in rainfall patterns or extreme weather events, or proposed development. In some versions of this application, a biocredit maintains value if the biodiversity indicators do not decrease below those of a reference site (ie biodiversity remains the same). Here, biocredits are used to maintain areas that have not been degraded but are at risk of being degraded. However, biocredits can also track increases in biodiversity (ie the biodiversity indicators rise above those of the reference site).
  • Restoration: Biocredits are applied to an ecosystem or landscape that requires restoration for biodiversity regeneration and enrichment, improved ecosystem services and/or landscape connectivity enhancement. Therefore, for the biocredit to maintain value, the biodiversity indicators must be increasing (ie biodiversity is increasing/being restored). Biodiversity indicators could include a rate of change. It is essential that a time frame is set out in which the indicators will be measured and over which the desired positive change is evaluated.
  • Supporting existing efforts: Biocredits can also be used to reward the existing management efforts that go into conserving pristine sites. Here, biocredit schemes are used to generate investment to incentivise further conservation and create opportunities for countries and IPs & LCs that have succeeded in their conservation efforts to date to be rewarded for past efforts and supported to continue these efforts. This application of biocredit schemes suggests that, regardless of the risk profile, all landscapes and seascapes should be afforded the opportunity for investment.

Source: Ducros, A., Steele, P. (2022). Biocredits to finance nature and people: emerging lessons. IIED, London


Investment interest in biocredits continue to grow

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Investment interest in biocredits continue to grow

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