Biodiversity Credits: Demand Drivers and Guidance on Early Use

Could biodiversity credits improve market practices?

The study Biodiversity Credits: a Guide to Support Biodiversity Credits: Early Use with High Integrity by the World Economic Forum and McKinsey & Company explores the emerging market for biodiversity credits.

They formulate several recommendations ensuring these credits are sharp, credible, and transparent by signalling high integrity and low risk from the outset to the financial markets:

• Biodiversity credits are verifiable, quantifiable, and tradable units representing biodiversity restored or preserved over a specified period.
• The voluntary market for biodiversity credits could be worth £69 billion by 2050, potentially bringing large-scale positive impacts to nature, communities, and companies.
• The study identifies four use cases for biodiversity credits: enhancing carbon credits for better nature outcomes, accessing ecosystem services as inputs, contributing to nature recovery, and offering products bundled with nature recovery.
• A contested fifth use case involves using biodiversity credits to voluntarily take responsibility for a company's unmitigated and residual direct or indirect impacts on biodiversity.
• Biodiversity credits would require high-integrity commitments and actions from buyers and robust, scientifically rigorous measurement and verification standards to ensure tangible benefits for nature and local communities.

Introducing a framework for biodiversity credits opens doors for impactful change by integrating nature's irreplaceable benefits into the scope of financial analysis.

They could enable companies, governments, and organisations to invest in nature conservation and restoration, outlining a harmonious balance between economic progress and environmental stewardship.

Critics may question the feasibility of the proposed use cases, the study's optimistic outlook on the potential size of the biodiversity credit market and the assumption that these credits will lead to positive outcomes.