The credits scheme will be part of the government’s dual strategy of developing land and recovering natural resources.
Biodiversity credits will be coming into force in the UK next week (commencing 12 February), panellists speaking during investment consultancy Mercer’s first biodiversity summit said.
The statutory biodiversity credit scheme will be introduced alongside the mandatory Biodiversity Net Gain (BNG) – a government strategy aiming to develop UK land and contribute to the recovery of nature.
BNG is part of the Environment Act 2021, which mandates that project developers need to achieve a net improvement of 10% in biodiversity on land they use through onsite improvements, or purchase biodiversity units from an offsite land manager.
To ensure that the pace of development in England is not impacted by BNG, the government has created a statutory biodiversity credits scheme as a last resort for developers to meet the new rules.
The UK is also part of the International Advisory Panel for Biodiversity Credits. The panel is a joint initiative between the UK and French governments that supports the development of biodiversity credits by identifying, developing and promoting practices, norms, standards and policies to underpin the development of high-integrity biodiversity credit markets.
Speaking at the biodiversity summit, Leo Niesel, Senior Investment Research Specialist at Mercer, affirmed that the UK’s biodiversity credit scheme would come into force next week. In a Q&A that followed the discussion, an audience member asked him whether he thought carbon and biodiversity credits were a form of greenwashing.
“There’s so much debate about it, but I think there’s a high-quality carbon credit space,” he responded. “For example, when you are planting forests on degraded land, or restoring the original rainforest on lands that have been used for farming. I think the same opportunities do exist in biodiversity credits.”
Hill Gaston, UK Head of Sustainability at Mercer, added that investors could take comfort in the fact that UK biodiversity credits would be underpinned by regulation and a “huge amount of information”.
Target 19 of the Kunming-Montreal Global Biodiversity Framework (GBF), which was agreed at COP15 in December 2022, has recognised biodiversity credits as an innovative mechanism for driving private sector finance into biodiversity.
At the One Forest Summit held jointly by France and Gabon in March 2023, an agreement was reached for biodiversity credits to be used as a mechanism to provide financial incentives for countries to protect their most vital carbon and biodiversity reserves. This would be done through the establishment of a €100 million Positive Conservation Partnerships Fund, as reported by asset manager Pollination.
A report released in December by the World Economic Forum (WEF) found that with effective progress on governance, global demand for voluntary biodiversity credits could reach US$2 billion in 2030, and $69 billion by 2050. An accompanying report, however, found that improper use of biodiversity credits could harm nature and local communities, exposing buyers to strategic, operational and reputational risks.
Biodiversity credits are related to, but distinct from, voluntary carbon credits, the WEF explained. While the latter represent units of a carbon equivalent avoided or removed from the atmosphere, the former represent units of biodiversity restored or preserved, which may have a variety of distinctive characteristics.
In addition, while carbon credits seek to achieve a standardised unit as part of a commodity market, biodiversity credits may not lend themselves to full equivalence. The market could develop to include differentiated products such as credits for the type of nature restored, and metrics used to track improvements.