Biodiversity Credits: Demand Analysis and Market Outlook | World Economic Forum

#Climatechange, #ESG, #Sustainability, #Technology

Biodiversity credits offer a scalable way to finance nature conservation, but market integrity is critical to success.

Biodiversity credits are emerging as a promising mechanism to finance the conservation and restoration of nature. These credits are tradable, verifiable units representing positive biodiversity outcomes, such as habitat restoration or species protection. With the growing focus on biodiversity loss, companies are starting to recognize the potential of biodiversity credits to mitigate their environmental impacts and enhance corporate sustainability strategies.

Highlights three possible demand scenarios for biodiversity credits. In a “limited progress” scenario, global demand for biodiversity credits could reach $760 million by 2030, while in a “transformational change” scenario, demand could rise to $69 billion by 2050. The report emphasizes the need for integrity in the design of biodiversity credit markets, drawing lessons from carbon credits to avoid issues like greenwashing and double counting.

Significant challenges remain, including the lack of uniform data and the complexity of risk assessment models. Existing tools still struggle to provide comprehensive coverage of climate risks, particularly in emerging markets and unlisted sectors. Overcoming these barriers requires closer collaboration between financial institutions, tool developers, and regulators to develop robust solutions tailored to global market needs. Here you can find the link to view the document.

Several drivers are influencing corporate demand, including regulatory pressures, consumer demand for sustainable products, and reputational benefits. Companies can use biodiversity credits to ensure sustainable access to ecosystem services, enhance their carbon credits with biodiversity benefits, or even market products bundled with nature restoration outcomes.

However, key challenges remain. The infrastructure needed to support biodiversity credits—such as measurement, reporting, verification (MRV), and standardization—is still developing. To unlock large-scale demand, the report recommends actions by buyers, sellers, and regulators to improve market integrity and governance.

The potential for biodiversity credits to play a significant role in global conservation efforts is clear, but further development and collaboration are essential to realize their full impact

Here is the link to access the document: https://bit.ly/4gYkc15