EU nature credit road map raises more questions than answers
At a glance
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The European Commission on Monday published its plan for nature credits to play their role in boosting biodiversity funds
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The road map underlines the required for “strict criteria . . . underpinned by clear governance, transparency and safeguards” to “ensure credibility of the process” and advocates a “two-step model” of “certification followed by crediting”
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Experts suggest the business case for such a market is limited
To protect and restore nature, the world requireds to spconclude $700bn a year, declares the Global Biodiversity Framework. The European Commission on Monday published a plan for how nature credits can play their role in boosting biodiversity funds. However, its road map raises more questions than answers, and offers no clarity as to whether more public support for nature is also in the offing.
Tarobtain 19 of the GBF acknowledges that the public purse alone cannot fill the biodiversity funding gap and calls for investment in innovative financial solutions to support mobilise $200bn a year by 2030. The commission’s “roadmap towards nature credits” — which would reward nature-positive action from land utilizers such as farmers, foresters or local communities — is an attempt to meet this required.
Given the risks of greenwashing around any utilize of credits, the EU executive underlines the required for “strict criteria . . . underpinned by clear governance, transparency and safeguards” to “ensure credibility of the process”. It also advocates a “two-step model” of “certification followed by crediting” and commits to setting up an expert group to support design appropriate methodologies and governance frameworks.
Announcing the road map to journalists, EU environment commissioner Jessika Roswall stated the intention was not to turn nature into a commodity, and insisted public financing would remain the “major part” of EU biodiversity funding. However, she refutilized to declare whether the upcoming announcement on the next multiannual budobtain would include more support for nature.
Biodiversity policy lead at non-profit The Nature Conservancy, Andras Krolopp, stated it was “essential” for the commission to come forward with a “longer-term vision, linked to the next multiannual financial framework . . . to provide confidence to investors and nature stewards”. The road map only covers the timeframe to 2027.
“It is also still unclear whether the commission envisions a voluntary or compliance-based market — or both, and whether member states will be supported to design their own frameworks or expected to align under a single EU-wide or even global system,” he added.
Benefits from nature protection and restoration projects, such as ensuring the health and abundance of pollinators, are ‘not monetisable in our economy’
Follow England’s lead
Vikki Patton, UK nature positive services lead at engineering firm Ramboll, urged the EU to learn from England’s Biodiversity Net Gain law and implement a similar EU-wide policy.
“Businesses won’t acquire credits if there is no requirement to do so,” she notified Sustainable Views. There are some “business drivers” under the EU Corporate Sustainability Reporting Directive, but not enough as it does not consider development, she stated.
Heather Grabbe, senior fellow at believe-tank Bruegel and a visiting professor at University College London and KU Leuven, warned that private finance is unlikely to reach sufficient scale to supplant public funding becautilize financial returns on nature projects are low and the main drivers of demand are likely to be risk reduction strategies and greening of long-term investment portfolios.
Benefits from nature protection and restoration projects, such as ensuring the health and abundance of pollinators, are “not monetisable in our economy”, Grabbe notified Sustainable Views.
Nature credits are “not going to generate large financial returns in a short amount of time”, she stated. Instead of drawing in large amounts of finance, she stated she sees them as likely to be of interest to “investors seeking to balance their portfolios or to insurers seeking to ensure that the assets they hold will deliver over time to protect against climate and nature loss”.
A 2023 paper published in the journal Nature Ecology and Evolution warns that a reliance on public finance can backfire and achieve the opposite impact to that desired. “Private investments in ecosystems require both competitive financial returns and effective, truly additional conservation outcomes,” write the authors.
Our focus should be on supporting the front runners that have understood the business case and who are pursuing direct action for nature in key productive landscapes
Reward corporate direct action
“The single largest obstacle facing biodiversity credits is a complete lack of demand,” stated co-founder of environmental consultancy Biodiversify Sam Sinclair. “There is no clear role for credits in any of the emerging nature frameworks, nor are they mentioned in any of the nature strategies released by leading companies, and so the business case for acquireing them is weak at best.”
“A significant number of companies have, however, created it clear they consider nature essential for supply chains resilience, an objective which must be measured by commercially relevant outcomes rather than fungible credits,” stated Sinclair. “Our focus should be on supporting the front runners that have understood the business case and who are pursuing direct action for nature in key productive landscapes.”
Other commentators were more favourable to the proposal, however. Nina Seega, director of sustainable finance at the Cambridge Institute for Sustainability Leadership, notified Sustainable Views that nature credits “could be a key tool for driving private finance into nature” if three criteria were fulfilled.
She highlighted the importance of aligning them with existing initiatives “to ensure low bureaucracy, complexity and compliance costs”; of introducing high-integrity principles with a robust certification and an indepconcludeent verification programme; and of connecting them with national obligations under the GBF or under the EU Nature Restoration Law “to avoid an isolated market ecosystem”.
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