The Climate of Business #70: Can establishing a cost for biodiversity lead to economic stability?

Climate Change Reality

Welcome to the era of weather whiplash (Vox )

Academic alliances aim to put purpose and planet at core of curricula (Financial Times )

Flour made from food waste is coming for your cookies (Bloomberg )

Trying to live a day without plastic (The New York Times )

How ocean water vapour may be an answer to a climate change issue (NPR )

Cost-of-living crisis overshadows ‘unavoidable’ climate action (Al Jazeera )

Winemakers champion the next ‘perfect grape’ for climate change (Bloomberg )

Governments urged to confront effects of climate crisis on migrants (The Guardian )

Why the ozone hole is on track to be healed by mid-century (Vox )

Rediscovered 19th-century records help show impact of climate change on plants (Yale Climate Connections )

Business Climate Reality

Half of green claims used to sell products in EU are misleading, Brussels finds (Financial Times )

Wall Street's new ESG money-maker promises nature conservation with a catch (Bloomberg )

New solar-powered technology can transform plastic waste into sustainable fuels and cosmetics (Euronews )

What will the increased financialisation of carbon do for decarbonisation? (GreenBiz )

Why some of the biggest names in tech and auto are teaming up on virtual power plants (The Verge )

Rare-earth find in Sweden lifts hope for shift toward clean energy (The Wall Street Journal )

ESG accounts for 65% of all flows into European ETFs in 2022 (Financial Times )

When ESG investing looks an awful lot like gambling (Bloomberg )

Reality Check

The last two years showed us that nature has a significant role to play in securing the stability of our economy. Research proves that over 70% of GDP of the global economy is dependent on natural assets and ecosystem services.?

A key event where this thinking was stipulated was COP15 UN Biodiversity Conference, another type of COP solely dedicated to biodiversity. The event was of a significant magnitude as more than 200 countries agreed to a new set of goals and targets to both halt and reverse biodiversity loss by the end of the decade, conserving 30% of the world’s land and 30% of the ocean as well as mobilising $30B for developing countries by 2030.

There has been a wealth of options discussed to achieve such high stake ambitions. One key option is biodiversity credits.?

"Credits" due to the reputation in the last few years of offsetting credits in particular might not immediately bring positive thoughts to mind. Lack of traceability of the project's outcomes, credits sellers which have registered a day ago, alongside a whole wealth of resellers - a small set of the concerns raised in the last months.??

So how biodiversity credits can deliver benefits for business, nature and local communities making up for the mistakes of other credit markets??

Biodiversity credits should not be confused with carbon or biodiversity offsets. Offsets and carbon credits are based on the “polluter pays approach” and on factoring in the external costs from projects or products by quantifying their damage to biodiversity as a starting point.? In some cases, biodiversity offsets can even often be a legal requirement in certain projects like exploitation permits.?

A 'biodiversity credit' can be an economic instrument, which is used to finance activities or innovations to deliver net positive biodiversity gains. Biodiversity credits allow companies to support nature-positive action, funding long-term conservation. Such credits are part of a company’s natural positive journey and an investment, not necessarily to be used for compliance purposes.

What can biodiversity credits help us achieve?

• Help the private and public sectors achieve a nature-positive economic system
• But transparent governance is crucial and the involvement of indigenous people and local communities in respectful and active engagement
• Can provide important growth opportunities for the global natural resources as well as help mitigate risk and adapt to the impacts of climate change

• There is a big financing gap at the moment with the United Nations has estimated that $384B are needed annually by 2025 to protect nature and other statistics say that preserving and protecting nature can have a value of $700B annually
• Biodiversity is crucial for health and food security as millions of species work together to provide humans with various fruits, vegetables, and animal products
• Plants are essential ingredients for medicines?
• 75% of cancer drugs are natural or inspired by nature
• $75B / year of pharmaceuticals sales are based on materials of natural origin

Key Challenges

Important to consider both local-scale and system-scale integrity

• Meaning that the credits demonstrably deliver and maintain in a socially equitable, rights-based way outcomes that contribute to achieving societal goals?
• That they are not just being used for greenwashing and divert a companies indentation to reduce their negative impacts

Price Challenge?

• It is important to settle on efficient methodologies in order to properly quantify biodiversity costs, gains and losses and which one’s are the best to use depending on the project or ecosystem, etc
• One can simply look at the costs of conserving an area such as the park rangers or monitoring systems needed to prevent deforestation and poaching
• It has five categories of animals in an area (aquatic invertebrates, birds or butterflies)
• Each category is weighted based on how rare those species are in a country, then the abundance or biomass of these organisms is estimated. A "credit" is counted for every 1% increase in species richness and abundance, or avoided loss, per hectare

Open Questions

Do you think biodiversity credits will be a valuable contributor to the net-zero commitments of business? Would you like to learn more about how biodiversity and carbon credits are calculated? If any of these topic interest you, get in touch here or read more about biodiversity here .

If you enjoyed this week's "The Climate of Business" newsletter, please forward it to someone who will find it informative. Thank you for engaging in this important conversation!?

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