Boom or Bust for Biodiversity Credits in 2025
Release of high-level principles created a buzz around biodiversity credits at COP16, as market seeks to balance integrity with growth.
The next year will be crucial for the uptake of biodiversity credits, with principles to underpin integrity seen as critical to building trust and driving finance for nature conservation.
Last week at COP16 in Colombia, the International Advisory Panel on Biodiversity Credits (IAPB) launched its framework for high-integrity biodiversity credit markets, laying the foundation for a key route for channelling investment towards the objectives of the Global Biodiversity Framework (GBF).
The framework comprises 21 high-level principles for high-integrity biodiversity credit markets – co-developed with the Biodiversity Credit Alliance and World Economic Forum (WEF) – alongside IAPB recommendations and guidance to market actors for operationalising best practice.
The GBF’s Target 19 calls for the mobilisation of at least US$200 billion per year by 2030 to protect biodiversity, including financial resources from the private sector, with biodiversity credits seen as a catalyst for meeting this goal.
While the launch contributed to a high degree of interest in biodiversity credits at COP16, experts say the market must avoid making similar mistakes to carbon credits.
“Biodiversity credits are going to explode in scale and 2025 will be a critical year,” Simon Zadek, Founder of non-profit NatureFinance, told ESG Investor. “The credits will either begin to track against the framework that the IAPB has set out and lead to robust markets moving into 2026 and beyond, or it will diverge into being profits-focused with opaque certification and inappropriately low payments to nature stewards and by the end of the year it will already be a market in disrepute.”
Last December, the WEF’s Biodiversity Credits Initiative predicted that with effective progress on governance, global demand for voluntary biodiversity credits could reach U$2 billion in 2030 and US$69 billion by 2050. However, it also cautioned that improper use of biodiversity credits can harm nature and local communities and expose buyers to strategic, operational and reputational risks.
Zadek said that the biodiversity credit markets need to ensure a high degree of engagement and involvement for nature stewards, such as indigenous peoples and local communities, farmers, fishermen and other actors that maintain biodiversity assets.
“There is a positive side to the innovation of the biodiversity credits market and the scope and diversity of that innovation, but there is a challenging side in ensuring that the sheer diversity and speed of what is happening doesn’t deliver the wrong outcomes and lead this area into the same sort of disgrace as voluntary carbon markets,” said Zadek.
“We are at a junction where the enthusiasm, interest and potential and interest is there and the IAPB framework can take this in the right direction.”
Three of the IAPB’s principles concern respect for the rights of all involved, while a further three relate to inclusiveness toward vulnerable actors, including nature stewards, and a fair distribution of benefits.
Path to integrity
Carbon credits and voluntary carbon markets have faced long-standing criticism, including widespread accusations of greenwashing and limited positive environmental impact. Although biodiversity credits differ from carbon credits, those involved are aware of the need to demonstrate high-integrity credentials.
“Integrity is intrinsically crucial for biodiversity credits, but especially because of past problems in the voluntary carbon credits markets —such as permanence, lack of transparency, and lack of accountability — which have undermined confidence in nature markets,” said Gareth Thomas, Head of Research Innovation at the Natural History Museum.
He praised the high-level principles set by the IAPB framework as being a “significant and commendable effort toward integrity in biodiversity credit markets”, while stressing its ambition is “realistic”.
While IAPB notes it is “feasible” for high-integrity biodiversity credit markets to develop at scale and pace, it will require strong policy directives or regulatory mechanisms from governments to unlock finance for nature and nature stewards.
“Governments play a crucial role in shaping economies, championing innovation and enabling markets through the signals they send and the rules they set,” IAPB’s report read, asserting that high integrity at all levels was a “prerequisite for scale” not a barrier.
Zadek said demand from multilateral development banks would be needed to support the growth of biodiversity credit market in low- and middle-income countries that are nature rich.
Thomas flagged that regions with established frameworks of environmental governance – including parts of Latin America, Africa, and Asia – had already seen “rather strong” interest in biodiversity credits due to the biodiversity hotspots in these regions reflecting investment opportunities.
The IAPB recommended that the supply of public and private finance should seek to reinforce high integrity by setting, enforcing and aligning the expectations of other market actors. Thomas agreed that future scale requires commitments by the public and private entities through globally enforceable standards and incentives to create biodiversity-positive investments.
The IAPB’s report also includes 31 examples of pilot projects in various stages of development across 21 countries.
“The biodiversity credits market is still in its relative infancy, although it has grown significantly over the last few years, specifically since the establishment of the GBF,” said Thomas. “After COP16, I would expect demand to increase as biodiversity credits gain visibility and more stakeholders realise their potential to support both nature and sustainable development goals.
“This growth trajectory will likely accelerate as more corporate and public sector policies align with nature-based solutions and biodiversity targets,” he added.
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