Biocredits to finance nature and people

Think tank: IIED

Author(s): Anna Ducros; Paul Steele

December 5, 2022

This report from UK think tank IIED looks at biodiversity credits, or ‘biocredits’, are emerging as a tradeable unit of biodiversity.

Biodiversity is degrading at alarming rates, and people living in biodiversity-rich areas often bear the heaviest costs of biodiversity loss and inequitable conservation efforts. Biodiversity credits, or ‘biocredits’, are emerging as a tradeable unit of biodiversity that can incentivise nature conservation and restoration to benefit marginalised groups living with nature. Biocredits can complement carbon credits but are most effective as their own new asset class. As a purely positive investment in nature, biocredits are distinct and are preferred to biodiversity offsets, which can cause net damage to biodiversity. Demand for biocredits is growing among private investors, individuals and governments who want to invest in the conservation and restoration of biodiversity. Biocredits supplied by Indigenous Peoples and local communities can create an innovative way to fund locally-led action. Based on a review of three existing biocredit methodologies and learning from the pitfalls of the carbon market, we describe three challenges in designing and implementing an effective biocredit market: how to rigorously and equitably measure a unit of biodiversity; how to generate sufficient demand and sales of biocredits; and how the majority of the revenue from a biocredit scheme can be channelled back to Indigenous Peoples and local communities who will create biocredits for nature and climate outcomes.