How to kickstart the private sector biodiversity movement

Applying the carbon removal playbook to nature restoration

“Look closely at nature. Every species is a masterpiece, exquisitely adapted to the particular environment in which it has survived. Who are we to destroy or even diminish biodiversity? – EO Wilson

“Destroy nature and you destroy the economy…this is not some kind of a flower power, tree-hugging exercise…this is core economics…even if I couldn’t care less about the planet, even if I couldn’t care less about biodiversity, I would say the exact same things.” – Frank Elderson, European Central Bank Exec Board Member

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Beyond being a north star principle to which society should center itself, biodiversity is essential to our livelihoods. The more diverse an ecosystem, the more forms of life exist within it, each with its own role supporting other micro and macroorganisms. And the more types of life within an ecosystem, the greater the ecosystem’s ability to function and generously provide services like clean air and water, healthy soils, food security, climate adaptation, disease prevention, social stability, cultural significance, and much more. Not to mention the economic importance of nature: half of the global economy ($44 trillion) relies on nature’s services.

However, biodiversity is declining faster than at any point in our history. Wildlife populations are down 69% on average since 1970, due mostly to land use change that destroys, fragments habitats, and reduces biodiversity. According to Bloomberg NEF’s new Biodiversity Finance Factbook, at the current rate, 30-50% of all species may be lost by mid-century. That’s roughly 27 years from now. 

This must be prevented. And one of the tools available to prevent and restore biodiversity is financial capital. But based on today’s annual amount of biodiversity financing ($166 billion per year), we have a gap of roughly $830 billion between now and what’s needed annually by 2030 to help prevent that species loss from occurring. 

The vast majority of funding (76%) is provided by governments, particularly those of developed nations. It remains imperative that governments continue funding nature conservation efforts. And there is more than can be done around tax policies, subsidies, and direct spending on nature projects outside of their borders and into the global south (98% of all public dollars are spent domestically). However, governmental funding will not be enough on its own to achieve the results we need. 

As such, we need to unlock more private funding into projects that enhance biodiversity. There are various ways funding has flowed into nature, be it green finance, biodiversity offsets, ecosystem service payments, and grants to NGOs. However, the gap remains and is lacking a galvanizing mechanism to bring in more private capital from corporations.

If we’re looking for ways to galvanize corporations, there is another initiative that has been successful at it: the carbon dioxide removal (CDR) movement. So what if we approach private financing of biodiversity by pulling a page from their playbook?

Where biodiversity funding sits compared to net-zero

First things first, the funding objectives for biodiversity and achieving our net-zero goals are complementary. This is a “yes, and…” dynamic. 

Global warming is a major driver of biodiversity loss. So, actions taken to reduce emissions will generally support biodiversity. At the same time, many actions taken to protect biodiversity, such as preventing land use change (e.g., deforestation or conserving mangroves), often provide both climate mitigation and adaptation benefits.

The new Science Based Targets for Nature (SBTN) has made clear the same message: “This is not an either/or situation. Companies need to take an innovative approach to finding nature-positive solutions alongside rapid decarbonization. We need to halve emissions and reverse nature loss by 2030 to avoid catastrophic consequences.”

However, it’s worth noting the costs required to restore biodiversity are significantly less relative to the other massive problems we’re facing. Restoring biodiversity is one-seventh as costly as building a net-zero emissions energy system. Generating the capital we need for protecting and restoring biodiversity is more achievable than it may seem in the scheme of systems change.

Bloomberg NEF’s new Biodiversity Finance Factbook

Equally interesting is where global biodiversity spending currently lies relative to other categories. We are allocating ~4x more financing into the space economy compared to the funding we need to protect all life on Earth. 

Bloomberg NEF’s new Biodiversity Finance Factbook

What’s preventing this gap from being filled?

According to the Bloomberg NEF report, the complex challenges to scaling up biodiversity finance can be divided into six categories:

1. Lack of standardized data, metrics and consistent frameworks

2. Need to integrate biodiversity into key decision making

3. Absence of effective policy support

4. Dearth of bankable biodiversity projects

5. Uncertain environmental integrity of offsets and other mechanisms

6. Insufficient industry and local community buy-in

If you’re familiar with the carbon dioxide removal (carbon removal, or CDR) industry, you’ll notice these challenges sound very familiar; they are the same CDR is experiencing today. 

Fortunately, over the course of the last several years, the carbon removal community has put together a pretty effective playbook for wrangling private sector capital into its development. And there are elements of the playbook that can be adapted to achieve the same for biodiversity.

The Corporate Allure of CDR

There has been a huge corporate push toward net-zero commitments, which has been amazing and inspiring. According to McKinsey, 83% of Fortune 500 companies set a net-zero claim as of September 2022.

And within corporate net-zero strategizing, we’ve seen a growing movement toward financing carbon removal projects. Caveat: I am deliberately not referring to the broader carbon offset market here. Funding carbon removal has a different story. 

Funding CDR at the early stages of technology is pivotal and needs to continue in the coming years, particularly in the likely event of a 1.5/2ºC global warming overshoot scenario. Private sector financing of CDR has mostly manifested as pre-purchases and offtake agreements for carbon credits, R&D grants, and more. Within the past year or so, the most famous examples have been:

• $925M in advance market commitments into Frontier, from Stripe, Alphabet, Meta, Shopify, and McKinsey 

• A new $200M offtake agreement from JP Morgan Chase

• $29M spent on CDR projects by Microsoft in 2022

• First Movers Coalition has 9 members that have pledged to contract at least $25 million of durable and scalable carbon dioxide removal

• NextGen CDR Facility (which is run by South Pole and Mitsubishi and includes founding buyers of Boston Consulting Group, LGT, Mitsui O.S.K. Lines, Swiss Re, and UBS) revealed the advance purchase of almost 200,000 tonnes of carbon removal credits

There’s certainly still a long way to go (especially in relation to the financing gap needed to achieve 10 GT of CO2e removed per year), but almost $1.5B committed over the course of roughly one year is a significant amount of money in the very beginning of what will be a massive transfer of capital. Particularly if and when the compliance market takes shape and other policy mechanisms force private funding of these solutions.

The CDR movement’s ability to catalyze private funding in such a short amount of time has been compelling, and has led to fast advances in policy, standard-setting, and more. So, how has the CDR industry been successful? They’ve been directly addressing several of the aforementioned challenges:

1. Net-zero has been integrated into key decision-making

Net-zero has, for better or worse, become synonymous with “doing good” for companies. And despite its flaws, achieving net-zero is something that can be partially achieved through funding CDR. GHG emissions are quantifiable, making it possible for companies to set clear targets and take action (at least theoretically). There are standard-setters that dictate the rules, such as Science Based Targets Initiative (SBTi) saying CDR can be a part of neutralizing residual emissions, and the Voluntary Carbon Market Integrity Initiative (VCMI) guiding companies to use carbon credits to go “above and beyond” the decarbonization of activities in their own value chain to “further contribute” to cutting emissions.

2. Excellent industry buy-in

It always starts with a few champions of the cause. Stripe, Microsoft, and Shopify took some of the first public positions on the importance of corporations funding CDR projects. They used their influence to effectively galvanize other corporations to do the same, which resulted in the crucial formation of branded coalitions that companies want to be a part of (such as Frontier, First Movers Coalition, NextGen, CO2.com, and Milkywire).

3. Dearth of bankable projects

Due to heightened corporate interest in purchasing credits from the voluntary market, along with favorable policy, investment capital has begun pouring into project developers and cutting-edge CDR companies that are building the technology to sequester carbon dioxide. 

With the demand in place, as certain standards become more universally accepted, dynamics like the 45Q tax credit remain in place, and the foundations of the carbon market withstand the current turbulence, more CDR projects will become less risky and thus more bankable. Bankability is being made more possible today by multi-year offtake agreements, credit ratings (see below), the existence of 3rd-party insurance (such as Kita and MIGA), and potential blends of concessionary, debt, and project finance into diverse capital stacks.

4. Addressing MRV and project integrity

Monitoring, reporting, and verification (MRV) remains one of the biggest challenges within CDR. Carbon credits have been plagued with integrity issues related to additionality, double counting, and leakage, particularly given that so many of them have nothing to do with carbon removal (such as RECs and other avoided emissions). However, the number of companies, including existing suppliers of CDR and 3rd-party providers, that are building the right instruments for MRV is increasing every day. As are the number of bodies working to bring integrity to carbon credits through updated standards and methodologies for which approaches/technologies can be used for which types of projects, be it Verra, Gold Standard, Climate Action Reserve, ICVCM, and ratings agencies such as BeZero and Sylvera.

5. Thriving and engaged public community

Simultaneously, public communities like AirMiners and OpenAir have formed and blossomed into thriving ecosystems of individuals eager to support one another and propel the movement forward. These groups have been pivotal to shaping the dialogue and even political landscape favorable for private commitments to CDR. Moreover, OpenAir and groups like Carbon180 and American University have helped educate and shape policy discourse, advocating for key legislation like the 45Q tax credit, the CREST Act, and grant prizes to spur along innovation like the $3.5 billion toward DAC Hubs.

How can we build the same financing movement for biodiversity? What can we pull from CDR’s success?

The success of private financing into CDR started with a few corporate leaders who understood the importance of carbon removal and its role in achieving true net-zero goals. Those companies took a stand and created the first market for CDR projects and credits, which resulted in the conception of a new business model; this subsequently led to more and more founders/startups deciding to develop new ways to remove CO2, which resulted in communities of supportive people growing around them. The momentum blossomed, creating a sea-change in how carbon removal is being integrated into corporate discussions of decarbonization and net-zero goals. 

All of this has been happening while questions of standardization, MRV, credit integrity, bankability, and policy are actively being sorted out (and will continue to be in the years to come).

We need this same type of galvanization to get kick-started for biodiversity in order to funnel in more private capital. Pulling from the some of the successes of the CDR playbook while being mindful of the current shortcomings, there are several things we can do: 

1a. Integrate biodiversity into key decision-making

As it stands today, unlike net-zero goals and carbon accounting, few companies take account of their nature-related impact and dependencies via their supply chains. According to the CDP, nearly three quarters (70%) of companies do not assess the impact of their value chain on biodiversity.

Some have made sustainable commitments (mostly related to deforestation), but those commitments are often not being realized. Planet Tracker recently examined 26,500 votes on biodiversity proposals; they found the majority (54%) of the votes were against biodiversity measures, and almost two-thirds of the votes either opposed the proposals or were not voted on at all. 

Central to integrating biodiversity into this decision-making is the use of legislation, regulations, and frameworks. These already exist for biodiversity. The Kunming-Montreal Global Biodiversity Framework was established at COP15 in Montreal last year, which adopted four goals and 23 targets for achievement by 2030. In addition to the widely-celebrated 30% conservation pledge, Target 15 was established, which requires governments to require all large companies and financial institutions to regularly assess and disclose their risks, dependencies, and impacts related to nature no later than 2030.

Moreover, as Forbes reports, we can soon expect the Taskforce on Nature-related Financial Disclosure (TNFD) to publish the final version of its Framework, which will likely serve as a universally accepted structure for reporting on biodiversity impact, and ultimately pressure companies to prioritize their relevant reporting standards. Particularly if that reporting becomes mandatory for financial regulation purposes.

This is all essential and encouraging. However, companies are not yet required to do anything for another 7 years. So, in order to catalyze biodiversity into corporate decision-making, it might require a reverse flow of first building industry buy-in.

2a. Create industry buy-in

In order to create more industry buy-in for funding biodiversity projects, there must be an incentive for companies to allocate funding from their budgets. And without the crucial ‘stick’ of regulations from TNFD fully in place yet (aside from compliance markets for offsets - more below), we need ‘the carrot.’ This requires turning to CDR. 

Being recognized as a leader in the climate space has been a successful motivator for corporations to join coalitions and fund CDR projects. It’s hard to go at climate financing alone: it requires extensive in-house science and sustainability expertise, and the rules, regulations, and public perception can change quickly. 

That said, it does take a few initial thought leaders to build up that expertise, step out on a limb, and start the movement. Similar to the stances taken by Stripe, Shopify, and Microsoft in CDR, a group of corporations needs to emerge that is championing and funding biodiversity projects. 

A good place to start is the 17 companies that have signed on to pilot the new Science-Based Targets for Nature. These companies will be following SBTN’s guidance, taking steps to understand their impact, set targets, and then act. However, as they make the necessary changes to their supply chain, there’s an opportunity to simultaneously fund additional biodiversity projects. 

This is the same dynamic underway with many of the SBTi’s net-zero commitments out there - there is a primary focus on decarbonization and a secondary emphasis on supporting CDR projects that can result in current/future high-quality neutralization of residual emissions. 

What does it look like to build a coalition and vehicle for funding these biodiversity projects? There are two theoretical scenarios, and they are not mutually exclusive:

Scenario A: Create a dedicated coalition to funding biodiversity credits & accompanying technology

The most parallel mechanism to carbon credits is the use of “nature credits,” otherwise known as biodiversity credits, or “biocredits.” The overarching concept of ‘creditizing’ biodiversity is not new. Rachel Lim’s recent piece on nature credits does a fantastic job of explaining the situation. However, to date credits have mainly been in the form of compliance-mandated offsets. $6 billion is spent annually on existing biodiversity offset projects, which mostly takes the form of “Payment for Ecosystem Services”, “Habitat Banks”, or “Ecological Offsets” that are required to ‘offset’ destructive activities. 

However, due to the technical and financial limitations in measuring nature (more below), it can be very difficult to measure equivalence and to ensure that offsets are truly providing “no-net-loss.” In some cases, those offsets are actually causing more destruction through unintended consequences. Biodiversity credits are not necessarily offsets, much as carbon credits are not necessarily offsets. Thus, offsets need to be in their own category, and we need separate methods for financing net-gains.

Biocredits are better defined in this extensive report from ​​International Institute for Environment and Development (IIED) as tradable units of biodiversity that represent positive change and do not imply biodiversity loss elsewhere. Moreover, biocredits offer an opportunity to truly support local, frontline indigenous communities that are experiencing the anthropogenic impacts of nature loss first and worst.

The IIED report describes three types of biocredits: preserving or avoiding loss, restoration, and supporting exciting efforts. See this footnote below for more detail on each type.¹

Source: IIED

In order to move beyond biodiversity offsets into financing net-gains with biocredits, we need several first-mover companies to build a new coalition: a “Frontier for Biodiversity.” This entails pre-purchasing and offtake agreements of biocredits, and R&D grants toward both the science and development of greater technological methods for monitoring, reporting, and verifying biodiversity net gains. Much like in CDR, having such a coalition would be crucial in rallying corporate interest and kicking off the flywheel of funding and project origination.

By focusing on biodiversity, this coalition would include additional projects that are harder to quantify in terms of carbon benefits but have strong biodiversity and community gains, the reintroduction of keystone species, invasive species management from companies like Inversa and Maui Nui Venison, or coral reef restoration. On the R&D side, it could include research on fungi’s role in ecosystems SPUN, or private efforts to create effective palm oil alternatives from organizations like Terviva or C16 Biosciences.

There is a growing movement in the CDR world to fund nature restoration (and the carbon projects that enable it) using Beyond Value Chain Mitigation (BCVM). BCVM is simply a mitigation action or investment that falls outside a company’s value chain. The idea is to invest in many nature-based solutions using BVCM dollars rather than counting them toward one’s emissions accounting. This engenders more financing to important projects without the pressure to count them as offsets and risk issues of accounting and reporting. 

Similarly, the funding for this new biodiversity coalition should initially be spent under the structure of BVCM. That said, similar to net-zero, and as the structures are put in place, localized project investments by corporations might also have the future capacity to be used toward SBTN goals and TNFD reporting, thereby increasing corporate incentive to fund these projects now.

Scenario B: Join and create coalitions that focus on a company’s holistic ecological footprint. 

Of course, many biocredit projects have carbon-benefits. This makes it somewhat difficult to view biocredits and carbon credits as totally separate asset classes.

However, if we can transcend the carbon tunnel vision and start to hold companies accountable for their broader and interconnected footprint, there’s greater incentive to create or support coalitions that fund solutions based on their collective co-benefits. 

One way to make this a reality would be more companies joining the efforts of TIME’s CO2.com coalition, which has taken a fantastic ecosystem approach to selecting which projects to fund based on a portfolio of metrics, such as those below. Their Planet Portfolio includes a mix of biochar production, drone-based reforestation, direct air capture, community-managed mangroves, and indigenous land guardianship. The Milkywire Climate Transformation Fund has taken a somewhat similar approach. 

Source: Planet Portfolio impact reporting from CO2.com

Taking it one step further, an ideal future could entail companies financing projects based on their respective Ecological Footprint, a concept articulated in The World Wildlife Fund’s Living Planet Report. The footprint consists of “all competing demands on nature, from food and fiber production to the absorption of excess carbon emissions.” Measuring companies based on the total impact they are having on nature seems much more effective, than net-zero numbers. Per the report, Ecological Footprint is a combination of six categories:

• “Grazing land footprint measures the demand for grazing land to raise livestock for meat, dairy, leather and wool products.

• Forest product footprint measures the demand for forests to provide fuel wood, pulp and timber products.

• Fishing grounds footprint measures the demand for marine and inland water ecosystems needed to restock the harvested seafood and support aquaculture.

• Cropland footprint measures the demand for land for food and fiber, feed for livestock, oil crops and rubber.

• Built-up land footprint measures the demand for biologically productive areas covered by infrastructure, including roads, housing and industrial structures.

• Carbon footprint measures carbon emissions from fossil fuel burning and cement production (for the sake of units of measurement here, these emissions are converted into forest areas needed to sequester the emissions not absorbed by oceans.”

Regardless of the scenario, the result of these coalitions is a) the public-facing incentive for more companies to join them, b) the creation of / greater allocation to funding vehicles and c) the signaling of corporate appetite/demand to fund biodiversity projects, which initiates a feedback loop of more projects being developed and greater impact.

3a. Creating more bankable biodiversity projects

There are too many unknowns and loose threads in terms of market structure to have a number of bankable projects yet. However, the first biocredits are happening. And there is a wide array of parties working to make projects investable through a form of credits for biodiversity gains. The IIED report highlights how organizations like Terrasos, ValueNature, and Wallacea Trust are trailblazers in setting up projects, protocols, and standards for inclusive biodiversity projects and credits.

Similar to carbon credits, as the corporate demand, market structures, registry, standard-setting, and 3rd-party support industries take shape, more bankability will hopefully come to conservation investments.

4a. Identify standardized data, metrics and consistent frameworks

Crucial to all the above are accepted reporting and monitoring frameworks, and the standardized data and metrics to inform them.

Due to the (beautiful) complexities of nature, many preservation and restoration impacts are difficult, if not impossible to quantify 100%. This is different and more challenging than measuring tons of CO2 equivalent that have been released into the atmosphere (though we know there are plenty of issues with MRV in carbon removal).

That said, there certainly are a range of metrics that can be measured and benchmarked, and combined together to form a “basket” or index to evaluate resulting preservation or restoration activities with.

• Terrasos measures the IUCN risk category of an ecosystem and the amount of ecological connectivity. They review land-management milestones like profit-sharing agreements and planting, as well as ecological milestones like species composition, replacement of degraded land cover with natural cover, increased habitat for fauna species, etc.

• The Wallacea Trust defines a unit of biodiversity as a 1% increase or avoided loss in the median value of a basket of metrics (per hectare). They use a minimum of five metrics that combine species richness and abundance

There are also fantastic companies developing MRV technology to capture and synthesize this biodiversity data using bioacoustics, camera traps, remote sensing, environmental DNA (eDNA) sampling. Examples include NatureMetrics, Pivotal, Bioverse, Rainforest Connection, AudioMoth, Gentian, and others. As they succeed and can lower the costs of MRV (and hence transaction costs more broadly), the corporate investment appetite for biodiversity projects will likely increase.

All to say, this is difficult work. And standardization is far away for now. However, similar to the need to consolidate 14 methodologies for soil carbon credits, as time passes, there will likely be a way of doing things that becomes more universally accepted. 

Fortunately, there are a growing number of essential organizations working to put standards in place, including the Biodiversity Credit Alliance, Verra, and Plan Vivo.

5a. Build public community

Coming full circle, communities are the essential building blocks of any movement. They are critical to inspiring action at the corporate level; particularly given that many members of corporations are actively members of these communities, eager to learn and adapt.

We simply need a larger public community of stakeholders from all types of industries and private/public/non-profit/other categories to be discussing and rallying around biodiversity. There are a variety of one-off WhatsApp groups and Discords, but (to my knowledge) no centralized, well-known public communities exist yet that are focused exclusively on financing/deploying biodiversity projects.

AirMiners has over 2,200 members and OpenAir has over 1,100. It’s time for biodiversity to have a community as well, and see what’s possible when more folks are working together toward these goals.

What Follows

All of this is meant to inspire action. To create new levers and incentives for corporations to feel compelled to finance biodiversity, in order to catalyze a broader movement. 

I am undoubtedly and inadvertently missing a number of key organizations that are dedicated entirely to bringing more capital into biodiversity, and have been making incredible progress over the years.

These proposals for biocredits are high-level. There is so much to figure out when it comes to biocredits, especially in terms of corruption and loopholes, local community buy-in and co-designing of the projects, fair compensation and channeling finance to indigenous groups, and potential unintended consequences.

There are also many crucial supply chain actions corporations can and should prioritize taking outside of purchasing credits that have tangible impacts on biodiversity, especially in terms of land use management.

Lastly, private mechanisms for financing biodiversity can only go so far. Achieving the optimal flow of private financing will require a heavier role by governments and third-parties in the form of incentives and regulation.

But, we need to get the ball rolling faster. We don’t have time to sit by as more critical species are lost while another soccer field of forest is clear cut, stretch of coral is bleached, and patch of peatland is tapped for oil reserves. And creating new ways to galvanize corporations into taking positive action is central to making that happen.

1. Types of biocredits, per the IIED report:

a) Preserving or avoiding loss: Biocredits are applied to an ecosystem, landscape or seascape that already has high levels of biodiversity and that is under threat. Examples include avoided deforestation, mangrove and peatland conservation efforts, etc.

b) Restoration: Biocredits are applied to an ecosystem or landscape that requires restoration for biodiversity regeneration and enrichment, improved ecosystem services and/or landscape connectivity enhancement. Examples include post-wildfire reforestation, re-planting of seagrasses and corals, remediating non-arable land, transitioning prairies to grasslands, etc. Note: there are clear loopholes here that can and will likely be exploited for the sake of profiteering. For example, one theoretically could illegally cut down a forest, sell the wood, plant trees for restoration, and generate profit from credits, therefore making 2x the money despite having destroyed a living ecosystem. I would hope that we have enough remote sensing and benchmarking data to show the historical conditions of a parcel of land before/after certain claims are made, but it’s not easy, particular in certain geographies where the land boundaries aren’t black and white.

c) Supporting existing efforts: The best defense is a good offense. Biocredits can also be used to reward the existing management efforts that go into conserving pristine sites, particularly those not yet under threat with the goal of keeping it that way. *This third category is murky and might not be as likely for funding given the clear issues of additionality. However, if our focus is exclusively on additionality, how can we bring value to what is already valuable? A relatable project example would be the effort to compensate farmers who have been farming regeneratively for years and have previously built up high soil organic carbon matter in their soils with some form of new credits.