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Biodiversity Credits Market

  • Anaëlle de Serres
  • Aug 6
  • 6 min read

Recent news reports are showing a recurring image: climate-related disasters, hitting even closer to home each time. This is a clear reminder of ecosystem fragility and the risk it poses to biodiversity, on which the global economy heavily depends. However, there remains a $700 billion annual gap in global funding for biodiversity, a true testament to the neglect that biodiversity has faced in financial markets.


A Solution to Unlock Private Financing for Biodiversity-Related Projects

On July 7th, 2025, the EU Commission published a non-binding roadmap to introduce a biodiversity credit market in 2027, an attempt to leverage private funding to address this critical funding gap. The main purpose of this initiative, as specified by the EU Environment Commissioner Jessika Roswall, is not to turn nature into a commodity, but rather to reward actions that contributes to its preservation or restoration. It would allow projects that create positive or reduce negative effects on biodiversity to be monetized and rewarded through a rigorous verification and certification process.


This roadmap marks the beginning of a design and consultation process, as a finalized market framework is still under development. Key challenges such as credit standardization, governance, and safeguards remain to be resolved.


Deep Dive – How Does It Work?


  • Targeted projects include wetland restoration, afforestation, and species protection, among others.

  • Through an exhaustive verification and certification process, some of these qualified projects will be accredited and rewarded as biodiversity units based on their impact, size, permanence, and comparability to projects in other locations or with different scopes.

  • Protocols for such verification and accreditation are being refined and tested by frameworks and international organizations such as the Science Based Targets for Nature (SBTs for Nature), the Biodiversity Credit Alliance (BCA), and Verra, which provides an early-stage consultation service on biodiversity methodologies. Most of these projects are still in the pilot phase.


It is important to note that biodiversity credits are not fungible like carbon credits: each credit is site-specific and multi-dimensional, thus adding yet another layer of complexity in comparability and standardisation, as opposed to the carbon market.


With the growing importance of frameworks such as the SBTN, we can expect companies to be more compelled to participate in similar initiatives as a way to align with their environmental goals. The following example explains the potential mechanism behind the biodiversity market if it were well constructed. The biopharma company GSK, a signatory of the climate-focused Science Based Targets initiative (SBTi) framework, could choose to implement habitat restoration and invasive species elimination at multiple sites that it operates in. This decision could stem from its need to expand nature-positive projects as a way towards net-zero commitments, for instance. The site-level biodiversity improvements implemented would generate measurable nature-positive outcomes. Once audited and verified, these positive outcomes could be registered on a voluntary credit registry and monetized by being sold to a sustainability-focused buyer. Naturally, the translation of such projects into tradable credits depends on the development of robust methodologies, registries, and third-party verification systems that are still under development.

 

Why Is It Important?

 

Given the monetary incentive created, sectors such as the European agricultural sector are likely to be affected, and North American financial institutions should monitor this initiative as it represents various opportunities including:

 

  • An opportunity for impact fund managers with nature and impact-focused portfolios to monetize the positive impact they are generating

  • An opportunity for organizations relying on natural resources or ecosystem services to reduce their physical risks by making restoration and conservation more financially attractive

  • The development of a new financial instrument, which could complement other green finance tools such as green bonds in impact and nature-oriented portfolios(However, unlike green bonds, which are debt instruments with clear governance and repayment structures, biodiversity credits are speculative and face challenges around liquidity, permanence, and valuation)

 

Why Is This Initiative Receiving Skepticism?

 

The NGO Friends of the Earth has publicly stated their distrust toward the initiative, as expressed in an article published on July 7th, 2025. Other actors in the financial market have also expressed some doubts regarding the development of this nature-focused credit market, which can be explained by the following concerns:

 

  • Greenwashing concerns stemming from the intricate array of biodiversity-related projects and the complexity of the verification process and methodology gap

  • A lack of standardization, non-linearity and irreversibility; making comparability across geographies and project types even more difficult than for the carbon credit market, for instance

  • The potential diversion of public funding, which would defeat the purpose of filling the funding gap

  • Low market demand and high risks of valuation, which would result in poor liquidity (it is unlikely that demand for this type of investment will arise on its own, and will require the engagement of frameworks to create policy-driven and mandated demand)

  • Risks of unintended negative consequences and feedback loops, as well as poor accountability in the long term and permanence of the projects, real degradation caused by place-based accountability, and double-counting risk

  • Governance risks and limited safeguards for Indigenous communities and local stakeholders, as well as raising concerns about land rights, equity, and Free, Prior, and Informed Consent (FPIC)


Caution and critical eyes are essential when evaluating this initiative by the European Commission. Regardless, this roadmap brings to light a possibility for the financial sector to include biodiversity factors and brings necessary attention to this crucial issue.The road ahead will require not only innovation in financial mechanisms but also robust governance, stakeholder inclusion, and scientific credibility. One way for financial institutions to gain traction and leverage its potential impact is through the extension of sustainability training for employees in order to grow understanding and future demand for such credits, and to explore how this new instrument could eventually be integrated into their long-term nature strategies.

 

Who Should Learn About This Topic? 

 

As biodiversity credits become part of corporate sustainability strategies, it’s essential for several teams across the organization to build foundational knowledge in this area. Sustainability teams need to understand how to evaluate the ecological integrity of credit-generating projects and assess their alignment with corporate biodiversity goals. Compliance and Risk management teams must be equipped to identify potential greenwashing risks, monitor evolving regulatory frameworks (such as CSRD and the SFDR), and ensure proper documentation. Procurement and Finance teams should be able to conduct due diligence on credit suppliers, evaluate credit quality, and track both intended and unintended impacts. By developing this cross-functional understanding, organizations can make more informed, credible, and strategic use of biodiversity credits.

 

Portfolio Managers and Investment Analysts working on nature-related impact or thematic funds should develop a clear understanding of biodiversity credits as an emerging asset class within nature-related investment strategies. This includes the ability to evaluate the credibility, risk profile, and co-benefits of biodiversity credit projects, as well as their potential integration into biodiversity-linked funds, natural capital portfolios, and other structured financial products.

 

Note: Like carbon credits, biodiversity credits and offsets should not be the main solution companies rely on. The goal is to reduce their impact on nature and work toward becoming nature-neutral or even nature-positive. However, full neutrality is often difficult or impossible to achieve in the current system, so biodiversity credits can help fill that gap. That’s why teams involved in sustainability, compliance, and procurement need at least a basic understanding of how to source, assess, and track these credits—and ensure they support high-quality projects that avoid the risk of greenwashing.

 

 

 

Why Employee Sustainability Training Matters?


Overall, companies can reduce growing greenwashing risks by increasing internal expertise through sustainability and ESG training for employees, with a greater importance for the sustainability teams, investment and product professionals, and risk assessment teams. They could resort to ESG training providers, ESG compliance courses or customizable corporate ESG training.

 


Sources :

 

Abnett, Kate. (July 7, 2025). EU looks to 'nature credits' to fill green funding gap. https://www.reuters.com/sustainability/climate-energy/eu-looks-nature-credits-fill-green-funding-gap-2025-07-07/ 

 

Atlas Zero. (2025). What is the link between CSRD and SFDR?. https://www.atlaszero.earth/blog/article/what-is-the-link-between-csrd-and-sfdr-25a0b 

 

European Commission. (July 6, 2025). Questions and answers on Nature Credits Roadmap. https://ec.europa.eu/commission/presscorner/detail/en/qanda_25_1680 

 

Friends of the Earth Europe. (July 7, 2025). EU’s nature credits: a roadmap to greenwashing. https://friendsoftheearth.eu/press-release/eus-nature-credits-a-roadmap-to-greenwashing/ 

 

 

Science Based Target Network. (2025). Why set science-based targets for species and ecosystems? https://sciencebasedtargetsnetwork.org/about/hubs/biodiversity/ 

 

 

World Economic Forum. (May 2025). High-level Principles to Guide the

 

Wyburd, Inigo. (May 2, 2024). Pricing the priceless: Lessons for biodiversity credits from carbon markets. https://carbonmarketwatch.org/2024/05/02/pricing-the-priceless-lessons-for-biodiversity-

credits-from-carbon-markets/

 
 
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