Sustainability credits, how they work and why they are not good for poor countries

Companies will be able to obtain sustainability credits to reduce their environmental impact

Obtain cash credits in exchange for projects that protect biodiversity. The novelty is foreseen by the Kunming-Montreal agreement signed on the sidelines of the Cop15 on biodiversity held in Montreal last December.

“The idea is the same as the voluntary carbon credit market, but the market driver is biodiversity”, he explains to Frederic Hache, co-founder of the think tank Green Finance Observatory. The vanguard of this new market is England which will launch a prototype of sustainability credits in November 2023.

How the British model of biodiversity credits will work

In February, the Sunak government gave its response on the issue of Biodiversity Net Gain BNG included in the 2021 Environment Act. BNG is an approach to land development and management that has the objective Of leave the natural environment in a better state than before.

A very important feature, especially for understanding the reactions of the poorest countries, is that the net gain in biodiversity can be obtained in the same place as the project, but even off site or through a combination of on-site and off-site measures.

In the report “The Economy of Biodiversity: The Dasgupta Review”, the British government argues that consider nature as a class of goods will help improve biodiversity conservation. It is therefore proposed to manage the loss or deterioration of ecosystems with financial assets.

As reported by, according to the new law that will be in force from November, all new development projects in the area that will require a planning permit will have to ensure that they offset 100% of the impact and increase the value of the site’s biodiversity by at least 10%. The 110% rule also requires that any affected habitat within the boundary be replaced by another on a ‘like for like’ or ‘like for better’ basis.

While in the first hypothesis, the violated habitat must be restored within a radius of 10 km; in the second, explains Hache, “it is possible to compensate by choosing any place, and not necessarily with a habitat, for example, of flamingos but with a equivalent monetary value ecosystem service”.

There are no mandatory measures to prioritize destruction containment over recovery, nor are there any limits to the permitted use of offsetting.

How biodiversity credits work

The idea behind biodiversity credits is to assign a monetary value to jobs involving:

  • protection from extreme climatic events
  • CO2 sequestration
  • the purification of air and water
  • the conservation of flora and fauna
  • other benefits for the ecosystem

Projects that aim to conserve or restore these services can generate biodiversity credits that can be aPurchased by entities or companies interested in offsetting or reducing their environmental impact.

On the one hand, there are the bodies that issue biodiversity credits and on the other the companies that will be able to obtain them. Each credit is sold only once and prices necessarily vary according to the specifics of each project. explains that credits, based on performance, are only released to the market when the project has achieved verifiable performance and management objectives.

Credits can be created before being used, and can also be held, indefinitely, until assigned to a project. The British government is also planning the creation of habitat banks for the creation of larger and more strategic sites for nature.

This market is already attracting interest from various entities. According to CarbonPulse, for example, the English organization Botanical Gardens Conservation International is preparing 65 projects in Africa, Asia and South America protection of endangered tree species for use in the upcoming biodiversity credit market.

The anger of the poorest countries

Despite being the first global agreement to guarantee the stability of ecosystem services, countries such as the Democratic Republic of Congo have tried to block the Kunming-Montreal agreement by pushing instead for the creation of a fund linked to biodiversity. The president of Cameroon called the agreement a real “fraud”.

The angular passage, the opposing countries argue, is the possibility of generating sustainability credits even in areas far from those where the intervention is carried out. A possible speculation that the co-founder of Green Finance Observatory explains as follows: “Rich countries, instead of curbing their destructive impact on the environment, claim to compensate elsewhere, preferably in poorer countries where land is cheapimplementing some small actions such as the restoration of habitats for a particular species or plant”.

Hache himself has no doubts about the future of this market: “Just as happened with the voluntary carbon market regulated by the Paris Agreements and made operational by the Glasgow Cop, so COP28 will make the biodiversity credit market operational”.