Protecting and restoring nature requires a high volume of resources, estimated at at least US$ 700 billion per year, According to the United Nations, the majority of this amount should be provided by governments through the redirection of subsidies that currently harm biodiversity, as agreed upon by the countries of the UN Convention on Biological Diversity.
But to achieve this goal, we need to go beyond public resources., It is necessary to mobilize US$$ 200 billion per year in the private sector., combining existing instruments and new financial solutions for conservation.
In this context, the biodiversity credits have gained ground as a market mechanism for Directing private capital towards positive actions for nature..
What are biodiversity credits?
Biodiversity credits they are Financial instruments generated from initiatives that protect, preserve, or strengthen biodiversity in a specific territory.. In practice, they recognize and reward actions with a positive environmental outcome, benefiting landowners, businesses, and communities that adopt sustainable practices and contribute to the conservation of fauna and flora.
Each credit represents a unit of positive impact in an ecologically sensitive region. In other words, it functions as a form of... finance and to promote conservation and restoration projects with measurable criteria.
Why biodiversity credits are gaining attention
Biodiversity credits are gaining traction as an alternative to expand private funding for conservation and restoration. This movement intensified after the approval of Kunming-Montreal Global Biodiversity Framework in 2022, often called the "Paris Agreement for Nature".
Another important factor is the advancement of standards and pressures for corporate transparency. The expectation is that Companies should disclose their risks and environmental impacts more clearly., including metrics linked to natural capital, such as those proposed by Taskforce on Nature-Related Financial Disclosure, TNFD.
In practice, this increases the demand for instruments that link private investment to concrete environmental outcomes..
How does a biodiversity credit work in practice?
The mechanism may vary depending on the standard adopted, but the logic is similar.
Civil society organizations, governments, landowners, or companies focused on conserving or restoring nature can... issue credits. In general, each credit represents a defined outcome, such as the conservation or restoration of a particular area over a specific period.
On the other hand, companies and investors can acquire these credits as a form of to fund positive actions for biodiversity., with traceability and proof of results.
The direct link to environmental restoration
Biodiversity credits They are linked to environmental regeneration practices, such as reforestation, ecological restoration, and agroforestry systems.
Those credits, If implemented correctly, they can encourage actions such as:
- Restoration of degraded areas;
- Reintroduction of native species;
- Formation of ecological corridors, connecting fragments of vegetation and allowing the flow of fauna and flora;
- Implementation of agroforestry systems, which combine agricultural production and conservation.
Opportunities for rural properties and businesses
Like carbon credits, biodiversity credits They can be an opportunity for economic growth for those who protect and restore natural ecosystems.
- For rural landowners - you credits They open up the possibility of making preserved and restored areas profitable without depending on converting the territory to conventional activities that often degrade the soil and reduce biodiversity. In this model, Preserving native vegetation and restoring degraded areas becomes a choice with economic returns..
- For companies – the purchase of biodiversity credits It allows for the financing of conservation and restoration projects, helping to address environmental impacts associated with operations and production chains. Furthermore, this type of investment can... to support the management of risks related to ecosystems, such as: damage to forests and plantations, regulatory and compliance pressures, and demands for transparency regarding impacts on and dependencies on nature.
One crucial point: credits are not a substitute for environmental responsibility.
Despite the potential, it's important to recognize that Market mechanisms can be seen as both a promising solution and a risky alternative., depending on how they are structured and used.
Therefore, the adoption of biodiversity credits needs to follow a certain “mitigation hierarchy”, which defines a priority order for companies:
- To avoid generating negative environmental impacts as much as possible;
- Reduce impacts that cannot be avoided;
- Restore through in-house projects, whenever possible;
- Offset only the minimum and residual portion of what is unavoidable, using instruments such as credits.
This care is essential to ensure that loans are part of a serious and consistent strategy., and not a shortcut to justify impacts.
Why the private sector needs to contribute to biodiversity.
Up to now, governments have accounted for the majority of global funding allocated to nature., approximately 83%. However, given budget constraints and other national priorities, it is unlikely that... public resources alone cannot cover the remaining deficit.
Therefore, pressure is growing for the private sector. assume a greater role in financing conservation and restoration..
In addition to demands from civil society and international commitments, there is a pragmatic factor. Funding nature conservation can help companies manage real risks, with direct effects on productivity, logistics, and business stability..
The role of Sitawi
The climate crisis and the loss of biodiversity are urgent challenges. To confront them, it is essential To enable alternative financing options that accelerate conservation, restoration, and impact economy initiatives, increasing the resilience of ecosystems and society..
At Sitawi Finances for Good, we believe that Financial mechanisms are a central part of this response.. We develop financial solutions to conserve biodiversity and address climate challenges, identifying mechanisms tailored to each biome and need.
We have experience in combining governmental, private, and philanthropic resources to generate positive socio-environmental and financial impact, including structures involving biodiversity credits.
Do you want to support conservation and restoration strategically?
Talk to our experts to evaluate possibilities, models and implementation paths.
