Biodiversity market

The awakening of the biodiversity market

In the last four decades, the planet has seen 69% of wild species decline, 75% of terrestrial environments and 40% of marine environments have undergone significant alterations, reflecting an unprecedented environmental crisis. In the following article we will try to analyse the new awakening of the biodiversity market and its influence on the sustainability sector.

Biodiversity loss: a major challenge ahead

Biodiversity loss has been identified as one of the most severe risks to humanity in the next 10 years, according to the World Economic Forum Global Risk Report. And more than 50% of the world's GDP depends on nature, which means that a large part of the global economy is exposed to different risks as a consequence of environmental degradation.

This drastic transformation of ecosystems requires an urgent assessment of the causes, a reassessment of practices and effective measures to protect and restore biodiversity, which is essential for the survival and well-being of life on Earth.

Businesses often negatively impact natural capital as a result of resource exploitation and pollution, and in the face of this reality, business leaders are increasingly aware of the importance of preserving nature by seeking tools to identify, quantify and mitigate impacts, assess risks to their respective businesses and ultimately, but not least, to take advantage of biodiversity-related opportunities.

New criteria and global lines of action

Just as companies adopted decarbonisation programmes to combat climate change a decade ago, international frameworks and initiatives are now emerging to outline approaches to enhance and regenerate biodiversity, actively involving the private sector.

The first relevant milestone was reached at the end of 2022 with the publication of the Kunming-Montreal Global Biodiversity Framework. This agreement, signed by the countries that form part of the United Nations group, establishes criteria and lines of action to halt and reverse the loss of biodiversity by 2030 and restore ecosystems by 2050.

Since then, further guidelines have been developed to promote action in favour of natural capital, requiring a higher level of transparency from business organisations. In this context, the Taskforce on Nature-related Financial Disclosures (TNFD)The aim of this standard, by and for the private sector, is to help identify impacts and dependencies with nature, as well as to assess related risks and opportunities in order to incorporate them into company processes.

New private actors are entering the biodiversity conservation space, seizing the opportunities of a new model that protects and encourages the regeneration of natural capital. Reforestation or regenerative agriculture are good examples of these practices.

Biodiversity credits, a $2 billion market by 2030

This increase in private actors and new business models is becoming an accelerator for the capital market by boosting the financing of such projects, which are evolving into so-called biodiversity credits.

These credits respond to a strategy that seeks to channel investments associated with effective biodiversity enhancement. The main objective is to offer a tradable biodiversity unit that provides a comprehensive and transparent investment option.

Internationally, there are already companies offering these financial products, although there are still certain shortcomings in the model due to a lack of methodological standardisation, as well as the concrete value of these products.

However, despite these preliminary and immature market limitations, according to a report by the World Economic Forum, the biodiversity credit market is gaining traction as a viable tool for biodiversity conservation and restoration, estimating a market of up to $2 billion by 2030 and $69 billion by 2050.

The three levers of biodiversity credits

What are biodiversity credits for? Biodiversity credits allow more resilient businesses to be generated, developing business strategies that promote a positive impact on nature and represent a new market opportunity. In this sense, these credits have three main levers:

  1. They increase the business resilience and mitigate their risksBiodiversity credits would mitigate biodiversity risks according to the hierarchy of mitigation levels, reducing companies' exposure to the physical and transitional risks they generate through their activity, such as regulatory changes and investor expectations.
  2. They serve to take a further step in the commitments to be Nature Positive.: The purchase of biodiversity credits is also a way for companies to become more sustainable. net positive with nature, contributing beyond mitigating the negative impacts generated. This approach would not only enhance the reputation of companies, but also enable them to meet consumers' sustainability expectations.
  3. Generate new business opportunitiesBiodiversity crediting: Entering into biodiversity crediting projects can generate business and innovation opportunities. Companies can discover potential benefits for developing nature-related products, opening up new revenue streams and improving their long-term sustainability.

Advantages of promoting biodiversity in Spain

In Spain, the market for biodiversity credits has great potential due to the country's rich biological diversity and the growing awareness of the importance of conservation.

Biodiversity credits are an opportunity to contribute to the recovery of fauna and flora in rural areas, to channel private capital towards these regions and to generate green employment, attracting population and betting on the cohesion of these territories, as well as exploring these new business opportunities.

The implementation of biodiversity credits can become a catalytic lever for the development of large-scale conservation projects, which not only preserve the environment, but also strengthen the local economy.

The biodiversity market seems to be starting to wake up, fostering the emergence of new opportunities for private investment and sustainable business development. Biodiversity credits, although still at an early stage, can become a key tool for channelling capital into conservation, offering benefits for both nature and business.

As more businesses adopt biodiversity plans and seek innovative ways to mitigate their environmental impacts, biodiversity credits will position themselves as an essential component in the transition to a more nature-friendly economy.

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