A solution that must grow with high integrity
The concept of biodiversity credits emerged to go beyond the concept of offsetting and deliver long-term positive outcomes for biodiversity and ecosystems. The biodiversity credits market doesn’t exist yet, and that’s precisely the opportunity to build it right. At Quantis, we consider that one critical principle, namely avoided-loss crediting, rests on contestable assumptions about what would have happened without the project. In a market designed to finance measurable, additional ecological gains, that counterfactual logic doesn’t belong.
Here is what needs to happen now, and why early movers who align on these principles today will be better positioned than those who wait for regulation to catch up.
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The Kunming-Montreal Agreement aims to halt and reverse biodiversity loss by 2030. Achieving this goal is estimated to require $722–967 billion per year, while current spending on biodiversity through various channels is about $124–143 billion annually. This leaves a global biodiversity finance gap of roughly $600–800 billion per year (around $700 billion on average)1, highlighting the urgent need for new mechanisms to mobilize additional investment on nature.2
Scaling biodiversity credits is one option that could contribute unlocking private capital toward restoration/regeneration and protection contributing to investments required by global commitments, such as the Kunming-Montreal Global Biodiversity Framework (GBF).
The Biodiversity Credit Alliance defines Biodiversity Credits as an economic instrument based on a measured, evidence-based and durable unit of positive biodiversity gain, additional to what would have occurred otherwise.
Unlike offsets, which compensate for residual impacts, biodiversity credits are designed to contribute to a nature-positive trajectory. They represent quantified conservation, restoration, avoided loss or maintenance outcomes in a specific location, and aim to generate funding toward actions that deliver verifiable ecological benefits (e.g., species abundance, areas of habitats, ecological integrity, etc.).
Our Quantis position: no credits for avoided loss
The Biodiversity Credit Alliance includes “avoided loss” in its definition of credits, the idea that a project can generate credits by preventing degradation that would have occurred without it. We see this as a design flaw, for two reasons:
- Fragile additionality. Demonstrating that degradation would have happened relies on counterfactual scenarios that are inherently unverifiable.
- Baseline inflation risk. The more pessimistic the projected baseline, the more credits a project generates. The economic incentive pushes toward exaggerating the threat.
A high-integrity market must finance restoration, regeneration, and active stewardship.
The biodiversity credits market is still nascent: there is no regulated global biodiversity credit market comparable to carbon today – no credits are issued yet, while some biodiversity schemes already exist. On the other hand, some well-recognized carbon credits start to integrate other environmental and/or social co-benefits, which is a good signal, though they don’t grant with biodiversity certificates per se.
But rapid growth without strong safeguards increases the risk to replicate the challenges seen in parts of the carbon market that led to criticism and uncertainty (e.g. greenwashing risks, lack of verification / transparency, inflated baselines, weak additionality, unintended negative consequences such as displacement of local communities or further biodiversity degradation by planting trees with rapid growth and short life duration).
For biodiversity credits to succeed, three main aspects must be clarified:
1. Eligibility criteria
- How buyers can access the market, notably not allowing offsetting
- Creating clear borders with primary (with credits) vs. secondary markets (not allowing credits)
2. High-integrity guidelines for projects to avoid greenwashing
- Grounded in science, with standardized biodiversity metrics
- Share benefits with Indigenous Peoples and Local Communities
- Embedded in the mitigation hierarchy:
- Avoid: conserving existing ecosystem intact (e.g. not replacing natural grasslands or wetlands with trees plantation)
- Reduce: changing practices to limit the impact of human activities on ecosystem. E.g. recycling water for industrial usage
- Restore & Regenerate: implementing practices that generate some benefits on natural and/or productive ecosystems. E.g. Nestlé’s regenerative agriculture program
- Transform: aiming at deeply changing economic models and societal expectations – this step is the one that can generate long-term positive outcomes for biodiversity (which is different from offsetting) that can be economically valued. E.g. Patagonia transferring its benefits to restoration initiatives.
- Transparent in methodologies and governance
- Linked to measurable and durable ecological outcomes, with long-term commitment
3. Clear governance of the market, overcoming financing barriers.
Even well-designed credits will not scale without addressing structural barriers. A BCG analysis projects biodiversity credit demand at only ~$1-2 billion by 2030 (roughly 1% of the GBF $200 billion target). Closing that gap requires:
- A clear demand signal from regulationFinancial mechanisms that de-risk early investment
- Market infrastructure that reduces friction
Without these three foundations, biodiversity credits can become reputational instruments rather than financing tools for measurable ecological recovery.
Various instruments are currently available for companies
To structure a rapidly evolving and still fragmented landscape, we distinguish two main categories of biodiversity credits, reflecting existing market trends and underlying economic logic:
- Voluntary nature credits: credits purchased without regulatory obligation to finance positive biodiversity outcomes, that cannot be assimilated to offsets
- Payment for Ecosystem Services (PES) / PES schemes: broader payment mechanisms for ecosystem services that underpin and inform the design of voluntary credit systems
| Feature | Voluntary Nature Credits | PES / PES Schemes |
| Purpose | Contribute to measurable biodiversity gains | Pay for environmental services delivered |
| Regulatory status | Voluntary (market-driven) | Voluntary, contract-based (public or private) |
| Tradable asset | Yes | No |
| Typical buyers | Companies, investors (corporate scale) | Governments, agencies, sometimes private actors (regional scale) |
| Example | Australia’s Nature Repair Market (NRM) UK Biodiversity Net Gain (BNG) Verra Nature Credits (SD VISta Nature Framework); Plan Vivo PV Nature4; Emerging pilot biodiversity credit projects (e.g., habitat banks in Latin America or Africa) | Costa Rica national PES program (forest protection, carbon, biodiversity)5; PES schemes from French river basin authorities (water quality, biodiversity); Watershed PES program in Latin America and Asia |
| Market maturity | Emerging and small-scale | Used globally with longer history Not market-based (most often public mechanism) |
Leveraging established carbon market frameworks and progressively expanding them with robust biodiversity indicators appears more actionable and faster to implement in the near term. Our conviction at Quantis is that a multi-indicator environmental credit integrating one or multiple indicators depending on the project (such as climate, biodiversity, water, etc.) would better reflect ecological performance than siloed instruments and would synergize efforts to complete required data. The carbon market is expected to remain more important with a biodiversity credits market’s forecast size in 2030 which remains limited. As carbon credits projects often generate co-benefits with biodiversity, we believe this would help accelerate the financing of solutions with wider benefits and with clear metrics, as long as the above conditions and principles remain in use.
Such multi-indicators instruments would need to cope with the intrinsic difference between carbon and biodiversity credits: carbon credits can be used as compensation, but biodiversity credits cannot.
Illustration
Within the Voluntary Carbon Market, a number of Nature-based Solutions3 projects already integrate biodiversity considerations into carbon crediting.
- Example 1: Verra’s Verified Carbon Standard (VCS) projects can apply the “Climate, Community and Biodiversity” Standards (CCB) to demonstrate positive biodiversity outcomes.
- Example 2: Gold Standard for the Global Goals and Plan Vivo, also incorporate biodiversity-related indicators, particularly in land-use and agroforestry projects. In all cases, however, biodiversity is typically assessed as an additional attribute without specific crediting, while carbon remains the core tradable unit, and without the possibility to value projects with biodiversity-only outcomes.
The increasing emphasis on biodiversity outcomes is reshaping expectations around environmental markets, with a gradual move toward recognizing biodiversity as a value driver on its own.
Perspectives to scale opportunities
Biodiversity credits face a set of barriers that limit their scale. A key challenge is the lack of reliable public data, which constrains transparency and credibility in verification. At the same time, there seems to remain a limited number of highly profitable investment opportunities, compounded by multiple risks for investors; political, ecological, and reputational4. This highlights the central role of public policy in either enabling or hindering market development.
Additional frictions include weak communication between buyers and sellers, the complexity of measuring and reporting robust outcomes, and broader political instability, all of which increase uncertainty and transaction costs.
The first step is to convince demand of the value of such instruments that:
- Generate ROI related to restoration and regeneration in their value chain, limiting disruptions that are increasing in the value chains of most sectors, and almost everywhere (making sourcing relocation more challenging). Strengthening the understanding of material nature-related risks for companies is critical to demonstrate this business case;
- Enables companies to get (or stay) ahead of regulation: for example L’Oréal recently updated its Sustainable Land Use Policy, which includes ecosystem services regeneration and restoration, and such a multi-benefit approach is also particularly relevant under the new Land Sector and Removals Standard (LSRS) of the Green House Gas (GHG) Protocol;
- Contributes to corporate targets achievement.
Once companies are aligned with the ‘why’, several enablers are emerging to unlock the scale of biodiversity credits, of which:
- Creation of a regulated market to incentivize companies to invest in biodiversity credits
- Leveraging existing financial mechanisms, such as sustainability-linked loans or blended finance can help improve the attractivity of the instruments and mobilize investments
- The creation of dedicated and regulated platforms can facilitate matchmaking by connecting buyers and sellers more efficiently.
- Finally, breaking down silos between climate and nature agendas is essential to drive more integrated, coherent investment strategies and accelerate action.
Conclusion
Biodiversity credits hold genuine promise as a mechanism to channel private capital toward nature-positive outcomes, but only if the market is built right from the start. The carbon market’s challenges offer a clear lesson: speed without integrity destroys trust and, ultimately, impact.
The investment mobilization is real and urgent ($200B/year based on GBF target 19). Let’s not be naïve, credits alone won’t close it, but a well-governed, science-grounded biodiversity credits market can meaningfully complement public finance, regulatory instruments and other financial instruments.
Three things need to happen now:
- Convergence on standards. Policymakers, standard-setters, and scientific bodies must align on shared metrics, eligibility criteria, and additionality rules before the market scales. Fragmentation is a barrier for buyers and an invitation to greenwashing.
- Break the silos. Multi-indicator credits (climate, biodiversity, water) are more pragmatic than parallel single-metric instruments. The voluntary carbon market should evolve alongside, not in parallel.
- Move now. Early movers who build internal nature-resilience, pilot high-integrity credits, and shape emerging standards will be better positioned operationally and reputationally than those who engage only under compliance pressure.
Our role at Quantis is to help companies navigate this complexity with rigor: grounding biodiversity strategies in science, challenging credit claims, and ensuring that investment in nature translates into verifiable, durable ecological outcomes.
Read the interactive article
- The $700 billion gap refers to the GBF target 18, target 19 and target 15 (https://www.cbd.int/gbf/targets) ↩︎
- Source: https://www.oecd.org/en/topics/finance-and-investment-for-biodiversity.html + Deutz et al., Financing Nature: Closing the Global Biodiversity Financing Gap, Paulson Institute, TNC, Cornell (2020) + Synthesis of biodiversity finance gap estimates used in global policy discussions. ↩︎
- IUCN definition of Nature-Based Solutions ↩︎
- The current state, opportunities and challenges for upscaling private investment in biodiversity in Europe (https://www.nature.com/articles/s41559-024-02632-0) ↩︎
