As financial markets grow and compete, adapt and innovate, they can – at times – be more biology than economics, as if to peer through a microscope, there is something captivating about studying their evolution over time.
Biodiversity offsets are a compliance instrument designed to compensate for adverse environmental impacts from project development, whereas biodiversity credits are seen as more voluntary market instruments and can be used to finance stronger biodiversity outcomes.This opens the demand door beyond miners and developers to any companies that have committed to Nature Positive 2030 and similar frameworks.
As all biology does, this evolution will develop, as will its purpose. And as financial markets like scale and liquidity, expect some “accreditation victors”.There are huge lessons to be learned from watching the evolution of the carbon credit market – its journey from compliance market to voluntary net zero emissions to now a gold star for those that aspire towards a negative emissions target.
We can see this in today’s ACCU spot market, with nature-based removals trading at an approximate 10 per cent premium to avoided emissions. Beyond this, carbon credits can generate a premium for producing associated ‘co-benefits’ – in essence, a positive externality from the carbon project that enhances environmental, social, or First Nation’s outcomes.
But will there be demand? The planet certainly hopes so. With sovereign credit ratings vulnerable to the overexploitation of ecosystems, there’s no doubting the butterfly effect is more than just an allegory in chaos theory.
Another scam for billionaires and multinational companies to avoid real change?