Credit where it is due
Carbon offsetting remains a controversial topic in climate finance. Biodiversity offsets and credits are, if anything, even more hotly debated given the more heterogeneous nature of local environments and ecosystems. There may still be a role for credits and offsets, even so.
TOWNSEND One way of achieving investment at the required scale could be through biodiversity credits. However, even as this market matures the risk is that companies use it as a way to mitigate their on-paper impact without fundamentally addressing the real impact across their supply chains.
Investment through offsetting has a place. But it can’t be at the expense of people and companies taking responsibility for their own footprint. Investment is required at scale and offsets are one mechanism to help achieve this. However, we also need to build frameworks and develop investor expectations that fit alongside the work businesses can do to measure their footprint and take responsibility for impacts right through their supply chain.
Most people who work in conservation are a little traumatised by the offset market, particularly in New South Wales – where habitat is destroyed in one place and an offset in a completely different ecosystem and habitat paid for in another. This will have its own long-term consequences.
WHITTON Some companies believe they can buy their way to mitigation. But this idea keeps being challenged, locally and internationally. As an example, Norges Bank, which has around 9,000 equity investments globally, has recently updated its position on the use of offsets for investee companies. It suggests companies should engage with offsets but should do so as a proactive investment in reducing damage and increasing resilience rather than as part of efforts to meet a net zero pathway.
The debate within environmental markets is very clearly starting to shift in this direction. Many are starting to say environmental markets are a mechanism that directs capital to emissions sequestration but also nature recovery, landscape improvement and resilience. The emphasis on using nature markets to mitigate or compensate for an entity’s system footprint is definitely shifting.
HOGG Offsetting is a tragedy. Most people who work in conservation are a little traumatised by the offset market, particularly in New South Wales – where habitat is destroyed in one place and an offset in a completely different ecosystem and habitat paid for in another. This will have its own long-term consequences.
In the conservation space, offsetting is great as a way to get capital into the system for restoration. But, as others have said, it should not be a way to pretend to be a nature-positive company.
GRAY Integrity needs to go a lot further than project level, because biodiversity markets are moving very quickly. We need to learn from carbon markets and build biodiversity credits as a credible economic market, not as a hobby or philanthropic project.
MURPHY It is good to debate this and the issues with offsets are clear. However, offsets play an important role if we want to invest capital in preservation and protection at real scale. There is a ready-made, functioning market that can support preservation. If we accept that there will be environmental damage in mining and energy projects, hundreds of millions of dollars could be invested in protection that would help get the biodiversity credit market up and running.
HOGG The key is to ensure that the offset market is not the end point but a step on the road to transition. This has been the issue in the past and has caused problems – particularly in south-eastern Australia, where offsets have been most prevalent.
The nature systems in this part of Australia are not found elsewhere in the world. If we lose them, they will be gone. Much of the area that is benefited through offsets is not agricultural land: it is desert – which is already well protected in Australia.
