18 August 2025 by Dr Tim Coles
We were recently commissioned by the UK FCDO to advise on how a biodiversity credits market can be launched in SE Asia. After much research and consultation we generated a report titled ‘Biodiversity Credits: Potential and Enabling Conditions in Southeast Asia’ – it has 10 key recommendations which can be applied both locally and internationally, these are summarised in this blog.
1. Agree a unit of biodiversity gain definition
Given the large number of ways in which biodiversity can be quantified, resulting in outputs presented in non-comparable ways, having a single agreed unit of biodiversity gain recognised across governments would help encourage corporates to quantify the units of biodiversity on their sites and affected by their activities. The highest quality definition is:
“A 1% gain per hectare in the median value of a basket of 5 metrics (taxa) that reflect the conservation objectives for the submitted habitats, with additionality and permanence”
This definition works for Verra, Plan Vivo and Wallacea Trust / Biodiversity Futures Initiative (BFI) standards and doubtless other methods could be developed to report units of gain to meet this definition.
2. Encourage issuance of biodiversity credits from publicly and philanthropically funded projects
Price discovery for biodiversity credits is necessary in order to attract commercial investment for wildlife conservation or restoration projects. These types of projects are already attracting public money, multilateral development bank soft loans or from private or corporate philanthropy. Encouraging the quantification of the units of biodiversity gain for these projects and issuance of biodiversity credits, would then enable the donors to receive their capital sum back and perhaps recycle the sums into additional projects. More importantly though it would enable price discovery from the sale of the biodiversity credits which is a key component needed for the biodiversity credit market to attract commercial investors.
3. Introduce legislation to require companies to report on their nature impacts
Developing legislation requiring corporates registered within each of the countries to include data on their Nature impacts in their annual reports would stimulate demand for biodiversity credits. This is in line with existing EU legislation and this type of legislation will doubtless be developed elsewhere. It would help with developing a business case for corporates on why they should both quantify biodiversity gains as a result of management actions on their own land or that of their suppliers (insetting) or invest in external wildlife conservation or restoration projects in order to generate biodiversity credits.
4. Enforce biodiversity quantification for nature-based carbon projects
Currently, the only liquid nature-related market is for carbon. Indonesia, Malaysia and Philippines all have carbon registries where carbon projects, whether on government, community owned or private land, need approval to proceed. This creates an opportunity for the governments to require all nature-based carbon projects to quantify the units of biodiversity gain they are generating in one standardised unit. This would allow buyers of those credits to claim that they were only buying offsets from projects that were generating an X percentage increase in biodiversity, which would increase the value and appeal of those credits. It would also encourage carbon project developers to design projects that produce a positive biodiversity outcome.
5. Ensure local stakeholder benefits
Using the same carbon registry mechanism to exert control, all approved projects should require a minimum of 60% of the final value of the project (i.e. including profits made on selling the credits to buyers) to go to local communities. The main thrust of the carbon or biodiversity credit projects should be to incentivise local stakeholders rather than national level stakeholders, on the basis that the former have a greater influence on whether the project succeeds or not. Government charges (e.g. required donations to NDCs) or taxes (e.g. Indonesia’s 10% tax on sale price of credits) therefore reduce the direct benefits going to local stakeholders and governments should bear that in mind when requiring charges and taxes on projects. Project developers will tend to focus investment on countries where a greater percentage of the funds can directly benefit local stakeholders, because these local payments are a good indicator of whether the project will succeed or not.
6. Encourage private sector investments in wildlife conservation
Biodiversity credits as a financial instrument are not yet trading and are unlikely to attract commercial investment until there is more evidence of the prices that biodiversity credits will achieve. This means that philanthropic investments into biodiversity projects are likely to be the key funding stream in the next few years, which we suggest are used to generate biodiversity credits. Ensuring that there are no legal or administrative restrictions on allowing these biodiversity credits to be issued and traded will help ensure that these types of philanthropic investments will be concentrated on SE Asian countries. Making it clear in national legislation that owners of land have the rights to sell biodiversity credits would incentivise this activity and encourage investments into nature.
7. Introduce compliance legislation
Many countries (e.g. Colombia, UK, USA, New Zealand, Australia) have compliance biodiversity markets where developers of new infrastructure projects need to replace or enhance the biodiversity of the site being affected. Whilst this encourages them to include as much nature as possible in the design of the new projects, they still end up needing to fund the creation of additional habitats as additional offsets. This leads to the development of Environment Banks that develop wildlife conservation projects in order to sell those projects to developers needing offsets for their development projects. Development of biodiversity compliance legislation aimed at new construction projects could provide investment into nature projects as offsets and help the governments achieve their 30 x 30 commitments. However, it is vital that the legislation emphasises the Mitigation Hierarchy and that avoiding and minimising impact on biodiversity of the development is the priority.
8. Develop habitat quantification systems
One area of method development that would not just help with the voluntary markets but could also form the basis for establishing a compliance market for biodiversity would be to develop a habitat-based quantification system. Compliance markets tend to work by measuring the existing habitats and their quality at the planning approval stage and then requiring the developer to replace the habitats either like for like (e.g. the US Clean Water Act 1977 that required replacement of any wetlands damaged during developments) or a net increase in the biodiversity post development (the UK Biodiversity Net Gain concept).
9. Governance of biodiversity credits
It is likely that once biodiversity credits start trading properly, their regulation would be most easily managed through the same mechanism used for authorising carbon projects in each country. However, given the nascent state of the biodiversity credit market and the need to encourage inward investment into nature projects, it is recommended that no steps are made at this stage to regulate biodiversity credits. This should be revisited once biodiversity credits are accepted as an international funding mechanism, but should include the following:
10. Capacity training for issuance of biodiversity credits
The level of knowledge about how biodiversity can be quantified, verified and issued as biodiversity credits was low amongst the government staff interviewed for this report. Capacity training for these staff plus representatives from indigenous and local people organisations and NGOs should increase the supply of packaged projects.
Read the full report here: https://www.evidencefund.com/lib/Z5KIJADI/download/TQHTSMUN