Nature Positivity Needs Parental Guidance: JP Morgan

While the UK's Net Gain regulation has grabbed headlines, it’s essential to recognize that its growth is driven by regulatory requirements. Beyond this, the broader biodiversity credit market is still in its infancy but holds significant promise, according to a recent JP Morgan ESG Flash Note entitled “Biodiversity credits: regulation & corporate commitments will be key to boost demand.”

The report offers five key takeaways:

1. The Baby: Biodiversity credits are still new, with prices ranging from $2 to $700 per unit. Why? There’s no standard way to measure biodiversity outcomes yet—different developers use different methods.

2. The Bathwater: Global demand for biodiversity credits could hit $1-7 billion by 2030, and a whopping $180 billion by 2050. The 2022 Global Biodiversity Framework, signed by 190+ countries, is helping boost the market.

3. The Nursemaid: Companies will play a big role. Biodiversity credits help businesses secure vital ecosystems, support nature recovery, offer eco-friendly products, and address unregulated biodiversity impacts. Major sectors to watch: agribusiness, construction, and utilities.

4. The Carrot: The Taskforce on Nature-related Financial Disclosures (TNFD) is pushing to stimulate voluntary demand by encouraging companies to assess their impact on nature and set biodiversity goals. Biodiversity credits could be key to meeting these commitments.

5. The Stick: In the UK, developers must meet a 10% biodiversity net gain (BNG) target using metrics developed by the Department for Environment, Food and Rural Affairs (Defra). Can’t achieve it? They can purchase biodiversity credits from the government as a last resort.