COP30: Biodiversity Payment Requirements Key as Emerging Economies Develop
BELEM, Brazil — Emerging economies are likely to see substantial amounts of development in coming years and governments should use the opportunity to create and implement biodiversity compensation requirements to fund nature restoration efforts, attendees at the COP30 UN Climate Change Conference here were told.
Mariana Sarmiento, the founder of Terrasos, a Colombia-based developer that provides biodiversity units for compliance and voluntary markets, told OPIS that emerging economies in Latin America and Asia are likely to see more infrastructure development as these areas will see higher demand for the minerals and metals necessary for the energy transition.
“We need to accept that reality and have both the regulatory norms in place but also how do financial institutions really push on this concept of no net loss [of biodiversity] that has been present in their principles for more than a decade,” she said.
These regulatory norms would not only help stop the loss of natural environments, but would drive and scale up biodiversity and nature markets, Sarmiento added.
The Colombian government requires certain companies whose operations impact the environment adhere to a no net loss policy. Terrasos operates habitat banks, or areas where preservation or conservation efforts are carried out, usually in threatened or degraded environments.
Biodiversity credits can be issued once a developer and verifier can monitor improvements or enhancements.
The OPIS Biodiversity Market Report includes more details on Terrasos’ methodology and projects in Colombia.
“We’re facilitating that deployment [of funds] through habitat banks. For every dollar that we invest in a habitat bank, we’re mobilizing 20 times that in private capital. There are very few instruments in the finance world that are able to do that,” Sarmiento said.
Other countries have adopted similar measures or exceeded them, as is the case in the U.K., which instituted the Biodiversity Net Gain mandate in early 2024. The program requires developers to enhance nature by at least 10% either on-site or off-site or through the purchase of statutory biodiversity net gain units.
Chile, a country with vast reserves of lithium and copper, is an example of a country that has compensation regulation, though efforts are being made to strengthen the program, Sarmiento said. According to recommendations from the UN Development Program, the Chilean government “needs to reinforce the environmental compensation system through better institutionalization and effectiveness allowing the incorporation of costs in the development projects and the protection of the natural capital.”
Sarmiento said Terrasos only issues biodiversity units or credits once certain monitoring and verification milestones are met. These projects are also planned for a 30-year term, meaning they are run similarly to infrastructure projects, she added.
In addition, contractual requirements are also important in order to contribute to nature restoration. For example, a number of Terrasos’ clients are solar energy companies that are deploying solar panels around Colombia.
Because Terrasos is familiar with the Colombian landscape and regulation, the company is positioned to understand the impact of building and placing these solar panels in a suitable area. “We know where solar companies are building and we can anticipate the [biodiversity compensation] requirements they’re going to have,” Sarmiento said.
Financial contractual requirements are also helpful, she said, particularly if these can lead to lenders obtaining more favorable interest rates.
Nature, and exposure to nature risks, has become an increasing concern for certain financial institutions, according to the executive of a European bank.
Markus Muller, chief investment officer for sustainability at Deutsche Bank’s private bank division said the bank had created an advisory panel on nature in late 2023.
Muller said the bank needs external experts to help it understand the risks it faces from its exposure to nature and climate but also gauge which nature-positive solutions are the most viable for conservation finance.
“We need them and these experts to tell us where in the transformation we’re in. We’re using our toolkit, there is not one tool for one problem, we have to understand what we want to fix,” Muller said.
The German bank last week said it was working with the governments of Honduras and Suriname to develop carbon credits under Article 6.2 of the Paris Agreement, also known as Internationally Transferred Mitigation Outcomes, or ITMOs.
The bank said that this partnership could pave “the way for a new category of carbon credits and could mark the start of sovereign Rainforest Carbon Credits sold at scale directly to private sector companies under Article 6.2 of the Paris Agreement. The signatories emphasize in the Letter of Intent the importance of preserving rainforests to meet global climate and biodiversity goals.”
The German bank said that developing these ITMOs would contribute to the “remuneration of the protection of standing rainforests at a national level with the goal of preserving these unique ecosystems.”
COP30 runs from Nov. 10 to Nov. 21.
–Reporting by Humberto J. Rocha, hrocha@opisnet.com; Editing by Jeff Barber, jbarber@opisnet.com