Financing conservation has a new face

“We‘ve said many times we‘re going to do better, but we haven’t. Biodiversity is decreasing at an alarming rate,” said Julia Fa, senior research associate at the Center for International Forestry Research and World Agroforestry (CIFOR-ICRAF). That stark reality alone helps explain and justify the urgency behind the adoption of the Kunming-Montreal Global Biodiversity Framework. But before we explore new solutions, it’s worth pausing to grasp the scale of the crisis. 

1. One million species are at risk of extinction. Since 1970, global wildlife populations have plummeted by 69%. 

1. Deforestation continues at a staggering pace, with an estimated 10 million hectares of forest lost annually between 2015 and 2020.020. 

1. Climate change is intensifying biodiversity loss, unleashing increasingly severe hurricanes, floods, droughts and wildfires. 

These pressures are pushing nature beyond its limits. And the stakes couldn’t be higher. Biodiversity isn’t just about protecting rare species or scenic landscapes. Biodiversity forms the foundation of food systems, water cycles, economies and human well-being. Investments in restoring nature generate a wide range of benefits, including enhanced ecosystem services, improved climate resilience and improved local livelihoods. 

Yet despite growing awareness, conservation efforts remain woefully underfunded. So why hasn’t conservation kept pace with the crisis?

The funding gap: Why traditional models are falling short 

Conservation funding has always existed, coming in the form of government programmes, philanthropic donations and non-profit efforts. These have played a significant role in biodiversity conservation, but they haven’t kept pace with the scale of the biodiversity crisis.

According to the Financing Nature report by Deutz et al. (2020), the global biodiversity financing gap amounts to approximately USD 700 billion annually. Relying on voluntary donations, inconsistent government funding, and short-term aid is no longer tenable and simply insufficient to counter the systemic drivers of biodiversity loss (OECD, 2020). These sources are vulnerable to political shifts, economic downturns and environmental shocks, as made painfully clear during the COVID-19 pandemic, when conservation revenues from tourism collapsed (UNEP, 2021).

If conventional approaches fall short, then it’s time to consider new ones.

What are biodiversity credits and why do they matter?

Although the concept isn’t entirely new, biodiversity credits remain poorly understood. In essence, they are financial instruments that link private capital to conservation outcomes.  A biodiversity credit represents a verified, measurable, evidence-based unit of biodiversity benefit, one that is both sustainable and additional to what would otherwise occur naturally.

Why does this matter? For one, natural ecosystems provide an estimated USD 125 trillion in value every year. Forests alone sustain the livelihoods of over 1 billion people in the Global South. Moreover, every dollar invested in nature restoration generates an average of USD 9 in economic benefits.

Biodiversity credits aren’t just about assigning monetary value to ecosystems. They aim to create the financial infrastructure necessary to protect nature at scale.

Understanding biodiversity credits: Mechanics, markets and misconceptions 

To appreciate the promise—and complexity—of biodiversity credits, it helps to clarify a few key concepts.  

First, carbon credits. While the idea of biodiversity credits is inspired by the more established mechanism of the carbon market, the two mechanisms serve different purposes.  Carbon credits are tied to the reduction or removal of greenhouse gases (measured in tCO₂e). Biodiversity credits, by contrast, aim to protect species, restore habitats and preserve ecological integrity. 

Second, biodiversity offsets.  These involve compensating for biodiversity loss caused by development, typically mandated by law. A company building a mine, for instance, might be required to fund equivalent conservation efforts elsewhere. In such cases, biodiversity credits can serve as a currency of exchange. But biodiversity is context-specific and not easily interchangeable. That makes trading credits across locations—say, destroying 10 hectares of primary forest in one country and offsetting it with five credits purchased elsewhere—highly controversial.  

This is where concerns about greenwashing arise. Without strong safeguards, biodiversity credits risk becoming tools to legitimize destruction rather than prevent it. 

So, who are the buyers and sellers in this emerging market? 

On the supply side are local communities, Indigenous groups and farmers’ organizations—often best placed to deliver conservation on the ground. On the demand side are companies looking to reduce their ecological footprints, as well as financial institutions, governments, philanthropists and consumers. Some actors in the carbon market are also expanding into biodiversity. These buyers are motivated by regulation, ethical responsibility and growing investor pressure. 

Together, they are shaping a nascent market that could bring significant ecological and economic benefits—if designed and governed properly.

Tropical ecosystems: A test case for biodiversity credits 

Some of the world’s most biologically rich but vulnerable ecosystems are in the tropics—and they may offer the clearest test of how biodiversity credits can work in practice. 

Consider the Rupununi region of Guyana, the Yangambi landscape in the Democratic Republic of Congo, and Cameroon’s Dja Periphery. All three are biodiversity hotspots where conservation finance could be a game-changer. To that end, the European Union is supporting the SWM-Biodiversity Component—a study aimed at developing standardized, cost-effective ways to monitor biodiversity in these regions. 

Combining cutting-edge tools like eDNA and AI with Indigenous knowledge, the initiative lays the groundwork for credible biodiversity credit systems. These credits could fund efforts such as jaguar conservation in the Rupununi, protection of Congo Basin carbon sinks in Yangambi, or mangrove restoration in the Dja—all while empowering communities to lead. 

The EU’s involvement signals growing confidence in biodiversity credits as a lever for achieving global conservation goals, including the 30×30 target. Done right, they can turn high-value ecosystems into sustainable investment opportunities.