In the Bosque de Niebla, located in the department of Antioquia in northwestern Colombia, biodiversity bonds have emerged to push for protection of the ecosystem from threats such as deforestation and rising temperatures. But these instruments are still very green in Latin America. CREDIT: Courtesy of Terraso

By Emilio Godoy
MEXICO CITY, Aug 28 2023 (IPS)

Located in northwestern Colombia, the Bosque de Niebla is home to 154 species of plants, 120 bird species, 21 species of mammals, 16 water springs and five hectares of wetlands.

Forming part of the Cuchilla Jardín-Támesis Integrated Management District in the department of Antioquia, the ecosystem provides water and climate regulation to the entire northwestern region of the country."Not all ecosystem services are the same, it has to be a very judicious system. And there have to be local regulations, from green taxonomies (classification of activities) to regulations. Therein lies the dilemma of where the sector has to go." -- Lía González

For this reason, an innovative financing scheme, biodiversity bonds, seeks to strengthen the protection of this area for 30 years, in the face of threats such as deforestation, drought and rising temperatures due to the climate crisis.

Private Colombian investor Terraso and Spanish carbon offset seller ClimateTrade, a climate solutions company that utilizes blockchain technology to facilitate large-scale decarbonization efforts through innovation, created voluntary biodiversity bonds for the Bosque de Niebla in May 2022.

The aim is to care for 340 hectares registered as a habitat bank by the Ministry of Environment and Sustainable Development of Colombia, one of the 10 most biologically diverse countries in the world.

Habitat banks are areas where conservation initiatives are aggregated and ecosystem preservation, enhancement or restoration actions are implemented to generate quantifiable biodiversity gains.

Each biodiversity credit represents 10 square meters of threatened, conserved or restored land. Technical, financial and legal guarantees will sustain the project for at least 30 years. Each bond, worth 30 dollars, corresponds to 30 years of conservation and/or restoration.

But the scheme raises concerns about the commercialization of wildlife and the pursuit of profit over ecological benefits.

Patricia Balvanera, an academic at the Institute for Research on Ecosystems and Sustainability of the public National Autonomous University of Mexico, said the financial market approach does not address the full spectrum of environmental, cultural and social issues, which can cloud the vision of the integral importance of nature.

“Other non-integrated values have to do with social, ethical principles that have developed around nature. We have bought ourselves an image as a factory of resources at the service of people and we have discarded the role of nature and society through a relationship of care and reciprocity,” she told IPS from the northern Mexican city of San Luis Potosí.

The expert is co-author of the study “Diverse values of nature for sustainability”, published on Aug. 9, which addresses a more holistic view of care.

Unlike offsets for environmental damage due to infrastructure projects, biodiversity credits are an economic instrument that can be used to finance actions that result in measurable positive outcomes through the issuance and sale of biodiversity units.

The buyers of biodiversity bonds gain in reputational aspects, by promoting the restoration and protection of ecosystems, and obtain funds by reselling the bonds, as it is a voluntary market.

These are different from carbon credits, where companies and individuals can buy the reduced emissions credits in what is known as the voluntary carbon market, to offset their polluting emissions: each one represents the elimination of one metric ton of carbon from the atmosphere.

For the carbon dioxide equivalent trapped and stored in ecosystems such as forests, project owners can issue certificates for sale in national and international markets to national and international corporations and individuals who want to reduce their polluting emissions.

Mangroves, such as these in the municipality of Paraíso in the southeastern Mexican state of Tabasco, are candidates for biodiversity bonds because of the services they provide and the need to protect them, like other ecosystems. But these credits still need international standards, verification and monitoring guidelines, as well as tangible results. CREDIT: Emilio Godoy / IPS

On hold

In Honduras, a project similar to the Colombian one is advancing in Cusuco National Park, in the northwestern department of Cortés.

In the 22,200-hectare forest, decreed in 1987, the international alliance of environmental organizations rePlanet seeks the conservation of 1,883 hectares in 25 years in the face of threats such as deforestation and the risk to 24 species.

The project could issue bonds this year.

Lía González, director for Latin America of the Belgian social impact investment firm Incofin, said the instrument involves several challenges, such as monetization, assigning value to the blocks of land, the creation of standards for measurement, verification, monitoring and issuance, as well as the involvement of the communities.

“Not all ecosystem services are the same, it has to be a very judicious system. And there have to be local regulations, from green taxonomies (classification of activities) to regulations. Therein lies the dilemma of where the sector has to go,” she told IPS from Bogotá.

The executive stressed that the scheme should avoid the carbon credits model and learn from its mistakes, such as inaccurate calculation of carbon sequestration and violations of community rights.

In 2022, Incofin’s portfolio covered 111 clients in 14 Latin American countries for a total of 400 million dollars in segments such as sustainable agriculture and microfinance. In Colombia, it supported eight clients and totaled 44.3 million dollars.

The company focuses on medium-term investments, so that beneficiaries have an additional source of income within the area being protected or restored.

So far, so-called green bonds have fallen short in financing for the conservation of natural wealth and sustainable land use, according to a 2020 report by the Luxembourg Green Exchange and the Global Landscapes Forum, entitled: “How can Green Bonds catalyse investments in biodiversity and sustainable land-use projects?”

Colombia and Honduras are the countries that have moved forward with these instruments, because they have regulations and several financial instruments related to biodiversity, although bonds are still a rarity.

In this regard, the Organisation for Economic Co-operation and Development (OECD), which groups the world’s 38 most developed economies, noted in its 2021 report “Tracking Economic Instruments and Finance for Biodiversity” that, despite the progress made, the substantial potential depends on increasing the use and ambition of biodiversity-relevant economic instruments.

In its Sixth National Biodiversity Report 2020, Honduras recognized the need to improve the monetary and non-monetary valuation of environmental services.

Financing schemes are essential to the development of the United Nations Decade on Ecosystem Restoration 2021-2030, adopted by the U.N. General Assembly in 2019, which seeks to prevent, halt and reverse the degradation of terrestrial and marine ecosystems, to eradicate poverty, combat climate change and prevent the mass extinction of species.

Moving towards a take-off?

In order for it to be successful, the mechanism requires integrity of the projects and the inclusion of all stakeholders, according to the World Economic Forum, dedicated to multinational business lobbying.

The Colombian Bosque de Niebla initiative has already placed 62,063 credits and has 61,773 available.

The investor Terraso has seven other habitat banks in various areas of Colombia that could generate more bonds.

Balvanera warned of perverse incentives that could undermine protection.

“If we think about financial schemes, the link should not only be transactional. There must be involvement of different stakeholders who collectively identify the mechanism that promotes conservation, respects the vision of care and maintains the livelihoods of the inhabitants of these areas,” she said.

The academic argued that “this generates a circular system that connects forest protection, water care, food production and sustainable consumption.”

For her part, González was open to analyzing these investments.

“Water could be a viable focus for climate resilience and its impact on the region’s climate. We are interested in learning about monetization and that additional sources of income can benefit protection processes, so that it is complementary to what we do,” she said.

Last December, the 15th Conference of the Parties (COP15) to the Convention on Biological Diversity (CBD) adopted the Kunming-Montreal Global Biodiversity Framework, which includes cumulative biodiversity funding of at least 200 billion dollars by 2030 from public and private sources.

One of its goals is to encourage innovative schemes such as payment for environmental services, green bonds, offsets, biodiversity credits and benefit-sharing mechanisms that include environmental and social safeguards.

To meet these objectives, the 196 States Parties to the CBD created the Global Biodiversity Framework Fund, which is managed by the Global Environment Facility and whose governing council was approved in June in Brazil.

In addition, the agreement includes the complete or partial restoration of at least 30 percent of degraded terrestrial and marine ecosystems by 2030, as well as the reduction of the loss of areas of high biological importance to almost zero.

The El Cielo biosphere reserve in the northeastern Mexican state of Tamaulipas. Critics of biodiversity offsetting say it could open up unspoiled natural areas to human activity, and complain that it commodifies ecosystems. Credit: Courtesy of the government of Tamaulipas

By Emilio Godoy
MEXICO CITY, Sep 22 2014 (IPS)

Compensation for biodiversity loss, which is taking its first steps in Latin America, is criticised by social organisations for “commodifying” nature and failing to remedy the impacts of extractive industries and other activities that destroy natural areas and wildlife.

“No market mechanism resolves the underlying problem,” Margarita Flórez, executive director of the Environment and Society Association (AAS), a Colombian non-governmental organisation, told Tierrámerica.

“The most serious thing is the environmental liabilities. What should be done about the damage that has already been caused? How do we make sure it’s really compensation and not just remediation?

“We keep losing resources and we haven’t been able to curb the loss at all. This mechanism is plagued with contradictions,” she said.

Since August 2012 Colombia has had a “manual for the allotment of compensation for the loss of biodiversity”, although it is not yet applied. The manual enables businesses to know precisely where, how and how much to compensate for the ecological impact of their activities.

The plan stipulates that compensation must be made in areas that are “ecologically equivalent” to the place that will be damaged, and that it can be carried out in areas listed as a priority by the National Restoration Plan or the National System of Protected Areas.

The compensation or “biodiversity offsetting” activities must last as long as the useful life of the mine or other project, and can entail financing to create or strengthen protected areas or conservation agreements with private property owners or indigenous or black communities on collectively-owned land.

The manual is to apply to projects or works in the mining, oil, gas and energy industries as well as ports, infrastructure, and new international airports.

Excluded are national protected areas, national parks, and biosphere and forestry reserves whose activities depend on special legislation.

Compensation for secondary vegetation ranges between 0.01 and 0.02 square km for every square km affected. And in the case of natural ecosystems, it ranges from 0.02 to 0.1 square km for every square km affected.

In Colombia there are 55 national protected areas, representing 10 percent of the country’s total territory.

Biodiversity offsetting is one of the six Innovative Financial Mechanisms outlined by the Convention on Biological Diversity (CBD), which entered into force in 1993 and has been ratified by 193 countries. The treaty is widely seen as the key document on sustainable development.

The other mechanisms are environmental fiscal reform, payments for ecosystem services, green markets, biodiversity in climate change funding, and biodiversity in international development finance.

Currently only one-fifth of the signatory countries have biodiversity offsetting mechanisms, and some 45 programmes are in operation, with an investment between 2.4 and 4.0 billion dollars.

Map of the offsetting factors in terms of representativity of ecosystems and biomes in the biological-geographic districts of Colombia. Credit: Courtesy of the Colombian Environment Ministry

In Latin America, Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela are the countries with some kind of biodiversity offsetting system, while Ecuador is studying how to implement a mechanism.

Chile, for example, is working on the creation of compensation for biodiversity loss, based on new Environmental Evaluation Service regulations that incorporate the guidelines for offsetting, in a country where protected areas cover 19 percent of the territory.

In Peru, where 166 natural areas cover 17 percent of the country, the guidelines for the design and application of the Environmental Impact Evaluation System’s Environmental Compensation Plan are being debated.

In Mexico, Pedro Álvarez, the head of biological resources and corridors in the National Commission for the Knowledge and Use of Biodiversity (CONABIO), a government agency, sees it as feasible to combine conservation mechanisms with economic production.

“If communities learn that biodiversity has value, it becomes a good opportunity to generate hope in the management of natural resources,” he told IPS. “But in order for it to work, public funds must be guaranteed for lengthy periods of time.

“In addition, we have to choose the areas with the greatest biodiversity, and prevent it from becoming a situation of ‘if they pay me, I’ll take care of it’,” he said.

The 2013-2018 Sectoral Programme on Environment and Natural Resources indicates that 29 percent of Mexican territory has lost natural ecosystems, in a country with 176 natural areas.

The National Commission on Protected Natural Areas administers the 176 areas, which cover 13 percent of Mexico’s territory.

With the Environmental Compensation Programme for Change of Land Use in Forested Areas, the National Forestry Commission financed 275 projects last year covering 321 square km of land.

“In Colombia, the incentives for conservation have been tiny,” AAS’ Flórez said. “The manual is full of declarations and fails to explain precisely how it can be applied. Details are needed – when, in what conditions, and what will happen if this isn’t applied.”

Tremarctos-Colombia, a system that conducts a preliminary assessment screening of the impacts of an infrastructure project on local biodiversity and provides recommendations regarding the compensatory measures a project will have to assume, can be used in the first phase of the project.

The manual for establishing the compensation for biodiversity loss will be used in the second stage, and in the third stage monitoring will be carried out to compare it to the baseline and guarantee that there is no net loss of biodiversity.

Countries like Brazil, Chile, Colombia, Ecuador and Venezuela suffered biodiversity loss between 1990 and 2008, according to the Inclusive Wealth Index, a study of 20 countries led by the United Nations Environment Programme (UNEP).

“New mechanisms must be created,” said CONABIO’s Álvarez. “But it’s not a question of paying people for polluting; that is dangerous. The precautionary principle [the precept that an action should not be taken if the consequences are uncertain and potentially dangerous] must be included in environmental rulings, and there should be a kind of environmental insurance premium in case of accidents.”

The “No to Biodiversity Offsetting!” movement issued a manifesto in November 2013 in Edinburgh, Scotland, complaining that it “could lead to an increase in damage, but even more concerning is that it commodifies nature.”

The document, signed by dozens of organisations around the world, says “biodiversity offsetting allows, or even encourages, environmental destruction…[and] is the promise to replace nature destroyed and lost in one place with nature somewhere else.”

Offsetting, according to the signatories, “is beneficial to the companies doing the damage, since they can present themselves as a company that invests in environmental protection, thereby green-washing its products and services.”

The campaign argues that biodiversity offsetting will not prevent loss, and will harm communities and separate them from the environment in which they live, where their culture is rooted, and where their economic activities have traditionally taken place.

One of the aims of the CBD’s strategy for resource mobilisation is to consider offsetting mechanisms, where they are relevant and appropriate, as long as there are guarantees that they will not be used to weaken the unique components of biodiversity.

This story was originally published by Latin American newspapers that are part of the Tierramérica network.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes