Nature credits – Nordea’s perspectives on an evolving market
The growing global focus on nature loss presents both challenges and opportunities for the financial sector. As more nature-positive solutions are requested, Nordea has been actively exploring the emerging nature credit market – a trading system for positive biodiversity impacts. This overview examines the current landscape, key challenges and future potential of this evolving market.
Over the past year, senior biodiversity experts Jan Wärnbäck and Anna-Karin Modin-Edman in Group Sustainability have explored and engaged in the emerging biodiversity and nature credit space. Focus has been on industry collaborations and policy dialogues, including the EU Commission’s Roundtable on developing a plan to build a nature credit market. Now, the two experts expect a further ramp-up, but also see several challenges before widespread adoption.
“The biodiversity/nature credit market, meaning the trading of positive biodiversity impacts, is still in an early stage,” explains Anna-Karin Modin Edman. “The focus has so far concentrated on developing robust credit certification systems to ensure trust, which is great, as the supply of credits is of course fundamental for developing a well-functioning market.” She adds:
“In parallel, we hope to see increased ambitions and focus on how to build and scale demand. In the short term, we see limited commercial opportunities for Nordea related to biodiversity/nature credits due to challenges related to a lack of demand at scale. However, in the medium to long term, EU ambitions to scale this instrument will likely impact market opportunities positively.”
In the medium to long term, EU ambitions to scale this instrument will likely impact market opportunities positively.
According to Anna-Karin Modin Edman, the current main challenges related to scaling biodiversity/nature credits markets include:
The complexity of quantifying biodiversity impacts (positive and negative) and how to ensure like-for-like compensation when using credits as part of mandatory or voluntary compensatory measures.
An immature industry response to biodiversity impacts, where companies’ biodiversity impact mitigation hierarchies typically prioritise mitigating actions before adopting compensatory measures and positive impacts. Only a few companies have tried to offset negative impacts and/or make positive contributions. Voluntary measures, such as Science Based Targets for Nature have not yet scaled.
As methodologies, data capture and approaches develop, policies evolve and companies mature in addressing biodiversity, opportunities will arise. Jan Wärnbäck compares the development to that of the carbon removal market, which has seen rapid growth in the 2020s:
Senior biodiversity expert Jan Wärnbäck.
“The biodiversity/nature credits market could offer future commercial opportunities for Nordea, similar to those explored in the carbon removals market, and we want to be a part of this development. To scale the market for biodiversity/nature credits, and for Nordea to play a more commercial role, several actions are necessary.” He continues:
“Firstly, cost-efficient and rational ways for companies to quantify biodiversity impacts are needed to support their transition toward net-zero loss of biodiversity and positive impacts. A more widely accepted definition of how biodiversity/nature credits can be used as offsets and/or compensation for diffuse and/or historic impact in the value chain should be developed, i.e. what level of like-for-like compensation is necessary.”
“Secondly, policy development is needed to promote and scale demand for biodiversity/nature credits as demand cannot be solely driven by philanthropy and smaller investments as part of CSR/branding efforts. And thirdly, a secondary trading market should be developed in parallel with the development of supply and demand for biodiversity/nature credits to further support the general market development.”
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