4 min read

Newsletter #7

Newsletter #7

๐Ÿ’ก One idea: Towards a global biodiversity credits market

๐Ÿ“ˆ One data figure: 4.5% per year, the tepid growth of geothermal energy

โœจ One success: Mr Green Africa, from plastic waste to value

Not a subscriber yet?

๐Ÿ’ก Towards a global biodiversity credits market

Over 1 million species are at risk of extinction according to the last Global Assessment Report on Biodiversity and Ecosystem Services released by IPBES. Forests and rivers, coral reefs and mangroves, deep waters and arable soils, all of them are threatened by pollution, urbanisation or fires. The current rate of extinction is tens to hundreds of times higher than the average over the past 10 million years, mainly because of habitat destruction driven by human activities.

Urbanisation and intensive agriculture are two important drivers of biodiversity loss, such as here in the US.

The World Economic Forum and PwC published the results of a study showing that more than half of the worldโ€™s total GDP is dependent on nature and is therefore exposed to nature loss. Because businesses rely on well-functioning ecosystems, they have a key role to play in nature conservation. This is why many are currently exploring the concept of biodiversity credits to unlock private financing for nature-positive outcomes. Indeed, we need to spend 5 to 10 times more per year to tackle the biodiversity loss crisis but we cannot rely on public funding only.

Biodiversity offsetting schemes have already been implemented for about 20 years in many parts of the world. ย Under this regulatory framework, companies responsible for destroying an ecosystem are asked to fund the restoration of an equally sized piece of land, usually at a local level. This is the last step in the Avoid-Reduce-Restore mitigation hierarchy.

A biodiversity credits market could instead work at a global level. Many companies might wish to contribute to nature-positive projects as part of their CSR policy, following the assessment of their nature footprint (see the work of the TNFD here, for example). Voluntary biodiversity credits would be purchased from conservation projects with measurable and verifiable biodiversity outcomes.

In Ireland, the sale of biodiversity credits financed the first restoration project. 600,000 native trees were planted, and robust metrics and verification features enabled the alignment with sustainability reporting standards, which eventually triggered corporate investments. AXA Ireland purchased the biodiversity credits for 2 million euros. Bravo!

"The Woodland Nature Credit will finance the establishment of large-scale new native woodlands in Ireland. In return, the funders will receive an environmental coupon in the form of carbon sequestration, biodiversity uplift and amenity value", Paul Flynn - then Chief Operating Officer Markets, Bank of Ireland

Similar initiatives are flourishing globally. Here is a list for those who want to know more:

These pilot projects are encouraging, but a global biodiversity credits market has yet to materialise. In order to scale up without just greenwashing business-as-usual, stakeholders need to collectively assess the demand and the supply, design the governance of the framework, and define issuance and transaction rules. To help build credibility and facilitate biodiversity gains measurements, a few startups are already providing geospatial, DNA and blockchain innovations. Work in progress.

๐Ÿ“ˆ 4.5% per year, the tepid growth of geothermal energy

The geothermal energy market is expected to register a CAGR of 4.5% from now to 2027 (source here). This is far below the various simulations generated to achieve the Paris Agreement goals. The Covid-19 outbreak has certainly slowed down the development of new projects, but the sector also faces challenges that have been known for many years: deterring exploration risks, gigantic capex needs and cumbersome regulatory processes.

Geothermal power plant in Iceland

Yet the increasing global need for green electricity sets favourable conditions for geothermal power. This source of energy is indeed abundant, cost-effective and low-polluting. The private sector keeps on investing, supplemented by public funding, which will generate numerous growth opportunities over the upcoming years. In the United States in particular, by far the leader in the global market in terms of installed capacity, the Department of Energy launched a new Enhanced Geothermal Shot to reduce costs by 90% by 2035.

From Iceland to Indonesia, several are pushing investments and technological innovation. The top three players - Mitsubishi, Ormat and Engie - are more active than ever while geo-tech startups raise rounds after rounds. Fancy investing in Africa? Take a look at what's happening in Kenya.

โœจ Mr Green Africa, from plastic waste to value

Speaking of Kenya, the Nairobi-based startup Mr Green Africa is disrupting the current informal and somehow exploitative plastic recycling national sector. The company purchases directly from their sourcing agents and over 2,000 individual waste pickers, some of societyโ€™s most marginalised people. Collected plastics are then processed into post-consumer recycled (PCR) and sold to plastics manufacturers in the FMCG sector such as Unilever. The B-Corp company recycles thousands of tonnes of plastic every year, amounting to millions of tonnes of CO2 saved while providing jobs for many.

Doing business as a force for good

The CEO and founder Keiran Smith was pleased to announce the raise of a Series B round from Alphamundi and 7 other investors in January 2022. This inflow of capital should allow Mr Green Africa to improve its technology-enabled information system that monitors flows and transactions. Undoubtedly a lot more is to come.

Enjoyed reading? Please forward this to colleagues and friends!

Subscribe to the weekly Climate Foresight newsletter to stay updated on how climate change will dramatically impact businesses and the economy.