Biodiversity loss and nature’s degradation are among today’s most urgent environmental challenges. In response, nature credits are gaining traction as a sustainable financing tool for nature-positive actions. These credits are a tradable instrument that quantifies the impact of activities focused on restoring and protecting natural capital. The concept is similar to carbon credits, which are used to trade greenhouse gas emission reductions. Globally, over 50 voluntary nature credit markets are currently active, with ongoing discussions about their operation in various international initiatives, including the “Biodiversity Credit Alliance.”
Following this trend, on July 7, the European Commission (“EC”) announced its “Roadmap towards Nature Credits.” This initiative aims to establish a robust nature credit market mechanism within the European Union (“EU”). The roadmap outlines a “Two-step model” for this market: first, a “certificate” will be issued when an independent body confirms that nature restoration and conservation projects meet EU certification standards. Then, if the actual performance is scientifically proven, a “credit” will be issued, making it tradable. EC President Ursula von der Leyen hailed the issuance of nature credits as a means “to put nature onto the balance sheet,” underscoring their potential for generating revenue.
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1. |
Key Initiatives of the Nature Credits Roadmap |
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Ensuring Strong EU Stakeholder Cooperation and Enhancing International Cooperation
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Timeline |
Plan |
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2025 |
Form an expert group encompassing diverse stakeholders, such as nature credit experts, Member State representatives, farmers, forestry workers, and local communities |
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2025-26 |
Participate in international forums and partnerships, including the Convention on Biological Diversity (“CBD”) Conference of the Parties (“COP 17”), to incorporate international trends |
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Developing Robust Methodologies and Governance
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Timeline |
Plan |
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2026 |
Adopt carbon farming methodologies under the EU Carbon Removal Certification Framework (“CRCF”) that mandatorily include biodiversity co-benefits |
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Gather opinions from the expert group to ensure that certification criteria and methodologies for nature restoration and protection activities are transparent, authentic, simple, and practical |
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2027 |
Gather opinions from the expert group on the governance framework for the nature credit market, including credit ownership, registration, transfer, verification, and reporting |
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Fostering Readiness for Nature Credit Markets
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Timeline |
Plan |
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2025-26 |
Conduct an assessment of nature credit supply and demand across the EU and gather opinions from the expert group on how to foster the nature credit market |
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Public Seed Funding to Kick-start Nature Credits
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Timeline |
Plan |
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2025-27 |
Launch pilot nature credit projects and support them through EU funds |
The EC plans to explore future strategies to stimulate demand for nature credits through disclosure and procurement regulations, tax incentives, and other regulatory instruments. Additionally, the EU Committee of the Regions (“CoR”) has proposed incorporating nature credits into the Corporate Sustainability Reporting Directive (“CSRD”) framework and linking them with existing mechanisms like the EU Taxonomy. Therefore, companies operating within the EU should continuously monitor developments related to nature credit integration with existing regulations.
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2. |
Implications for Businesses |
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Risk Mitigation and Value Creation: Companies can indirectly contribute to environmental improvement and enhance supply chain resilience by strategically purchasing nature credits from projects located in areas critical to their business operations. This helps mitigate their exposure to physical risks.
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Sustainability Disclosure: Setting targets for nature credit purchases and aggregating performance allows for robust sustainability disclosures. Nature credits provide an objective and verified metric to quantify nature protection activities. Disclosing quantified targets and achievements credibly communicate a company’s commitment to nature protection.
While nature credits are not yet institutionalized in South Korea, companies planning nature restoration and biodiversity projects should consider their potential future linkage to nature credits. By establishing management plans based on credible standards and developing scientific performance measurement methodologies during project design, companies can proactively prepare for the emerging nature credit market. Management plans should reference protocols from existing voluntary nature credit markets overseas and include details such as information on the project’s target area and consultation methods with Local Communities (“LCs”) and Indigenous Peoples (“IPs”). Furthermore, performance reports should transparently share scientific measurement methodologies and any issues encountered during project implementation.
