Biodiversity offsets are conservation activities intended to compensate for the residual, unavoidable harm to biodiversity caused by development projects. Recent experience with regulatory regimes, such as wetland and conservation banking in the USA, tradable forest conservation obligations in Brazil and habitat compensation requirements in Australia, Canada and the EU, has been supplemented by growing interest in the potential of voluntary biodiversity offsets. This experience suggests that biodiversity offsets may be of value to business, government, local communities and conservation groups alike. For example:
- Benefits to business: Biodiversity offsets can strengthen companies’ license to operate by encouraging regulators to grant permission for new operations and by securing the support of local communities and non-governmental organisations. For companies, investment in biodiversity offsets can provide a cost effective means to demonstrate that society should continue to trust them with access to the land and sea needed for their operations.
- Benefits to government: Biodiversity offsets offer regulators a mechanism to encourage companies to make significant contributions to conservation, in many cases without the need for new legislation and at less cost than alternative policies. Offsets can also help to ensure that development projects intended to meet growing demand for energy, minerals, metals, crops and transport are planned in the context of sustainable development, and accompanied by counterbalancing measures to secure the conservation of ecosystems and species affected by development.
- Benefits to conservation groups: Conservation organisations can use and influence biodiversity offsets to secure more and better conservation and obtain additional funding for conservation, for instance, to establish properly financed ecological corridors or strengthen networks of protected areas. Offsets could also help ensure that national or regional conservation priorities are integrated into business planning.
- Benefits to communities: Local communities can use biodiversity offsets to ensure functioning and productive ecosystems during and after development projects, not only with properly rehabilitated project sites, but with additional conservation outcomes outside the project’s borders, to support livelihoods and amenity.
While the benefits of biodiversity offsets are potentially large, several significant hurdles need to be overcome to realise them. Chief among obstacles is the need for a shared vision of the meaning and standards required of offsets among companies, governments, communities and conservation NGOs. There is a need to secure consent and build trust among key stakeholders for the approach, to strengthen the business case needed to motivate companies and to establish the policy frameworks to underpin offsets. Some question the benefit of offsets to conservation and to business. Their views need to be taken seriously and they should be involved in discussions on whether and how biodiversity offsets should be conducted.
This report is a joint effort by Insight Investment and IUCN-The World Conservation Union; both of which have an interest in exploring biodiversity offsets. Insight Investment is a fund management company based in the City of London managing approximately £75 billion of assets (as at 30 September 2004) on behalf of some 300 institutional investors and millions of retail customers of the HBOS group. Insight has both a financial interest and a moral responsibility to engage with companies in which it is invested to encourage them to adopt high standards on, and manage risks related to, key social, environmental and ethical issues, of which biodiversity is one.
The authors’ aim in conducting the interviews with companies, regulators and biodiversity experts that form the basis of this report was to explore the potential and limitations of biodiversity offsets: to consider the concepts involved, such as “net benefit” and “no net loss”, as well as why, where, when and by whom biodiversity offsets might be used, and what issues remain to be resolved. In the report, the authors discuss these issues and draw preliminary conclusions regarding the potential and limitations of biodiversity offsets, and what steps are needed to develop the approach further.
