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BSI is developing five national standards to underpin nature markets. The Flex 700 series will provide integrity through a systematic foundation for investments in nature and unlock more private finance to restore and protect biodiversity.
Five years ago, the Financing Nature Recovery UK initiative published a roadmap to place nature on a well financed and sustainable path. Among other things, the initiative recommended strong governance and harmonised standards. This March, BSI’s Nature Investment Standards (NIS) programme published the second version of BSI Flex 701, which clarified roles and cut back on some aspects that are now addressed in four other standards. Flex 701 aims to provide a sound framework for nature markets, describing core requirements for governance, monitoring, verification and reporting.
Nature markets help channel private finance into projects and programmes to restore and create biodiversity by generating revenues for them through the sale of credits or units.
These markets are complex and varied, involving a diverse group of suppliers, buyers and intermediaries, while environmental transactions vary greatly in type, size and duration. “There are lots of other moving parts, and it is easy to lose sight of the trading process,” says Ian Dickie, a director at environmental-economics consultancy eftec, and lead technical author for Flex 701. “We are trying to write a set of principles that cover all those setups.”
Dickie has worked in environmental economics for 25 years and was drawn to this work as he realised the importance of standardisation to harmonise nature markets and deliver universal integrity and credibility. “A standard is the only way to do it,” he says. He already knew a lot of people with a wide range of applicable experience, such as farming and finance, to contribute to the framework standard. “There was going to be a difference of views but the group typically resolved them by listening to each other,” he adds.
Although the term ‘nature markets’ is relatively new, the concept is well established through carbon offsetting, of which there are dozens of schemes worldwide. More recently in the UK, the legal requirement under the Environment Act 2021 for biodiversity net gain (BNG) for certain developments has catalysed a new market for BNG units. Under this system, if developers cannot create a net gain on site, they can do so by financing biodiversity projects offsite by buying BNG units.
The demand for nature markets is growing, whether compulsory or through voluntary actions, such as a desire for businesses to reduce their environmental impacts. And such markets are vital. Reversing biodiversity decline requires effective policies and a lot of finance – the UN Environment Programme Finance Initiative, for example, has determined that we need an extra $700bn (£511bn) to restore and protect biodiversity.
The IUCN UK Peatland Programme and the UK’s Woodland Carbon Code (WCC)
are two examples of successful and credible nature markets. The WCC, for example, has well over 2,000 registered projects, both active and in development. In total, these could deliver almost 30 megatonnes of reductions in CO2.
Yet there are also reports by journalists, scientific researchers and NGOs challenging the integrity of nature markets, especially for carbon offsets. For example, investigations into offsetting in the Amazon, reported in The Guardian, determined that the real CO2 reductions were less than 10% of the claimed amounts. More than 70% of the offsetting reports examined by Carbon Brief showed evidence of harm to local communities and indigenous populations, and a report in Science examining 26 schemes robustly questioned whether carbon-offsetting schemes are effective at all.
So why are some schemes regarded as credible and others questionable? Among the credible schemes, the common factors are strong governance, an application of national and international standards, and third-party accreditation. “Standards won’t assure integrity in isolation. There is also the wider governance framework needed,” says Dickie.
In one high-profile report challenging offsetting, the scheme in question does use accredited verifiers, but the operator’s standards are proprietary and the overall scheme is not accredited. “The absence of an overseeing accreditation process to ensure integrity was a problem here. In global carbon markets, the Integrity Council for the Voluntary Carbon Market is aiming to correct this, but we do not want to have a similar situation in UK nature markets that will damage confidence, and could prevent markets taking off in the first place,” says NIS programme director George Sethia.
“We are aware of the number of methodologies operating within UK nature markets that can be wildly different, such as how they address additionality, permanence and verification,” he adds.
BSI is also aware of differences in transparency. However, Sethia is confident from feedback that a means of certifying high-integrity methods and schemes will channel finance towards projects that create real and lasting results, which in turn will boost investor confidence.
In a 2023 publication on a framework for nature markets, Defra said: “While there is significant potential for nature markets, challenges remain, including ensuring market integrity, managing risks and attracting private investors.” Investors typically cite the need for certainty and integrity, and in many other fields standards provide such integrity. For nature markets, this is the role of the Flex 700 series.
BSI’s NIS enables stakeholders to see the standards developing and evolving, and contribute to them. “Our standards are market-led. They have gone through a consensus process including public consultation and have been developed via a group formed from cross-market stakeholders,” says Sethia.
The NIS hub also includes a helpful navigation tool where users choose their role and markets, and the tool directs them to the applicable standard, highlighting the relevant clauses.
The responses to Flex 701 and related standards have been positive. Sethia says: “We encourage everyone involved in UK nature markets to engage with, use and feed back to us on the standards. They can do this via our BSI NIS hub.”
There will be formal accreditation schemes, but these can take time to set up. “We are encouraging relevant organisations to consider their own internal alignment and self-assessment in preparation for a future certification process,” says Sethia. Moreover, organisations can engage with third-party assessment bodies to assess conformity with Flex 701, and identify improvement opportunities.
As a framework standard, Flex 701 was developed to cater for the complexity of nature markets. “People may be aware of carbon offsets, but not so aware of BNG. So we wrote the standard to cater for different needs,” Dickie explains.
Rick Gould MISEP CEnv is an environmental scientist and writer
