Biodiversity Offsets: The Business Case

Why should businesses voluntarily “go the extra mile” and take on biodiversity offets?   What’s in it for them?

Many businesses are recognizing that their biodiversity impacts can lead to significant regulatory, financial and reputational risks as governments, financial institutions, and civil society increasingly expect developers to take full responsibility for such impacts. Benefits of voluntarily undertaking a biodiversity offset for a company include improved license to operate (through a better reputation with regulators, local communities and civil society as a whole), improved competitiveness and access to finance. 

Project developers’ access to finance will increasingly depend upon no net loss approaches to their biodiversity impacts.  Revised Performance Standards issued by the International Finance Corporation (IFC) (the private sector arm of the World Bank) came into effect on 1 January 2012.  Revised Performance Standard 6 concerns biodiversity conservation.  Clients with an impact on "Natural Habitat" are required, where feasible, to demonstrate “no net loss” of biodiversity, and those affecting “Critical Habitat” are obliged to demonstrate  ”net gains” in biodiversity. The significance of the IFC Performance Standards is considerably amplified by the fact that  the 80 financial institution members of the Equator Principles Association,  together responsible for some 70%  of international Project Finance debt in emerging markets. have committed to following the revised IFC Performance Standards.