Founded in 2006, Ecosystem Investment Partners (EIP) specializes in large-scale ecosystem restoration and nature-based solutions, benefiting both the economy and the environment. Over the years, EIP has played an active role in restoration projects spanning the nation, successfully rehabilitating and safeguarding over 43,000 acres of wetlands and 220 miles of streams.
Before co-founding Ecosystem Investment Partners, Nick Dilks dedicated a decade to The Conservation Fund, where he managed the organization’s national real estate program. During this time, Dilks garnered recognition as an innovator in land conservation strategies. In parallel, Adam Davis was a key figure in the establishment of Ecosystem Marketplace, a premier global information hub on markets and payments for ecosystem services. Davis also co-founded Natural Strategies, a prominent national sustainability consulting firm.
On behalf of Ecosystem Investment Partners, we express our deep concern and disappointment regarding the recent decision by the European Union (EU) Commission to exclude biodiversity offsets from its taxonomy of “sustainable activities,” which contribute to the protection and enhancement of the natural environment. This decision arrives precisely when innovative means of funding extensive restoration and conservation efforts are urgently required to address the pressing challenges facing our natural world. Dismissing one of the most established, readily investable, and impactful mechanisms for financing environmental enhancement is, at best, shortsighted. At worst, it contradicts the ethical investment principles and business practices the EU Commission aims to foster.
In June 2023, the EU Commission removed biodiversity offsets from its latest taxonomy update following pressure from the advisory group, the Platform on Sustainable Finance (PSF)(1). As highlighted by the Senior Economist at the World Wildlife Fund (WWF), a PSF member, “Offsetting is intrinsically tied to biodiversity harm elsewhere, resulting in a zero-sum game for biodiversity. Consequently, it cannot constitute a substantial contribution to biodiversity.””
This perspective overlooks a critical aspect: the mandate for offsets to maintain a project at a baseline condition, essentially a “zero-sum,” embodies the core essence of sustainability—extracting no more than can be replenished. Furthermore, “zero-sum” outcomes are decidedly more favorable than persistently losing biodiversity. In actuality, offsets that hinge on scientifically validated land restoration, coupled with enduring safeguards via endowments for long-term monitoring and maintenance, epitomize the very essence of sustainability. This represents the hallmark of high-quality offsets.
In a world where biodiversity impact is an ongoing reality, the sole alternative to offsetting such impacts is refraining from offsetting altogether. Restoration projects are indispensable, and the wildlife and ecosystems benefiting from these projects remain indifferent to the ultimate funding source for restoration efforts.
Ethical Offsets
Sustainable economic development necessitates novel green energy initiatives and more efficient modes of manufacturing and infrastructure, striving to accommodate population growth, transition to clean energy, and enhance living standards while combatting poverty. True sustainability also demands environmental conservation and restoration. As articulated by the United Nations, sustainability signifies “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
The EU Commission’s stance, favoring credits funded by government or philanthropy while rejecting those funded by businesses or development, will yield the following outcomes:
- Reduced funding for biodiversity protection, perpetuating the current trajectory of biodiversity loss.
- Limited options for investors and businesses pursuing elevated ethical standards and sustainable development goals.
- Actual loss, rather than ‘no net loss,’ as endeavors to mitigate and minimize impacts cannot suffice to fully offset the consequences of economic activities.
Sources of Biodiversity Funding
It is a misconception that restoration projects financed by government or philanthropy inherently hold more ethical merit than those mitigating present economic activity’s impact. The funds allocated by the government and philanthropic sources originate from prior economic activities that were not obligated to provide offsets. Had offsets been mandatory in the past, the very damages these funds seek to address might never have materialized.
Although the EU Commission now opposes offsets, it maintains its endorsement of biodiversity credits. However, these credits primarily repackage initiatives already funded by government and philanthropy. Termed variously as ‘nature-based solutions,’ ‘landscape scale conservation,’ ’30 by 30,’ and the like, these initiatives extend the legacy of conservation efforts spanning decades. While improved credit measurement is commendable, it does not usher in novel revenue streams to support restoration and conservation undertakings. This distinction is crucial, given that the conservation movement’s aspirational objectives, including ambitious pursuits like the ‘half Earth’ initiative, have perennially suffered from inadequate funding.
David Sternlicht from the investment firm Ethic aptly emphasized in his article, “Beyond Priceless,” that addressing the ecological crisis necessitates embracing the role of money and markets. The present annual funding of $166 billion for biodiversity and nature protection, according to Bloomberg, predominantly derives from government spending (76 percent), with the remainder sourced from the philanthropic and private sectors. This report underscores that an additional influx of $830 billion annually is imperative within this decade to initiate a positive shift in the trajectory of nature loss.(2) Consequently, the notion that conventional conservation activities measured through biodiversity “credits” will usher in supplementary funding lacks compelling substantiation.
Offsets necessitating effective attainment of restoration objectives under stringent scientific standards represent a newfound and supplemental funding source of paramount importance. The definition of “sustainable activities” that dismisses biodiversity offsets, as portrayed in the EU Commission’s Platform on Sustainable Finance, presently awaits the scrutiny of the European Parliament and Council. Both entities must reject the notion that impacts will cease or funding for restoration will augment without offsets, in the interest of preserving biodiversity and nurturing a thriving living environment.
Offsetting remains the foremost viable avenue to replenish what we presently deplete, thereby securing a prosperous legacy for future generations. This signifies that the sole alternative to ‘no net loss’ is unequivocally ‘net loss.’
To foster this crucial dialogue, we extend an invitation for further engagement.
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(1) https://www.environmental-finance.com/content/news/eu-strips-biodiversity-offsets-from-taxonomy.html
(2) https://www.ethic.com/insights/beyond-priceless-the-need-to-value-earths-foundational-asset
