In the nascent world of carbon credit exchanges, one of the emerging focuses is supporting biodiversity projects. The idea is to allow carbon buyers and sellers to go beyond carbon neutrality by purchasing credits that directly support conservation and biodiversity restoration efforts around the world, and thus be 'nature positive'. The aim is to support the work of community groups, governments and companies whose actions reduce emissions while also protecting or restoring natural resources.

Biodiversity is a hugely valuable resource that provides services that people depend on, including water, food, fuel and raw materials, as well as climate-stabilizing ecosystem processes like carbon sequestration, soil retention and water purification. The need to scale up financing for nature has gained traction in recent years as global biodiversity losses continue unabated. A gap of up to $700 billion in annual financing is needed to halt and reverse species decline and maintain ecosystem integrity.

To help meet this need, 196 countries signed the Kunming-Montreal global biodiversity framework in 2022 and agreed to redirect $500 billion in subsidies toward nature. Increasingly, corporations and financial institutions are recognizing this need, with more than half of the Fortune 500 now reporting on nature-related impacts as part of their sustainability disclosures. However, so far, demand for biodiversity credits seems limited. Only a small proportion of the credits issued are resold to end buyers, and a handful of exchanges have emerged as platforms to connect supply and demand for biodiversity-based carbon credit transactions.

A carbon credit exchange operates much like a commodities trading exchange, with a central limit order book and the ability to buy and sell in standardized contracts. This allows traders to Mark-to-Market the value of their carbon portfolios and supports transparency and efficiency. ACX, for example, recently won the prestigious 'Best Carbon Exchange' award in Environmental Finance's 2021 VCM rankings and is currently the most active platform for trading biodiversity-based carbon credits.

As with all carbon market participants, biodiversity credit developers have a responsibility to ensure that their project delivers quantified biodiversity co-benefits. This starts with thorough project design and baseline assessments, selecting appropriate crediting standards, implementing conservation actions, conducting ongoing monitoring and engaging third-party verification. This is why biodiversity standards often stress community buy-in, operational involvement, and explicit benefit sharing to build trust and ensure local benefit scalability and sustainability.

Another way of connecting supply and demand for biodiversity-based carbon credits is through the development of a 'nature repair' market, which is being developed in Australia for the first time. This new market aims to provide a mechanism for addressing biodiversity offsets by compensating landowners and producers of carbon credits with credits from the newly created 'nature-repair' category, which is based on specific units of measurement such as threatened species or hectares of koala habitat.

But there are challenges, especially for those wanting to create the most efficient, transparent and scalable model for biodiversity credit markets. For example, it is still unclear how long it will take for biodiversity credits to reach the same level of maturity as carbon markets have reached for their more standardized counterparts.