Nature-based carbon credits are often sold as a relatively simple proposition.
A company finances a forest, wetland, mangrove, grassland or agricultural project. The project avoids emissions, removes carbon dioxide from the atmosphere, or both. A verified credit is issued. The buyer uses it within a wider climate strategy.
In reality, the quality of a nature-based carbon credit depends on much more than the volume of carbon stated on a registry.
It depends on whether the ecosystem is protected, whether the carbon benefit is additional, whether the land is governed fairly, whether local communities have meaningful participation, whether the project can withstand drought, fire, conflict or changing land-use pressures, and whether the intervention delivers durable outcomes over decades rather than accounting periods.
This is why the latest warning on biodiversity matters far beyond conservation policy.
A draft United Nations assessment indicates that the world is falling short on 22 of the 23 targets for 2030 under the Kunming–Montreal Global Biodiversity Framework. The framework, agreed in 2022, sets four long-term goals for 2050 and 23 action-oriented targets for 2030, including the protection and restoration of ecosystems, sustainable use of nature, finance and the rights and participation of Indigenous peoples and local communities.
The report remains part of an ongoing global review process ahead of COP17 in Yerevan, Armenia. Yet its core message is already unmistakable: global activity has increased, but current efforts are not sufficient to meet the framework’s 2030 objectives.
For carbon-market participants, the implication is clear.
Nature risk is carbon credit risk.
A carbon asset is only as resilient as its ecosystem
Nature-based projects can create meaningful climate, biodiversity and community benefits. They may help protect forests, restore degraded land, improve soil health, support coastal resilience and finance conservation that might otherwise be underfunded.
But they are exposed to the underlying condition of the natural systems on which they depend.
A forest-carbon project cannot be assessed solely by the expected number of tonnes it may issue. Its long-term credibility also depends on questions such as:
Is deforestation pressure increasing in the surrounding landscape?
Are fire, drought, pests or extreme weather becoming more likely?
Does the project have secure and legitimate land tenure?
Do local and Indigenous communities have decision-making power and a fair share of benefits?
Is the biodiversity baseline robust, and are ecological outcomes being monitored?
Could protection in one location push damaging activity elsewhere?
What happens if the carbon benefit is reversed after credits have been issued?
These are not secondary “co-benefit” questions. They are part of the core investment case.
When an ecosystem deteriorates, a project’s permanence risk rises. When land rights are disputed, social risk rises. When biodiversity outcomes are unclear, the wider integrity of an environmental claim can be challenged. And when project economics are based on a simplified view of ecological resilience, the credit may be less durable than buyers believe.
Why biodiversity failure changes the market conversation
The voluntary carbon market has spent several years responding to concerns over quality, additionality, baselines, leakage, permanence and claims. Those concerns have helped move the market towards more rigorous due diligence and a sharper distinction between high-integrity and low-integrity supply.
The biodiversity gap adds another layer.
If the world is not making enough progress on ecosystem protection and restoration, the pipeline of credible nature-based projects may face tougher conditions. Competition for suitable land may intensify. Delivery costs may rise. Climate hazards may undermine expected carbon outcomes. Communities may become more sceptical of projects that appear to prioritise external buyers over local needs.
At the same time, the demand for nature-based solutions is unlikely to disappear. Companies, financial institutions and governments remain under pressure to address residual emissions, nature-related risk and the financing gap for conservation and restoration.
This creates a more demanding market environment.
Cheap credits that treat nature as a uniform, interchangeable source of tonnes may become increasingly hard to defend. In contrast, projects that can demonstrate ecological integrity, credible governance, transparent monitoring and genuine local benefit may command greater trust—and potentially a more durable market position.
Carbon-only due diligence is no longer enough
A buyer evaluating a carbon-credit portfolio should not ask only:
“What is the price per tonne?”
The more useful question is:
“What combination of ecological, social, methodological and delivery conditions supports the tonne being offered?”
A more robust diligence process should assess at least five areas.
Ecological condition and resilience. Buyers should understand the project’s ecosystem, threats, biodiversity baseline, restoration plan and exposure to climate hazards. A project designed for historical conditions may not be resilient to a future of greater drought, flooding, fire or temperature stress.
Carbon methodology and monitoring. The project should have a transparent baseline, appropriate monitoring methods, clear treatment of uncertainty and a credible approach to reversals, leakage and buffer pools.
Land rights and community governance. Legitimate tenure, free, prior and informed consent where applicable, benefit sharing and accessible grievance mechanisms are essential. A project cannot be high integrity if it creates avoidable conflict or excludes the people who depend on the land.
Financial durability. Buyers should consider whether the project has sufficient resources to manage and monitor activities over its full crediting and permanence period. A project that depends on a short-term funding model may not be able to sustain long-term commitments.
Claiming and portfolio use. The buyer should be clear about what credits are being used for: addressing residual emissions, supporting climate contributions, financing restoration or making a particular public claim. The language should match the evidence.
From offset shopping to portfolio strategy
The next phase of voluntary carbon-market maturity will require more sophisticated purchasing.
That does not mean companies should abandon nature-based credits. It means they should stop treating them as interchangeable commodities.
A credible portfolio may include a combination of direct emissions reductions, renewable-energy procurement, supplier engagement, engineered removals, nature-based removals and high-integrity avoidance credits, depending on the organisation’s sector, footprint and transition pathway.
Within that portfolio, nature-based credits should be evaluated for what they are: long-duration, place-based interventions with complex ecological and social dependencies.
The right question is not whether nature-based credits are perfect. No climate-finance mechanism is free from trade-offs or implementation challenges. The question is whether buyers are prepared to understand, price and manage those risks honestly.
What buyers and investors should do now
Companies and financial institutions should begin by reviewing their existing nature-based carbon exposure.
First, identify the share of climate claims or carbon-credit procurement that depends on forests, land-use projects, wetlands, mangroves or agricultural interventions.
Second, establish a minimum diligence standard that goes beyond registry status and price. It should include ecological resilience, tenure, community engagement, governance, monitoring and reversal-risk assessment.
Third, require transparent documentation from developers and intermediaries. Buyers should be able to understand how a project sets its baseline, manages leakage, uses buffer mechanisms, distributes benefits and reports biodiversity outcomes.
Fourth, diversify. Concentrating too much carbon-credit procurement in a single geography, methodology or project type can create correlated risk—particularly as climate impacts and land-use pressures increase.
Finally, communicate with precision. Companies should distinguish between reducing their own emissions, using market instruments, retiring credits for residual emissions and financing climate or nature outcomes beyond the value chain.
The global biodiversity warning should not be read as a reason to disengage from nature. It should be read as a reason to engage more carefully.
Nature-based carbon finance can play an important role in protecting and restoring ecosystems. But that role depends on stronger project design, better governance, credible monitoring and buyers willing to look beyond the cost of a tonne.
In the voluntary carbon market, biodiversity is not an optional extra.
It is part of the asset’s underlying value.
Sources
Convention on Biological Diversity: Kunming–Montreal Global Biodiversity Framework
Convention on Biological Diversity: Global review of collective progress
Convention on Biological Diversity: First draft global report and measurement of progress
Convention on Biological Diversity: Nairobi meetings and first global assessment
Carbon Brief: World falling short on 22 of 23 nature targets for 2030