Authored by Albert Letting and Sofia Strömgård, IISD
Biodiversity credits are emerging as a potential tool to direct more funding toward protecting and restoring nature. Unlike offsets, which aim to compensate for environmental damage, credits are designed to generate measurable, net-positive biodiversity outcomes.
To explore how this idea could be applied in the Canadian context, the Nature Investment Hub and the International Institute for Sustainable Development co-hosted a round table with Canadian experts. The discussion highlighted both the opportunities and the practical challenges associated with developing a credible and effective biodiversity credit market in Canada.
Three themes stood out clearly from the conversation: ensuring market integrity, centring Indigenous leadership, and recognizing the role of regulatory signals in creating stable demand.
"Growth in the nature finance market is hampered by a lack of clarity on what different financial instruments can credibly achieve and at what scale. This session affirmed that the biodiversity credit market is nascent, but huge innovation potential can be catalyzed if we are willing to have honest conversations about inclusive benefits and leadership from Indigenous people, and learn lessons from mis-steps in the carbon market,” says Priya Bala-Miller, managing director of the Nature Investment Hub.
Insights summarized here represent collective views of the session participants and should not be solely attributed to either IISD or the Nature Investment Hub.
One of the main obstacles to scaling biodiversity credits is the lack of common standards and metrics. Currently, there is no unified approach to measuring biodiversity outcomes, which hinders confidence in the market. Experiences from carbon markets, including concerns about greenwashing and weak verification, were widely referenced by participants as lessons learned.
There was broad support for developing harmonized metrics and assurance mechanisms that can ensure consistency across projects and help identify risks early. Storytelling and flexible accounting methods are practical tools that can better capture the complexity of ecological outcomes without oversimplifying them.
Indigenous Peoples play a critical role in protecting biodiversity across Canada. At the round table, participants underscored that Indigenous leadership is not simply a principle—it is a practical requirement for building an effective market.
Indigenous communities are already developing their own biodiversity credit standards, often challenging conventional market concepts such as “additionality,” which can overlook long-standing stewardship. Ensuring that Indigenous peoples can lead standard-setting and governance processes, rather than being brought in later as partners or implementers, is essential to a legitimate and lasting system.
Supporting Indigenous-led standard development can also help Canada avoid some of the credibility and equity issues seen in other environmental markets.
The discussion also addressed the role of regulatory signals in shaping the future of biodiversity credit markets. Voluntary markets can help build momentum, but they may not deliver the scale needed to meet biodiversity goals on their own.
Take the example of the Department for Environment, Food and Rural Affairs Biodiversity Net Gain regulation in the United Kingdom, which requires developers to deliver a 10% net gain in biodiversity. This policy has quickly created demand for biodiversity credits and associated projects.
While Canada’s land governance context is different—particularly due to Indigenous rights and the extent of public land ownership—regulatory clarity could help de-risk investment, attract more capital, and provide a stable foundation for market development.
“There is already strong momentum on the supply side, with many biodiversity credit pilots underway. To match that, a project-based approach that introduces a mandatory market like the UK's Biodiversity Net Gain could be a logical next step to bring biodiversity into development projects,” says Albert Letting, senior policy advisor at IISD.
Advancing biodiversity credits in Canada will require moving on two tracks at once:
Quick Wins
Deliberate Groundwork
Aligning biodiversity credit efforts with related policy areas, such as green skills, innovation, and conservation planning, is critical to success and will help to develop a more coherent approach.
Read the session readout