 "From ecosystems to economics: The potential of a 'species stock exchange'")
As the world grapples with environmental challenges, the surge in initiatives to protect and preserve biodiversity has become a focal point. The United Nations (UN) has emphasised the need to protect 30 per cent of nature by 2030 to prevent the mass extinction of species. Increasing interest in biodiversity has led to an overcrowding of strategies and approaches, complicating the field.
Biodiversity conservation requires significant investments, but there is a gap between the demand and supply in funding. The annual financing gap for biodiversity conservation is estimated at $598-$824 billion, according to a report by the Paulson Institute, The Nature Conservancy and Cornell University.
Multifaceted initiatives are underway to restore biodiversity. USAID takes a comprehensive approach to protecting endangered species and helping partner countries. The UN Decade on Ecosystem Restoration supports action in 70 countries, channelling over $10 billion into projects aimed at reclaiming 300 million hectares of degraded land. The Great Green Wall project tackles desertification, planting some 10 billion trees in the Sahara and Sahel regions in Africa. In North America, the Model Forest Program is recovering more than 100,000 hectares of land. These programmes run alongside the EU Biodiversity Strategy for 2030, which aims to curtail habitat loss by half and protect 30 per cent of land and sea expanses.
More than one million species are at risk of extinction; a third of the world's topsoil has been harmed, and forest fires have become larger and more damaging. Half of the world's coral reefs have been lost. As we navigate through these alarming statistics, a novel concept emerges: A market for biodiversity. The idea is to place a quantifiable value on biodiversity to drive sustainable practices, foster innovative solutions, and secure the vitality of our planet's ecosystems. Simply put, it means capitalisation but for the greater good.
The nature of a market, where prices are determined by collective supply and demand, requires a fresh perspective on biodiversity. Typically, biodiversity and ecosystem services are considered public goods, devoid of market value. This notion must change. The objective is to bring a transformational shift in the way markets and economics value nature.
Biodiversity and commerce
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Our proposition introduces a conceptual species' stock market (SSM) that formalises the value of all species. Similar to a conventional stock market, the SSM will be a standardised platform for instantaneously valuing all items within its holdings. Species lacking individual ownership would undergo 'trading' that doesn't involve the transfer of ownership rights among shareholders. This approach bridges the connection between biodiversity's inherent value and a market-driven incentive for its preservation.
However, one of the major challenges is the difficulty in counting species. Another constraint is investors having limited interest in it. SSM may sound quite ambitious, especially with the idea of developing "digital species" and utilising DNA information and knowledge about animal characteristics and other aspects. In the past decade, there has been a growing trend of private companies getting involved in biodiversity conservation. There has been a significant growth in reforestation startups, with an impressive 44.2 per cent compound annual growth rate in terms of investment size between 2013 and 2023.
Another significant development is the emergence of biodiversity credits, which involves firms making payments to acquire environmental credits. Biodiversity credits play a pivotal role in curbing and reversing species loss. Wilderlands, an Australian organisation, offers a platform to purchase biological diversity units (BDUs), each representing one square meter of permanently preserved and actively managed land for 20 years.
Population growth helps investors' returns, a concept realised through the Rhino Impact Investment Project launched by the Zoological Society of London (ZSL) and that received funding from the Global Environment Facility (GEF). The project created the first 'pay-for-results' financial instrument for species conservation in the world with Credit Suisse's assistance.
The World Bank issued the bond in March 2022 through the International Bank for Reconstruction and Development's global debt issuance facility. The bond is a five-year, $150 million sustainable development bond. The Wildlife Conservation Bond, sometimes referred to as the Rhino Bond, features a conservation success payment paid by GEF to note holders and is conditioned on confirmed increases in the animal's population. It is the first financial tool ever created for the purpose of saving a species.
Indian perspective
India's biodiversity creates a dynamic landscape ripe with opportunities for conservationists. Scientists, researchers, and academics have a vast canvas to explore diverse subjects such as wildlife ecology, climate adaptation, and sustainable development. Notably, India contributes more than 10 per cent of the world's scientific publications on biodiversity, cementing its role as a global research hub.
The Indian government's commitment to biodiversity conservation is evident in the Ministry of Environment, Forest and Climate Change, which houses departments dedicated to safeguarding biodiversity. Additionally, the NGO sector provides avenues for professionals to engage in fundraising, project management, and community outreach efforts.
India's startup scene is emerging as a catalyst for change. Ventures like Aaranya utilise innovative technology to monitor wildlife populations. Rainforest Connection uses smartphones powered by artificial intelligence to detect illegal logging in forests. Beeodiversity uses bees as a natural surveillance network to monitor pollutants and ecosystem health.
As India looks to the future, the prospect of creating a market for biodiversity presents both promise and challenges. The country's rich biodiversity and diverse ecosystems make establishing standardised valuation metrics a formidable task. Striking a balance between economic priorities and protecting biodiversity is a challenge. In a landscape marked by varying land tenure and ownership issues, the development of a regulatory framework demands meticulous coordination. Despite these obstacles, a biodiversity market holds potential.
Through this market, we propose a biodiversity conservation framework tailored for India. It integrates financial markets with ecological stewardship, leveraging corporate revenues, household savings, and SSM instruments. A consortium of stakeholders, including governmental bodies, NGOs, and corporate entities, will prudently allocate these funds.
This interdependent connection between funding and ecological outcomes establishes an accountable framework, augmenting the efficacy of conservation initiatives. It can be launched under the regulatory oversight of Securities and Exchange Board of India in collaboration with the Environment Ministry, this market will incentivise impactful conservation outcomes.
The authors, Krishna Golyan and Surabhi Parida, are students of Hans Raj College, University Of Delhi. Charvi Gera studies at Shaheed Sukhdev College of Business Studies, University Of Delhi
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