There are markets for silver and there are markets for houses, and it doesn’t take a genius to see the difference between the two: an ounce of silver is an ounce of silver, interchangeable with any other ounce of the same quality, but the value of a house – or any piece of property – can fluctuate with the color of the flooring.
Carbon markets resemble silver markets because a ton of carbon dioxide has the same impact on the environment regardless of whether it comes from a smokestack in Germany or a forest fire in Brazil. That made it possible to create a global transparent marketplace designed to support sustainable development and identify the most efficient ways to reduce greenhouse gas emissions.
Biodiversity markets, however, have always been local because habitat is often unique and irreplaceable. A road that damages a bit of sage grouse habitat in the United States might be able to make good by restoring or preserving habitat of equal or greater environmental benefit in the same ecosystem, but even that approach has only a narrow band of effectiveness. “You can’t offset an extinction,” as Joshua Bishop of WWF Australia once said.
As a result, most biodiversity banking is confined to the developed world, which has the resources – if not always the political will – to balance development with conservation. Most degradation, however, is taking place in the developing world, which has massive development needs and little resources for conservation.
That got Frank Vorhies thinking: While we can’t offset biodiversity loss in one part of the world by saving habitat in another, could we somehow introduce the elements of transparency and accountability that work so well in carbon into conservation? And if we do, might this free up more capital for proactively supporting environmentally valuable areas, regardless of their location?
These questions, posed in 2008, launched an evolutionary process that drew on expertise from across the biodiversity spectrum and led to the formulation of something called “Verified Conservation Areas”, which are areas with specific conservation needs that have been identified and specific conservation actions that have been defined. As envisioned, many will be areas that haven’t yet been degraded, but that are under some sort of threat that can be identified and then either avoided or minimized through a process that is audited and transparent.
The areas and their action plans will be listed on the VCA Platform, much as houses are listed on a real estate board. Nearly 20 VCAs are currently being considered, and the first one is expected to be approved later this year.
Real Estate and Habitat
Vorhies, who set up the economics and business programs at the International Union for Conservation of Nature (IUCN), says that to understand VCAs, you have to look at the real estate market.
“People will tell you what the going rate is for apartments – to rent or to buy – but each has got a different storyline, a different location, and that’s what biodiversity is like,” he says. “Every bit of nature, every landscape on the planet, has a different set of issues and perspectives and legacies and threats and challenges.”
Intuitively, we all know this, and the conservation community has long funneled money into protected areas around the world, but that money hasn’t flowed in a standardized way that makes it possible to determine its impact, and it rarely finds it way to areas that are environmentally important but unprotected. Contrast this with carbon, where there are extensive rules – both guidelines and methodologies – that must be followed, starting with establishing a baseline to measure any changes over time, and where the targets are explicitly those areas that aren’t already protected by law, in the case of forest carbon.
Where’s the Guidance?
“Nobody’s providing practical guidance on area-based biodiversity assessment,” says Vorhies, explaining that to improve the conservation status of areas, we need to know baselines on ecosystems and their services, species and their habitats, and both the conservation and sustainable use of an area’s biodiversity.
“CI (Conservation International) produced a rapid biodiversity assessment tool, but it only looks at wild species,” he explains. “CI, IUCN, FFI (Fauna & Flora International) and others are helping companies with biodiversity baselines, but these studies are generally not public.”
What’s missing, he says, are publicly-available tools for developing conservation baselines that a critical mass of people can agree on.
2008: Why Reinvent the Wheel?
When the initiative first launched in 2008, the carbon markets were in full swing. The Clean Development Mechanism (CDM), the first global trading platform for environmental credits, was backed by the auspices of the United Nations, and Europe’s compliance emissions trading program meant that companies were eager to participate.
“So the folks over in the biodiversity world were saying, ‘Look at those guys in the carbon world – they’re getting a stack of money. Why can’t we create a Green Development Mechanism (GDM) for biodiversity financing?’”
Thus the idea of a GDM was born, but it was a name without structure; and, as Vorhies later learned, that name was as much of a hindrance as a help in securing finance.
What’s in a Name?
When he approached different countries and investors for support of the project, Vorhies encountered two types of people: those who liked the CDM and those who didn’t. On top of that, he found that both camps read too much into the acronym and, for better or worse, they both saw it as more akin to the CDM than it was.
“So we had to change the name,” he explains ruefully, “After the 10th Conference of the Parties to the Convention on Biodiversity (CBD) in 2010, we changed it to the Green Development Initiative, or GDI, to get rid of the CDM-GDM association because it was driving us nuts.”
2010: Refining and Redefining
That letter change effectively stopped all comparisons between the two, but the initial problem remained: what would the initiative stand for? All Vorhies knew at the time was that he didn’t want it to be like the CDM.
“It was quite clear that it wasn’t a commodity market; biodiversity isn’t a commodity,” he says. “The best market we could use was a property market – to think of biodiversity as something that you would recognize, trade and indeed celebrate like you do in property management.”
With a property market, such as apartments, each location has unique attributes: some might be close to public transportation; others may have a pool on the rooftop; and others might have a view. But aside from these additional features, all apartments can be described in terms of size, number of bedrooms, and other constant features.
Similarly, every landscape will have characteristics that can’t be replicated – just as they will also have basic qualities, like size and ecosystem, which can be described anywhere around the world. Taken as a sum of these descriptors, every conservation hectare has a story and a price.
This holistic approach led to another key difference between the GDI and CDM, at a time when the latter began to crash in the carbon world. The initiative wouldn’t be limited to offsets, although offsets could be one of many options in a developer’s landscape management plan.
“The offset’s only there for when you’ve gotten to the point of irreparable damage and can’t do anything else,” he explains. “But to get to that point, you have to do a whole lot of good things: like avoid, minimize, and restore. And that’s the stuff that needs to be recognized, celebrated and financed through making conservation visible.”
Good Deeds Unrewarded
Vorhies spoke from experience, having previously consulted Yemen LNG, a natural gas company building a new harbor to export gas over a coral reef ecosystem. The company tried to minimize its impact, and it even contacted IUCN to review its decision to relocate the coral nearby, away from where the piers needed to be. Vorhies says they spent large sums on this innovative technique but received no recognition for their efforts. With nothing of value to show their shareholders and no external driver to conform to, the company couldn’t justify its costs.
“Do you see the coral reefs?” asked the company’s environment manager in 2011, explaining his conundrum. “No. Just leave them. We’ve now got to get on with our business.”
Vorhies believes that if the company had do performance report every year, and had an accountable action plan, that would at least give the environment manager an opportunity to fundraise inside of the company for a biodiversity budget. Indeed, they had already spent a large amount on relocation, and it would not take nearly as much to manage and monitor the conservation of the corals. The company and its investors, including Total, could also be recognized publically for their in-situ conservation efforts.
2013: Visibility, Accountability and Marketability
By now, Vorhies had a solid set of criteria for a biodiversity mechanism that he thought would work, but the GDI acronym didn’t quite capture it. “You try to do an elevator speech with the initials GDI – and people say, that sounds really good but what is it?”
Thus, the Verified Conservation Area (VCA) Platform rose from its rejected predecessors to become the final name of the initiative – for now – and it came with the elevator pitch that fit the name.
The elevator pitch is this: the VCA Platform will provide visibility, accountability and marketability to project areas, but the specific improvements are up to the project developer. A verified conservation area may then focus on carbon, water, or any other “benefit” – while, ideally, the central focus would be a cohesive landscape approach – much as the landscapes approach that’s evolving in the carbon world, where carbon sequestration is seen as a proxy for good land management.
But how do you create a methodology that’s applicable in any ecosystem?
A Wing and a Toolkit
Recognizing this challenge, the VCA Platform instead relies on making innovation as it goes – by only requiring those involved with the project on the ground to have quantifiable metrics and present them publicly and transparently. Armed only with the standard and a basic toolkit approach, VCA hopes to develop best practice guidelines in this way.
“When it comes to actually measuring performance, we don’t have any agreed metrics to do a baseline assessment, let alone performance measurements,” Vorhies explained.
Instead, the toolkit provides the basic building blocks for designing a management plan – requiring a baseline assessment, SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis, and a concrete action plan. The latter goes onto the VCA Platform, with yearly updates including independent audits. Every year, an annual performance report will detail what exactly has happened in the area. Similar to an annual financial report, the audit will provide transparency about detailed activities in the area. Investors or donors could then go online, and look at actual projects before contributing.
2014: Building up the Brand
Despite the long journey from GDI to VCA Platform, the brand still needs greater recognition. For companies to buy into a new standard, they need assurance that the standard itself is credible. The VCA Platform doesn’t have that – yet.
Currently, the platform has started a pilot program and has a mandate from two government agency donors – the Swiss and the Dutch – to coalesce all of these ideas into a solid business plan for scaling up This business plan is now being presented to potential investors in the platform itself – seed capital to establish a new marketplace for verified conservation.
Already, there are a few protected areas (PAs) on the waiting list; even though those areas traditionally have a government mandate for conservation, they see the VCA as a way to state what they are delivering and as a way to raise funds. There are also areas on the other end of the spectrum: both private biodiversity restoration areas, including a rainforest in Brazil and a savannah wilderness in Mozambique, and projects linked to commodity supply chains or traditionally suspect sectors like mining and oil and gas. Yemen LNG, for example, has recently proposed to register its industrial harbor as a VCA.
Regarding working with extractive industries, Vorhies says, “I don’t see myself why mining can’t be just as responsible as the tourism which we run in our national parks in the U.S., with all the roads and hiking trails and the campgrounds and facilities required for tourists. With mining, they could come into a conservation area for 20-30 years and leave an endowment; whereas with tourism, when do we get rid of these people and what do they leave behind?”
Similarly with agriculture, a field is often seen as having “destroyed” conservation areas, yet Vorhies remains optimistic about their inclusion. This is evidenced by the growing use of sustainability standards for various commodities including coffee, cocoa, soy, and palm oil. The VCA Platform, however, brings a landscape level focus to sustainable agriculture which is of real interest to major food companies like Unilever.
“The VCA in that sense is not about recognizing that we’ve totally damaged this part of the world and therefore must pay. It’s more like saying this is where we are today and this is what we can do to make it better… It isn’t a conservation story; it’s a process of improvement. That’s the idea. We’ve tried to move the language from compensation to good practice. If we want to conserve our planet, we need to create a market for delivering conservation.”