Achieving Net Positive Impacts for Biodiversity

Through the Mitigation Hierarchy

What is the Challenge to Biodiversity? • New investments in infrastructure and resource development

are growing rapidly.

• Company commitment to biodiversity conservation is growing.

• Financial institutions seeking more environmental responsibility

BUT …

• Most funding is project based and does not look at impacts beyond the project boundary.

• Impacts from multiple developments are typically cumulative. • Existing environmental compliance process does not achieve no

net loss of biodiversity (NNL) or net positive gain (NPG)

Implementing the Mitigation Hierarchy

Restoration

Minimization

Avoidance

Offset to Achieve No Net Loss

Offset to Achieve Net Positive Impact

• Create a system for planning and that limits impacts to biodiversity and ecosystem services and incorporates that into the EIA process

• Create a value for biodiversity and ecosystems services and system where the developer pays.

Measurable conservation outcomes to compensate for significant impacts to biodiversity that remain after appropriate prevention and mitigation measures have been taken.

The goal of biodiversity offsets is to achieve no net loss, and preferably a net gain, of biodiversity on the ground with respect to species composition, habitat structure, ecosystem function and people’s use and cultural values associated with biodiversity.

Definition What are Biodiversity Offsets?

Some Key Offset Concepts

Ecological Equivalence or Like for Like

=

≠

Some Key Offset Concepts

Limits to What Can be Offset

Low Vulnerability High

High Irreplaceability Low

Feasibility best below curve (lower risk) Low to moderate irreplacability Vulnerability moderate to high - conservation options should exist Vulnerability low but biodiversity is restorable adding value

Thresholds for offsets A Key Role – Project Metrics

• Biodiversity counts and measures (what - is being exchanged, or lost and gained)

• A currency constructed from these data

(how much of what is being exchanged)

• An accounting model defining offset specifications (how much of what is needed)

• Spatial information to identify potential offset locations (where)

Some Key Offset Concepts

Permanence – Offsets should be designed and implemented to guarantee the outcomes over the long-term Legal, financial and management mechanisms need to be in place to secure outcomes that last at least as long as the development project’s impacts and preferably in perpetuity.

1) Individual offset

2) Aggregated offset

1) Conservation

bank

Types of offsets

Source: World Bank, 2009

Source: Ambatovy Project

Source: Carroll, Ecosystem Marketplace

Implementation options

Option 1: Single (individual) site

Option 2: Aggregated site

Option 3: Conservation banking

• Address the residual impacts of a single project • Demonstrate additional, measurable conservation outcomes

• One offset/compensation is planned to address several projects’ impacts • Offset/compensation demand is known in advance • Designed to compensate for specific biodiversity impacts

• Biodiversity credits are established in advance of any losses they may be used to offset/compensate • Designed to supply offsets/compensation over time for multiple losses

• Developer and/or partners (NGO, consultant, multi-stakeholder group)

undertake the offset • Developer buys sufficient ‘credits’ from a

landowner or conservation bank to offset its impacts.

• Payment to a government authority ‘in lieu’ (least desirable – other options preferred)

Three ways to implement offsets or compensatory conservation:

What Can We Learn from BBOP to Respond to this Challenge?

A collaboration of >75 companies, financial institutions, government agencies and civil society organizations working collaboratively, to develop best practice in

biodiversity offset design and implementation based on agreed principles.

1. Adherence to the mitigation hierarchy

2. Limits to what can be offset

3. Landscape context

4. No net loss

5. Additional conservation outcomes

6. Stakeholder participation

7. Equity

8. Long-term outcomes

9. Transparency

10. Science and traditional knowledge

Principles for biodiversity offsets Principles for biodiversity offsets agreed by all the BBOP members

• EIA rarely considers ‘no net loss’. • EIA typically only requires avoidance/minimization for some

impacts. • Usually does not address residual impacts. • Does not address all components of biodiversity. • Often very site specific – requires a landscape scale. • Often fails to address indirect and cumulative impacts. • HOWEVER the Mitigation Hierarchy can be integrated into

the EIA process to deliver NNL and NPG!

Offsets compared with Environmental Impact Assessment (EIA)

Can’t EIA take care of biodiversity?

Going Beyond Compliance Integrating the mitigation hierarchy within the EIA process allows projects to:

• Apply a landscape perspective • Respond to cumulative impacts • Produce comprehensive and

permanent solutions that can Avoid

Minimize Mitigate

Offset-Compensate

Impacts to biodiversity and ecosystem services

Working with a Broad Array of Stakeholders

Business – Making the

Business Case

Government- NNL Policy Development

Financial Institutions – Lending Practices

PS6, Green Protocols, Equator

Banks

Civil Society - Consultation and

Participation

The Business Case: Managing Risk

• Regulatory risks – Profitability may be threatened by fines, claims for damage, delays or

loss of authorization

• Reputational risks – Loss of trust, poor profile, target of negative publicity, NGO campaigns,

loss of license to operate

• Financing risks – Tougher access to investment capital—debt and equity—especially

given growing offset requirements by Equator banks

• Operational risks – Poor consideration of biodiversity & ecosystem services can increase

future vulnerability to risks (e.g. inadequate water supply, flooding)

Conservation planning can mitigate Risk

The Business Case: Gaining Competitive Advantage

• Access to land – at initial stages of project development & for ongoing exploration to extend the lifetime of existing projects;

• Legal and social license to operate • Access to old & new markets • Access to human capital • A seat at the policy development table

What do Governments Need?

• Provincial and federal standards and policies that support the Business Case

• Standards and policies that fulfill international agreements

• IUCN Red list, CITES, etc.

• Complementarity with growing lender standards and policies

– IFC Performance Standards 1 and 6

Financial Institutions Step up to the Challenge -

IFC PS6 and the Equator Principles Association

Canada Banks Adhering to Equator Principles • Bank of Montreal • Bank of Nova Scotia • Canadian Imperial Bank of Commerce • Export Development Canada • Manulife Financial • Royal Bank of Canada • TD Financial Group

What Do Equator Principles Require from Borrowers?

• To protect and conserve biodiversity.

• To maintain the benefits from ecosystem services.

• To promote the sustainable management of living natural resources through the adoption of practices that integrate conservation needs and development priorities.

Applying a Multi-Tiered Approach Projects and policies that affect the decisions and behavior of key stakeholders: Governments

Mandates, standards and regulations on best practices (mitigation, compensation) affect company behavior and investment approaches

Financial Sector

Safeguards that affect performance through pre and post-project requirements

Companies - Industry CSR and market access affect their actions on the ground (voluntary)

Most Effective & comprehensive

Benefits for government and society • Clear, streamlined guidance is needed for all stakeholders

to create certainty & to avoid delays • Adequate performance monitoring and enforcement • Incorporate the mitigation hierarchy into EIA and SEA • Avoid methods that don’t deliver NNL (e.g. poor metrics) • Avoid use of “in lieu” payments • Develop effective financial mechanisms that provide long-

term funding • Involve the private sector as partners in the development

of best practice • Landscape level approach is key to meeting conservation

objectives - Government role is key in this regard

Mitigation Hierarchy Lessons Learned

Definition Challenges to progress with NNL/NPG

• Political will

• Corporate commitment

• Institutional commitment within banks

• Greater participation from the NGO and scientific communities

• And overall: greater capacity + more models to show results

Summary and Conclusions • Business case is growing for companies

that often extends beyond legal compliance

• Lending community requirements increasingly include higher standards than required by governments

• Governments have an important opportunity

to contribute directly to biodiversity conservation by creating an even playing field for all businesses through clear regulations on mitigation and offsets.

Need to move beyond current compliance In order to adequately protect biodiveristy