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    Business in biodiversity

     

     
     
    International Trade Forum - Issue 1-2/2008 
     

    © Giles Kershaw The word 'biodiversity' is a contraction of the phrase 'biological diversity', and refers to all the different life forms (plants, animals and micro-organisms) that exist in any given ecosystem

    Commercial opportunities for investment and entrepreneurship in biodiversity go way beyond only agriculture, a major new study suggests

    'The idea of profiting from biodiversity conservation may seem strange, but this is in fact an essential condition for mobilizing private investment in conservation. Without profit, business dies and markets stagnate,' notes a major new study, Building Biodiversity Business, which has been underwritten by the International Union for Conservation of Nature and Natural Resources (IUCN) and Shell International.

    From forestry and fisheries to bioprospecting and ecotourism, biodiversity conservation can be profitable, the 164-page study suggests. It identifies business opportunities and proposals of concern to exporters, with particular emphasis on upcoming markets.

    Forestry

    A growing opportunity for many companies is to manage forest resources in ways that optimise a range of benefits, e.g. selling certified wood products, tapping into emerging markets for environmental services, non-timber forest products (NTFP), ecotourism and other 'green' products and services.

    Non-Timber Forest Products (NTFP)

    NTFP, including 'bushmeat', are major sources of subsistence and cash income and are especially important to the rural poor. Examples include edible nuts, mushrooms, fruits, herbs, spices, honey, gums and resins, rattan, bamboo, thatch, cork, ornamental plants and flowers, and an array of plant and animal products used for medicinal, cosmetic, culinary, cultural or other purposes.

    In addition to local uses, many NTFP are traded internationally. For example, the world trade in bamboo and rattan is currently estimated at US$5 billion per year according to the International Network for Bamboo and Rattan (www.inbar.int). Exports of bamboo shoots from Taiwan alone are worth approximately US$50 million while Indonesia exports US$700 million (70% of the global trade) in rattan.

    Specific business opportunities linked to NTFP include:

    • Investment in a portfolio of NTFP enterprises, either in a small number of high potential product markets, or a broader 'market basket' of products that promote practises including sustainable harvesting and support for local communities.
       
    • Invest in existing SME funds that support NTFP businesses, with equity and/or debt financing; alternatively, create new funds that can focus on NTFP enterprises, particularly in regions with market and conservation potential not covered by existing funds, such as parts of Africa and Asia.
       
    • Support the broader adoption of NTFP certification, the development of lower-cost systems, and research to measure the impacts of NTFP harvesting at the individual product/species and habitat/landscape level.

    Fisheries and aquaculture

    Aquaculture is growing very rapidly, particularly in Asia, and is increasingly viewed as a potential solution to the over-fishing of wild stocks, albeit one that comes with its own set of environmental issues. Several certification schemes are being developed to promote sustainable capture fishery and aquaculture, but only a fraction of the world's capture fisheries and aquaculture operations currently use environmentally friendly practices. There is a need to extend sustainable fisheries certification to address problems such as 'bycatch' (species caught unintentionally) and also to expand coverage to developing countries, where certification is currently very limited.

    Bio-carbon offsets

    According to the World Bank, 'The carbon market grew in value to an estimated $30 billion in 2006, three times greater than the previous year.' But while forestry and agricultural projects can sell carbon credits through the Clean Development Mechanism of the Kyoto Protocol, few transactions have been approved to date. Most activity linking carbon to biodiversity has taken place within the growing voluntary market, as corporations and individuals seek to offset emissions to meet their own reduction targets.

    There is a need for further experimentation within the voluntary carbon market, including support for avoided deforestation and related initiatives that bundle payments for a range of environmental goods and services, including carbon as well as biodiversity benefits.

    Payments for watershed protection

    Payments for watershed protection are increasingly used, and range from private users paying environmental agencies and NGOs to direct payments by central government to private landowners.

    Finding a willing buyer for watershed protection services is often the main barrier to introducing such schemes or maintaining them over the long term. The key is to identify downstream users for whom payments are a more cost-effective option than investing in costly water treatment or developing new water supplies.

    There is significant potential to leverage co-funding from government and development agencies and, in certain locations, to transfer the scheme to local water users. Contributions to poverty reduction can be substantial, due to the relatively low incomes of most upland farmers compared to downstream water users.

    Bioprospecting

    Bioprospecting is the systematic search for genes, compounds, designs and organisms that have a potential economic use and might lead to a product development.

    There are few hard numbers regarding the size of the bioprospecting industry, but growth to date has disappointed many advocates. For example, Costa Rica has received US$4.5 million from bioprospecting accords, a small sum compared to the annual income of approximately US$400 million derived from ecotourism.

    One source suggests that the current market is worth US$17.5-$30 million, although by 2050 this could grow to more than US$500 million. Potential investors in bioprospecting must demonstrate that both biodiversity and local communities are benefiting from their activities.

    There are substantial business risks associated with bioprospecting, not least of which is the potential damage to reputation arising from claims of biopiracy (the appropriation of rights over indigenous knowledge without compensation to the indigenous groups who originally developed such knowledge).

    The most appropriate opportunities will tend to be in countries with clear access, benefit-sharing policies and a solid institutional framework. On this basis it may be possible to reduce risk by investing in companies that actively support the communities that provide the raw materials.

    Developing countries could improve their healthcare systems by asking major pharmaceutical companies to help them improve their ability to research and develop their own drugs in return for access to natural resources, rather than making unrealistic assumptions regarding the level of financial gains that are possible from bioprospecting.

    Biodiversity offsets

    The use of legally mandated biodiversity offsets (providing for protection measures to compensate for possible reductions in biodiversity) is growing, and examples can be found in Australia, Brazil, Canada, Switzerland and the United States. The Environmental Liability Directive passed by the European Commission in 2004 could lead to similar arrangements throughout Europe. Analogous policies are under development in Mexico, New Zealand and Uganda, among other countries.

    In addition to mandatory offsets, there is growing interest in the potential of voluntary offsets. Some companies have made public commitments to implement biodiversity offsets linked to their 'footprint', while several mainstream investors are looking at biodiversity offsets as a new business opportunity, as well as an indicator of good corporate governance. Biodiversity offset opportunities include:

    • Creating a local ecosystem 'bank' whereby you buy or lease land, restore it and sell habitat 'credits' to public agencies and private companies that need offsets for regulatory compliance or to meet voluntary 'no net loss' commitments.
       
    • Becoming an ecosystem service 'broker' by purchasing biodiversity credits from landowners (secured by development rights) rather than the land itself and sell credits to mitigation buyers, as above.
       
    • Offering 'offsets for imports'. Identify global conservation priorities, define standards for credible offsets and set up a verification system for companies that could purchase voluntary offsets for all imports not already certified as 'sustainable'. Offsets would be supplied by accredited providers and subject to independent verification and regular renewal.

    Biodiversity management services

    This specialized market is expected to increase significantly as the private and public sectors see the inherent opportunity and risk of business in biodiversity.

    There are several non-profit opportunities that could be supported by a think-tank and ultimately lead to the development of additional (for-profit) investment opportunities through civil society, research, partnership brokering and public sector capacity building initiatives.

    More direct, for-profit, opportunities might include: integration of biodiversity with environmental impact assessment (EIA) processes; providing ecosystem restoration/rehabilitation services; benchmarking biodiversity performance; conducting and certifying Biodiversity Action Plans; or creating and certifying biodiversity offsets.

    Recreational hunting and sport fishing

    Opportunities exist to work with recreational hunting and fishing organizations with good records in supporting biodiversity conservation in developed countries, to open more chapters, or enter into mentoring relationships with similar organizations in developing countries to implement conservation programmes.

    Selected ecosystem markets and their potential for growth 

    Source: Adapted from information supplied by Michael Jenkins (Forest Trends; Personal Communication, 2006)Biodiversity management services offered by different providers 

     

        Building Biodiversity Business report by: Joshua Bishop, Sachin Kapila, Frank Hicks, Paul Mitchell and Francis Vorhies. You can download a copy of the report at: http://data.iucn.org/dbtw-wpd/edocs/2008-002.pdf