Biodiversity impact measurement: why it matters in forest diligence

Measuring the biodiversity impact of a project is crucial in nature-based project investments because it has far-reaching implications for ecological, social, and economic outcomes. Prioritizing biodiversity not only aligns with responsible and sustainable investment principles but also enhances the project's resilience, regulatory compliance, and overall value. It ensures that nature-based investments contribute to the conservation and sustainable management of our planet's ecosystems.

Ecosystem Services: Biodiversity underpins the provision of essential ecosystem services, such as pollination, water purification, and carbon sequestration, which are critical for human well-being and the sustainability of nature-based projects.

Resilience and Adaptation: Biodiverse ecosystems are more resilient and adaptable to environmental changes and disturbances. Projects that enhance biodiversity contribute to the long-term viability and success of nature-based initiatives.

Regulatory Compliance: Many environmental regulations and standards require the conservation and restoration of biodiversity. Compliance is essential to avoid legal risks and maintain the project's social license to operate.

Risk Mitigation: Biodiversity-rich ecosystems are less susceptible to disease outbreaks, invasive species, and other ecological risks. Investing in biodiversity can reduce the project's vulnerability to such risks.

Carbon Sequestration: Biodiversity and carbon sequestration are interconnected. Diverse ecosystems, such as old-growth forests, tend to sequester more carbon. Biodiversity impacts the project's ability to deliver on carbon offset commitments.

Positive Externalities: Biodiversity projects often generate positive externalities for surrounding areas. These can include improved water quality, enhanced recreational opportunities, and increased property values, contributing to the project's overall social and economic value.

Community Relations: Projects that prioritize biodiversity conservation can foster positive relations with local communities, particularly indigenous and traditional groups with strong ties to the land. This can lead to greater community support and reduced conflict.

Market Access: Some markets, such as eco-tourism or certification schemes like Fair Trade or FSC (Forest Stewardship Council), reward projects that prioritize biodiversity conservation. Access to these markets can enhance project profitability.

Scientific Knowledge: Biodiversity projects often involve scientific research and monitoring, which can generate valuable knowledge about local ecosystems. This knowledge can inform project management and enhance its long-term sustainability.

Global Conservation Goals: Many nature-based projects align with global conservation goals, such as the Aichi Biodiversity Targets or the United Nations Sustainable Development Goals (SDGs) or the new Science-Based Targets for Nature. Contributing to these goals enhances the project's societal and environmental impact.

Investor and Stakeholder Expectations: Responsible investors and stakeholders increasingly prioritize biodiversity in their investment decisions. Meeting these expectations can attract funding and support.

Future-Proofing Investments: Nature-based projects that prioritize biodiversity are better positioned to adapt to changing environmental conditions and regulatory frameworks. This future-proofing can protect the investor's long-term interests.

To measure biodiversity impact, one of the data points we collect and analyse is the type of plant/tree species and the genetic material used (diversity, adaptation to project conditions, resilience, etc). In the case of a reforestation or afforestation project, if the species is non native, we analyse its potential invasive behaviour in the context of the project conditions; if the species is native to the region, we analyse the consequences of its reintroduction and the project’s potential to enhance endangered species populations.

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Due diligence in nature-based project investments is crucial but complex. Focusing on the positive impacts in nature-based project investments is not only ethically responsible but also strategically advantageous. These projects contribute to environmental conservation, societal well-being, regulatory compliance, and financial viability, making them a win-win for both investors and the planet.

To assess the investability and impact of a forest project, Xilva’s analysis integrates 6 key areas of appraisal: Impact, Financial Viability, Safeguards, Project Design, Leadership & Team and Growth Potential.

These 6 areas are not individual, standalone elements of interest but, under Xilva’s systemic approach, they are critical, connected elements that, if not properly addressed and balanced, will reduce the project's ability to realise each individual impact.