Biodiversity Credits: Contribution vs Compensation
Amid growing interest in mobilizing financing for the conservation and restoration of nature, biodiversity credits are emerging as a promising tool. However, there is still considerable confusion about what they are, how they differ from biodiversity offsets (or compensation), and what types of claims they can support.
At corenature, we wrote this article to bring clarity to that discussion. We distinguish between two core logics: contribution and compensation. Contribution seeks to channel financing toward additional positive outcomes for nature. Compensation, on the other hand, should only apply when a company or organization is seeking to offset its own residual impacts, under much stricter criteria.
What is a biodiversity credit?
Before distinguishing between compensation and contribution, it's worth clarifying what a biodiversity credit actually is. According to the definition proposed by the Biodiversity Credit Alliance, a biodiversity credit is a certificate representing a measured, evidence-based unit of a positive outcome for biodiversity. That outcome must be additional to what would otherwise have happened, and durable over time.
The International Advisory Panel on Biodiversity Credits (IAPB) identifies different possible uses for these instruments. First, they can finance evidence-based positive contributions that support global nature goals, such as the conservation, restoration and sustainable use of ecosystems, in line with the Kunming-Montreal Global Biodiversity Framework. Second, they can be used to compensate for local residual impacts generated by the actor that acquires or uses the credit (a company, organization, or other type of entity), provided strict criteria are met: ecological equivalence, additionality, permanence, traceability and independent verification.
To better understand these differences, it helps to start with the mitigation hierarchy.
The Mitigation Hierarchy: a starting point
The mitigation hierarchy is a conceptual and methodological framework that sequentially orders the actions companies and project developers must apply to responsibly manage their negative impacts on biodiversity.
Under this approach, when a project or activity has the potential to affect species, habitats or ecosystems, the priority is, in order: first to avoid impacts; then to minimize them; then to rehabilitate or restore the affected areas; and only as a last resort, to compensate for residual impacts that could not be avoided, minimized or restored.
Once the mitigation hierarchy has been rigorously applied — and residual impacts addressed through compensation/offsets where appropriate — a distinct space opens up: that of additional conservation actions. This is where biodiversity credits can be positioned when used as positive, additional contributions to nature, supporting a credible transition toward Nature Positive goals, without replacing the obligation to avoid, minimize, restore or compensate for one's own impacts.
Biodiversity offsets
Biodiversity offsets are measurable conservation outcomes designed to compensate for significant negative residual impacts on biodiversity. In other words, they apply only to impacts generated by the company or organization that remain after measures to avoid, minimize and restore or rehabilitate have already been implemented. Their goal is to balance a specific loss caused by a development project through an equivalent ecological gain, seeking to reach a scenario of “No Net Loss", or ideally “Biodiversity Net Gain” / “Net Positive Impact".
The IUCN emphasizes that biodiversity offsets are only appropriate for projects that have rigorously applied the mitigation hierarchy and evaluated alternatives to avoid harm to biodiversity. Avoiding harm from the outset must always be the priority. For that reason, offsets should be used only as a last resort, not as a substitute for prevention, minimization or restoration.
A central principle of biodiversity offsets is the like-for-like approach (or ecological equivalence), which holds that the gain generated by a compensation must be comparable to the impact it seeks to offset. This means acting on the same type of ecosystem, habitat or species affected — for example, the loss of a dry forest cannot be offset by restoring a wetland or protecting a non-equivalent ecosystem.
This approach reflects the non-fungibility of nature: unlike carbon, biodiversity is local, complex and difficult to exchange. That's why, beyond ecological equivalence, geographic or biogeographic proximity is usually also required, so that the offset preserves ecosystem functions, connectivity and benefits for the local communities linked to the impacted area.
According to the OECD, biodiversity offsets are implemented mainly in three ways:
Permittee-led / one-off offset: the company or organization developing the project directly takes on the design, financing and implementation of the offset for the residual impacts generated by its own activity.
Mitigation banking or habitat banking: a third party conserves, restores or enhances biodiversity in a given area and generates verifiable credits, which can then be purchased by project developers who need to offset their residual impacts.
In-lieu payments: the developer pays a fund, authority or authorized entity to implement the offset on its behalf.
Today, habitat banks have become one of the main mechanisms for channeling offsetting processes for biodiversity impacts. In Latin America, the most relevant case is Terrasos in Colombia, which launched the country's — and the region's — first habitat bank in 2016. This model was later formalized in Colombia through Resolution 1051 of 2017 issued by the Ministry of Environment and Sustainable Development. The scheme allows conservation, restoration or sustainable-use actions to be carried out in defined areas, biodiversity gains to be quantified, and those gains to be converted into credits, for both mandatory offsets and voluntary investments.
Similar experiences have emerged in other countries. In England, the Biodiversity Net Gain scheme has, since 2024, required a minimum 10% biodiversity gain on certain development projects. In New South Wales, Australia, the former BioBanking scheme was replaced by the Biodiversity Offsets Scheme (BOS). Together, these cases show how habitat banks can channel financing toward positive biodiversity outcomes, provided they operate under clear rules, traceability and permanence guarantees.
Positive Contributions and Additional Conservation Actions (ACAs)
Once the sequence set out by the mitigation hierarchy has been followed — avoid, minimize, restore and, only where appropriate, compensate for residual impacts — a distinct and complementary space emerges: that of Additional Conservation Actions (ACAs). These are voluntary interventions that go beyond legal obligations or the requirements needed to mitigate a project's direct impacts.
Unlike offsets, ACAs are not designed to counteract a specific ecological loss, nor do they require demonstrating strict biological equivalence between impact and gain. Their purpose is to channel financing toward positive biodiversity outcomes at a landscape scale. This can include strengthening protected-area management, funding applied scientific research, restoring biological corridors, improving landscape connectivity, monitoring species, or supporting the environmental governance of local and Indigenous communities.
In the context of emerging nature markets, biodiversity credits can find in ACAs a transparent, lower-reputational-risk application. Under this model, the credit functions as a verified positive-impact certificate, without claiming to neutralize or offset a company's own loss.
Summary
In summary, a biodiversity credit can serve different purposes. It can function as a positive contribution to Nature Positive goals, channeling financing toward conservation, restoration or sustainable-use actions; or, under much stricter criteria, it can be used as a mechanism to compensate for residual impacts.
The table below summarizes the main differences between the two approaches, where each sits within the mitigation hierarchy, and the types of claims each can support:
* There must be a clear correspondence between the loss generated and the gain obtained, under criteria of ecological equivalence (like-for-like), additionality, permanence, traceability and independent verification.
At corenature, we believe a key condition for strengthening the integrity of these markets is to decouple the concept of a “voluntary biodiversity credit” from the “neutralization” narrative. Unlike carbon credits, which have historically been associated with offsetting emissions, biodiversity credits should not automatically be interpreted as a mechanism to compensate, balance or mitigate impacts on nature.
Biodiversity is highly specific, local and non-fungible: the loss of an ecosystem, habitat or species in a given place cannot simply be replaced by an improvement generated elsewhere. That's why, in most cases, biodiversity credits should be understood as a positive-contribution tool: a vehicle for channeling financing toward measurable, additional and verified outcomes in the conservation, restoration or sustainable use of ecosystems.
When a company has a residual impact of its own and seeks to offset it, the right instrument is not just any voluntary biodiversity credit, but a biodiversity offset, subject to much stricter criteria around the mitigation hierarchy, ecological equivalence, additionality, permanence, traceability and independent verification. Clearly distinguishing between biodiversity credits as positive contribution and biodiversity offsets as compensation is key to avoiding overstated claims, reducing greenwashing risk, and building a more transparent, credible market that is genuinely oriented toward generating a positive impact for nature.
Finally, we believe biodiversity credits can help mobilize private resources toward territories that hold strategic biodiversity today but lack sufficient financing. In Latin America, home to a fundamental share of global biodiversity, these instruments could become a concrete way to connect financing, conservation and territorial development. They can also strengthen regenerative production models, restore degraded ecosystems, improve the management of conservation areas, and create economic opportunities for local communities.
