In 2022, a ‘State of the Environment Report 2021’ (the Report) was released by Australia’s Federal Minister for the Environment and Water. As anticipated, it painted a grim picture of Australia’s natural environment and the potential impacts on Australians generally if the degradation continues. The deterioration of Australia’s natural environment was attributed to a number of intensifying pressures and environmental conditions such as climate change, habitat loss, invasive species, pollution and resource extraction. Notably, one of the key takeaways of the Report was identifying opportunities for the private sector to assist with environmental protection and restoration, with the Report highlighting a statistic that 90% of millennials are looking to environmental, social and/or governance (ESG) investments instead of traditional investments.
For context, an independently developed report produced by PWC stated that a biodiversity market could unlock $137 billion in financial flows to advance Australian biodiversity outcomes by 2050.
In response, Australia’s Federal Government produced a ‘Nature Positive Plan’ and committed to establishing a nature repair market, with a belief that this will make it easier for businesses and philanthropic organisations to invest in nature repair and create opportunities for landholders to better protect and manage their land. This was followed by the introduction of the Nature Repair Market Bill (Cth) (the Bill) and the Nature Repair Market (Consequential Amendments) Bill 2023 (Cth) into Australian Parliament.
What is the Nature Repair Market Bill?
The nature repair market, also referred to as the biodiversity market, is to be a voluntary market encouraging private sector investment in long-term nature repair, delivering improved diversity outcomes for native species and rewarding landholders for enhancing and protecting nature and biodiversity.
The Bill establishes a framework for all Australian landholders, conservation groups and farmers to participate in the market and to be issued with tradeable biodiversity certificates (Certificates) for projects that protect, manage and restore nature.
These Certificates are intended to be sold and transferred to businesses, organisations, governments, and individuals alike under commercial contracts, allowing biodiversity outcomes to be owned and traded separately from the underlying land itself. With Certificates providing standardised information, private investors will be able to compare and value these projects across the market.
In order to protect the integrity of the Certificates and ensure market confidence, the nature repair market will be regulated by the Australia’s Clean Energy Regulator, aligning both carbon and biodiversity markets. Certificates will also be able to be tracked through a public register, with project reports describing and verifying environmental benefits over time.
Registered projects
Certificates will only be issued if projects become registered by meeting various requirements, including the project progressing sufficiently enough to result in, or be likely to result in, its intended biodiversity outcome. Certificates will remain valid for the life of the project, with only one Certificate being issued per project unless otherwise relinquished or cancelled.
The types of projects eligible to be registered are those which improve or protect existing habitats, and those that establish or restore habitats. Projects can be on land, inland waterways (lakes and rivers), or in marine and coastal environments. The Department of Climate Change, Energy and Environment and Water set out some examples of projects eligible to be registered and receive a Certificate, which included:
- improving or restoring existing native vegetation, through fencing or weeding;
- planting a mix of local species; and
- protecting rare grasslands that provide habitat for endangered species.
Final comments
Despite the nature repair market currently being proposed as a voluntary market, the Bill should be of interest for all organisations pursing a nature positive strategy. There are some stakeholders that believe Certificates may eventually become legal requirements for such projects given the general movement towards mandatory disclosure in terms of ESG reporting for corporations and financial institutions.
There are still some concerns around the integrity of the Certificates and the fear of fuelling an “offset market” whereby organisations use the purchase of Certificates to justify harm to the natural environment. With plenty of detail to be finalised, the Bill has been referred to the Senate Environment and Communications Legislation Committee, with a report expected to be released in August 2023. Watch this space!
