How biodiversity is reshaping European investment strategies
Published on: May 16, 2025
There is a clear trend across Europe towards increased assessment and disclosure of biodiversity impacts for both businesses and financial institutions. Awareness of the need to manage potential financial risks arising from biodiversity loss has increased, incentivising nature-positive action and investment.
The EU Taxonomy sets out the criteria for determining sustainable activities, with a growing emphasis on biodiversity. It provides a framework for companies to report on how their activities comply with biodiversity-related criteria, resulting in greater accountability for biodiversity impacts. Many EU Taxonomy objectives link to drivers of biodiversity loss, or solutions to reduce loss. However, current EU taxonomy criteria do not specify all potential economic activities specifically from the perspective of their positive contribution to biodiversity. In practice, identifying and favouring biodiversity-positive activities in financial decision-making might require extra effort.
Global frameworks such as those provided by the Science-Based Targets Network (SBTN) and the Taskforce on Nature-related Financial Disclosures (TNFD), are increasingly used by companies to enable systematic value chain analyses, target setting and disclosures. On a European level, The Corporate Sustainability Reporting Directive (CSRD) includes reporting standards that enable companies to disclose information about their contribution to biodiversity loss through their own operations, and via value chains, and share what measures they are taking to mitigate that impact. Companies looking for biodiversity data and any related business linkages and increasing their knowledge of the potential financial risks and opportunities arising from biodiversity, are able to incorporate biodiversity into their financial decision making and business strategies.
Financial institutions step up biodiversity due diligence
Financial institutions are increasingly considering biodiversity risk in investment decisions. For example, the European Investment Bank has established its own Environmental and Social Standards, which include an assessment of biodiversity impact to inform decision making. Other financial institutions make use of the International Finance Corporation (IFC)’s Performance Standard 6 (PS6) as part of their due diligence process when determining whether to fund international projects. This is putting pressure on businesses to ensure that they have robust data to understand their biodiversity impacts, and that they can demonstrate that they have considered the impacts adequately.
Sustainable Finance Disclosure Regulation (SFDR) requires that financial institutions disclose how they manage sustainability risks, including biodiversity risks. This regulation aims to ensure that financial disclosures reflect the actual environmental, social, and governance (ESG) risks associated with investments, forcing companies and financial institutions to evaluate and report on their biodiversity impact.
There are also national initiatives and laws that push for biodiversity as well. For example, in the Netherlands, De Nederlandsche Bank has carried out research into its potential impacts and dependencies on nature in relation to its holdings in electric utilities and ASN Bank has been actively developing tools and policies to enhance biodiversity.
In France, Article 29 of the law on Energy and Climate requires financial institutions to publish information relating to the portion of their assets that comply with the environmental criteria set out in the EU Taxonomy. Additionally, the related decree stipulates disclosure of for example, a strategy for alignment with long-term biodiversity goals and biodiversity related financial risks.
Establishing biodiversity credit markets
Countries are establishing biodiversity offset and credit markets to incentivise private sector investment in conservation. Biodiversity offsets are mechanisms that allow private sector organisations to compensate for the biodiversity loss caused by their activities by investing in conservation or restoration efforts elsewhere. Biodiversity credits can be used and procured even without the need to compensate, depending on the definition and market system in place.
Biodiversity offsetting or credit creation are always linked to a specific location with inherent biodiversity properties and therefore it is also natural that progress has been made at the national level, and matched to each country’s own regulatory framework. Because of the potential risks of this approach, high-level principles to guide the biodiversity credit market development have been published. Today, biodiversity offsets and credit markets do not have a globally harmonised framework and unified system for definitions, quantification and verification. A solid and harmonised system is needed to ensure real benefits for nature when the market starts getting heated. The global demand for voluntary biodiversity credits could reach the size of nearly €2 billion in 2030 and in 2050 the market demand could reach nearly €67 billion, according to estimates.
Country snapshots – Local schemes and innovations
UK: Biodiversity net gain
The UK Environment Act 2021 in England makes it a legal requirement for the majority of developments to achieve a minimum 10% net gain in biodiversity after completion. This so-called biodiversity net gain (BNG) is achieved through enhancing, restoring or creating new habitats on-site; or by purchasing biodiversity units from a third party (e.g. Habitat Bank or Private Landowner) who establishes the agreed habitat off-site; or by buying statutory credits from the government, who will use the funds to establish habitats in strategic locations.
France: National biodiversity credit scheme
France has launched a national scheme for voluntary biodiversity credits, seeking to mobilise private financing to help nature conservation and restoration. Credits linked to sites approved by the government will enable buyers to both contribute to biodiversity restoration and compensate for their impacts.
Germany: Ökokonto system
In Germany municipalities can create an Ökokonto (eco-account), generating biodiversity credits through habitat protection or species conservation, which can then be purchased by developers to offset the negative impact of their projects have on biodiversity.
Finland: Science-based biodiversity compensation
In Finland ecological compensation for nature deterioration under the Nature Conservation Act can take place either by generating nature values or through the avoided loss offset. Nature value hectares are used as the unit for compensation. In addition, a system for voluntary biodiversity credits that go beyond existing environmental offsetting provisions is being prepared. This system covers establishing national science-based criteria for generating biodiversity credits, setting up a verification and registration system, and providing guidance on the types of claims investors can make when purchasing units.
The Netherlands: Sweco and the national biodiversity bank
In the Netherlands, Sweco is contributing to the non-profit organization The National Biodiversity Bank Foundation, to create a system of biodiversity credits in the Netherlands. Sweco’s Naturepoints calculator is used to quantify biodiversity gain or loss and to translate this into biodiversity credits. Naturepoints is a scientifically based method to quantify the biodiversity value of an area and estimate the effects of planned developments projects. The National Biodiversity Bank Foundation’s goal is to offer a transparent and guaranteed financing model for investments in biodiversity, working with landowners who want to strengthen biodiversity and with companies that want to finance it.
Sweco supports biodiversity risk assessment for large-scale projects
In the UK, Sweco is working as part of an international framework reviewing Environmental and Social Impact Assessments and Critical Habitat Assessments on behalf of the European Investment Bank (EIB) and other financial institutions to determine if investment opportunities are meeting international, and client-specific standards relating to biodiversity.
This work is enabling our clients to make informed investment decisions on large-scale energy projects, including major overhead powerline routes, hydro-electric dams and wind farms, taking into consideration their effect on nature.
