This topic has become highly relevant and will likely change the traditional forest and land management model to which we are so accustomed, even in Latvia. Nature credits are financial and conservation instruments that transform measurable nature improvements into certified and tradable units. They have been created as an innovative mechanism to attract private capital for the restoration of biodiversity and ecosystems. The Roadmap for Nature Credits, developed by the European Commission, provides for a voluntary, market-based system that financially rewards those who actively care for the environment.
The nature credit system supports both the restoration of European wetlands and the expansion of forest areas, which are among the primary and most frequently cited examples in the European Union.
How do nature credits work in practice?
In practice, the nature credit system acts as a bridge between landowners and companies wishing to invest in the environment. The entire process is based on four consecutive stages.
In the first stage, a landowner, farmer, or forest manager decides to carry out nature-enhancing improvements on their property that exceed mandatory legal requirements. For example, a farmer might stop intensive farming on a plot of land and convert it into a natural meadow or flood a former drainage ditch.
In the second stage, independent auditors and scientists get involved, conducting an initial survey of the territory and monitoring the achieved progress using strict, scientifically sound criteria. For example, it is measured whether the number of nesting birds in the area has increased or whether water purity has improved. Once real and measurable improvements in nature have been achieved, they are certified and converted into official “nature credit” units.
In the third stage, the certified credits enter the voluntary market. They are purchased by large companies or financial institutions. Companies need these to fulfil European Union sustainability reporting requirements, improve their reputation, or simply reduce the risks posed to their business by resource depletion and the climate crisis.
In the fourth stage, the funds from the sold credits go directly to the landowner. This creates a new, alternative source of income, making nature conservation and restoration a commercially viable occupation that can compete with traditional intensive farming or logging.
Supported activities – wetlands and forests
The nature credit system fully supports both the restoration of European wetlands and the expansion of forest areas. These activities are among the most prominent examples in European Union initiatives, as they have a huge impact on ecosystem health.
Wetland restoration means returning natural functions to formerly drained mires or floodable meadows. This helps retain water in the landscape, reduces the risks of flooding and drought, and creates an excellent environment for rare bird, insect, and plant species. In such projects, nature credits are awarded by assessing the stabilisation of water levels and the return of specific wetland species.
Forest expansion in the context of nature credits does not mean simple monoculture planting for timber harvesting. The emphasis is on the creation of diverse, native-species-rich forests and the preservation of old-growth stands. Credits are calculated based on the variety of tree species planted, improvements in soil quality, and the creation of new habitats for forest inhabitants.
In addition to these two areas, the system also supports improving soil health, restoring pollinator populations on agricultural land, and maintaining mosaic-like landscapes, which prevents the spread of uniform monocultures.
Methods used by scientists to measure nature improvements
Quantifying biodiversity and ecosystem improvements is more complex than carbon accounting, so scientists use a combination of several modern and traditional methods.
Firstly, the environmental DNA or eDNA (environmental DNA) method is widely used, which allows for the extraction of genetic traces left by organisms from natural samples, such as water from a restored wetland or a soil sample from a forest. This method provides an immediate, precise overview of all species present in the area, including invisible soil microorganisms, fungi, and hidden insect or fish species, without physically “encountering” the organisms themselves.
Secondly, remote sensing and bioacoustics are used. With satellite imagery, drones, and laser scanning or LiDAR technologies, researchers measure forest structure, canopy density, the volume of dry or dead wood, and soil moisture levels over large areas. Meanwhile, automated audio recorders placed in the wild capture the sounds of birds, amphibians, and bats, which are then analysed by artificial intelligence to determine species diversity and changes in their activity over the course of the season.
Thirdly, field inventory or habitat counting remains critically important. Certified experts survey areas in person, creating sample plots where they count specific indicator species – species whose presence indicates high ecosystem quality – measure plant community structure, and monitor the thickness of the soil organic layer. All these data are combined into a unified point or index system that clearly shows the increase in natural value over time.
Development of the nature credit system in the Baltics, Finland, and Sweden
The Nordic and Baltic countries are currently among the most active pioneers of nature credits in Europe, with states and the private sector rapidly establishing their own systems and pilot projects.
Finland has taken a leading role, having recently published an ambitious roadmap for nature credits until 2035. The Finnish government is purposefully building a national regulatory framework for the voluntary nature market so that local companies can transparently invest in ecosystem restoration, while ensuring that these credits later integrate perfectly into the European Union's emerging unified nature credit market. In Sweden, meanwhile, development is clearly moving through collaboration between the financial and scientific sectors. Researchers at the Swedish University of Agricultural Sciences have developed a unique point system for forest biodiversity, where points are awarded for the presence of rare species, dead wood, and sunlight access to the forest floor. This methodology is already working in practice – Swedbank in Sweden became the first bank in Europe to purchase nature credits certified under this system, financially supporting local forest owners who manage their land in an environmentally friendly way.
In the Baltic states, the system is currently in the active research and initial pilot project stage. Estonia is one of Europe's test beds for nature credits, where start-ups and scientists are testing the first digital solutions for creating nature-based credits. In Latvia and Lithuania, interest is growing rapidly both at the government level, analysing the legal and conservation aspects of system implementation, and in research. In Latvia, the Baltic Institute of Natural Capital B-Nature (formerly an association) has begun work, bringing together scientists specifically to integrate natural capital and ecosystem services into the economy, laying the groundwork for local nature credit projects.
Comparison of nature credits and carbon sequestration credits
Although both instruments were created to improve environmental conditions, there are fundamental differences between nature credits and carbon credits in terms of goals, measurement units, and impact on the environment.
The main difference lies in the nature and complexity of the measurement units. The carbon credit system is highly universal and mathematical – one credit unit is always equal to one tonne of carbon dioxide (CO₂) not emitted into the atmosphere or sequestered from it, regardless of where in the world the project is implemented. Nature credits do not have a single universal unit of measurement because nature is too complex. They are measured locally as a relative improvement in ecosystem quality within a certain area, for example, by tracking an increase in species numbers or habitat health indicators in a specific region. The focus and risks to biodiversity of both systems also differ. Carbon credit projects focus only on climate goals, which can sometimes even harm nature, for example, by planting a fast-growing monoculture of one tree species, which captures CO₂ perfectly but also creates a so-called green desert without biodiversity. The goal of nature credits is the living world and its diversity. As the European Commission is currently working on the synergy of both systems, future carbon certification methodologies will include mandatory requirements for biodiversity co-existence to prevent such conflicts.
The philosophy of using these credits in the market also differs. Companies have often used carbon credits as a “compensation mechanism”, transferring emissions or carbon offsetting, to justify pollution (which often continues) by planting forests elsewhere. The nature credit market in Europe is being built on a “nature-positive” principle, where the purchase of credits does not compensate for the destruction of nature elsewhere, but is a direct investment by companies in increasing overall natural capital and achieving sustainability goals.
Banks and companies in Latvia – interest in natural capital
In Latvia, the market for nature credits and natural capital is in its early stages of development, with interest from the financial and business sectors growing rapidly. The main drivers are large commercial banks responding to European Union sustainability reporting requirements and the need to “green” their loan portfolios.
Swedbank Latvija and SEB are among the most active financial institutions integrating nature conservation criteria into their operations. They offer more favourable terms or “green loans” to those farmers and foresters who implement biodiversity-promoting methods in their management. As parent banks in Sweden are already making the first practical nature credit purchases, this experience is gradually being transferred to Latvia as well.
Among companies, interest is being shown by large state and private forest and land managers. The state-owned enterprise “Latvijas valsts meži” is actively researching the synergy between carbon sequestration and biodiversity, developing environmental projects that could serve as a basis for credit creation in the future. As previously mentioned, the Baltic Institute of Natural Capital B-Nature in Latvia is an independent research organisation specialising in the scientific evaluation of natural capital and ecosystem services, providing data-driven assistance in climate and environmental policy planning. Parallel to this research work, private sector start-ups and platforms, including the initiative Baltic Nature Capital, are actively seeking commercial and technological ways to digitise and certify Latvia's forest natural capital, attracting private financing for carbon and biodiversity projects.
Forecasts for nature credit prices in the market
Globally and in Europe, the nature credit market is experiencing rapid growth. International market research, including reports from Polaris Market Research and Grand View Research, indicates that the global biodiversity credit market volume exceeds 100 million US dollars, with a forecast annual growth of approximately 23-30% until 2033-2034. Europe is currently the leading region, controlling nearly 40% of the global market.
Regarding market prices, there is currently no single universal value because, unlike a tonne of carbon, nature credit units are determined by the project developers themselves, based on the preserved area, time, and rarity of the habitat.
The price range in the voluntary market is very wide
Simpler, area-based credits, such as a preserved square metre of forest, are relatively cheap in developing countries – from 5 to 20 US dollars per unit. Higher-quality and more complex voluntary credits, where real species return is measured, range from 200 to 700 US dollars per unit.
Particularly exclusive and science-intensive projects, such as rare tree species rescue programmes, are sold for even several thousand dollars per specific impact unit.
An important benchmark for price forecasts is Great Britain, where a biodiversity net gain – Biodiversity Net Gain – scheme is set by law. In the state-regulated market, official nature credit prices range from 42,000 to as much as 125,000 British pounds for a single top-tier wetland or forest credit. This shows that in countries with strict legal regulations, the price of nature is extremely high. Experts predict that in the voluntary market, prices will only increase in the coming years. Companies are becoming increasingly selective and are prepared to pay a higher price for those nature credits that have a transparent, scientifically proven methodology, for example, using eDNA or satellites, because this protects them from the risk of being accused of “greenwashing”.
How many nature credits can be obtained from one hectare of Latvian forest?
The calculation for the number of nature credits from one hectare is not as simple as in the case of carbon quotas, where only tonnes are measured. Nature credit schemes use “ecosystem improvement points”, and the main principle is additionality (additionality). This means that credits cannot be received for a forest that is simply “there and growing”. The owner must carry out active, purposeful actions to increase biodiversity that exceed legal requirements. If a farmer or forester implements a biodiversity project on one hectare of Latvian forest, for example, by preserving dead wood or old ecological trees, creating a micro-reserve for rare bird species, or converting ditches into natural wetlands, scientists evaluate this improvement.
In Nordic and British practice, a one-hectare sample plot after improvements is generally able to generate an average of 2-8 nature units or credits. The exact number depends on the forest's initial state. If the forest was initially depleted and in a monoculture state, but then converted into a natural and diverse habitat, the number of credits obtained per hectare will be significantly higher, as the ecological leap will have been enormous.
European regulations that will “force” Latvian companies to buy nature credits
Currently, no regulation directly imposes a mandatory obligation or penalty on companies to “buy nature credits”. However, the European Union has created a legal framework that creates huge indirect pressure, making the purchase of these credits the simplest way for companies to comply with legal requirements and maintain competitiveness.
The main regulation is the EU Corporate Sustainability Reporting Directive (CSRD), which requires large companies and banks to report on their environmental impact in accordance with European sustainability reporting standards. A specific standard that regulates the nature domain specifically requires companies to disclose in detail how they halt biodiversity loss in their supply chain. If a company's operations, such as construction, manufacturing, or logistics, harm nature, the purchase of nature credits is the legally cleanest way for a company to show real, auditable, and positive impact on ecosystems in its official report.
The second important driver is the European Union Nature Restoration Law, which imposes a legal obligation on member states, including Latvia, to restore degraded habitats by 2030. For states to achieve these goals, public funding is not enough. The Nature Credits Roadmap developed by the European Commission serves as a tool for national regulations and tax relief to stimulate private companies to invest in these market instruments.
The third factor is the European Union Carbon Removal Certification Framework (CRCF), which determines that in the future, carbon credits will no longer be sellable as high-quality products if they do not have a demonstrable additional positive impact on biodiversity, so-called co-benefits. Consequently, companies will be forced to buy credits that combine both climate and nature conservation components.
Examples of pricing – Great Britain and Sweden
To understand how nature credit prices are formed, it is worth looking at two different models in Europe – the state-regulated and the voluntary market.
In Great Britain, the biodiversity net gain (Biodiversity Net Gain) system is strictly defined in law. Every real estate developer or builder has a legal duty to ensure an increase in biodiversity on the site by at least 10% after project completion. If this cannot be done on the building site, the company must buy credits from private “habitat banks” – farmers who have restored their land. In the free market, one meadow or grassland credit unit costs approximately 20,000-30,000 British pounds. If the developer cannot find a private seller, as a “last resort” they must buy state-issued “last instance” credits, the prices of which are deliberately set to be “astronomical” – from 42,000 pounds for a meadow up to 125,000 pounds for a high-value broadleaf forest and 230,000 pounds for river habitats. Such a model shows that as soon as the state introduces a mandatory requirement, the price of nature credits becomes very high and stable.
In Sweden, by contrast, a voluntary market operates based on the synergy between the private sector and science. Researchers at the Swedish University of Agricultural Sciences have developed a methodology that evaluates the ecological quality of forests. When local forest owners agree, for example, to stop tree felling for 30 years and carry out nature restoration measures, these improvements are converted into credits. In this model, the price is not dictated by the state; it depends on companies' willingness to invest. Swedbank in Sweden carried out such a voluntary transaction, buying nature credits directly from local foresters. The price here is formed by calculating the forester's lost profit from timber sales and adding the costs of nature restoration work and scientific monitoring. This ensures that for the farmer or forester, protecting nature is as financially attractive as logging.
The world's largest investment funds, asset managers, such as BlackRock, BNP Paribas Asset Management, Foresight Group and international financial organisations consider natural capital and nature credits to be the next major investment frontier, following in the footsteps of the carbon market, but with a more stable and real-asset-based structure. In reports and forecasts from leading funds and financial experts, several significant trends are emerging.
Market growth and volume
The largest market research funds and analysts, including Grand View Research and Polaris Market Research, predict that the global biodiversity credit market volume will experience a rapid leap. From approximately 7.1 billion US dollars, it will increase to 38 billion, maintaining an ambitious annual growth rate of approximately 23%.
Investors are aware that more than half of the entire world's gross domestic product is directly dependent on nature. Fund analysts, such as PwC, warn that if nature degradation is not stopped, it could destroy up to 12-18% of the market value of publicly traded companies over the next 15 years. Directing investment into nature credits is no longer just charity for funds, but the protection of their own capital and investment portfolios against systemic risks.
Structural supply deficit and price increase
Investment funds point to a distinct difference between demand and supply. While corporate demand for nature credits is growing by about 25% per year due to stricter ESG laws, the supply of high-quality and certified nature projects can only grow by ~15% per year. The long-term lack of supply means that high-quality, scientifically sound nature credits in particularly valuable and sensitive ecosystems, such as Nordic and Baltic forests or wetlands, will be guaranteed a constant price rise and premium status value. The funds predict that buyers in the voluntary market will prioritise not the lowest price, but project transparency, reliability, and local community engagement.
Transition from “niche” to core investment class
As indicated by the latest research conducted by the institutional investor network Mallowstreet in collaboration with BNP Paribas, natural capital is currently at a historic tipping point and is transforming into a mainstream investment instrument. Pension funds, insurance companies, and charitable foundations around the world are starting to purposefully increase their capital share allocated specifically to natural assets.
Large asset managers, such as New Forests, are currently creating and activating specialised billion-dollar global natural capital funds; their strategy is to invest in real natural assets – sustainable forestry, regenerative agriculture, and biodiversity projects. Institutional investors prefer these projects because they serve as an excellent hedge against inflation and market volatility, offering stable historical investment returns of 7-13%.
Funding gap and government support
The World Economic Forum and UN funds emphasise that funding from state budgets and donors for nature conservation is catastrophically insufficient, making up less than 0.1% of public spending. To achieve global nature conservation goals, approximately 400-900 billion US dollars are needed each year, which can only be provided by private capital.
Investment funds predict that governments around the world, including the European Union with its Nature Credits Roadmap, will increasingly introduce tax breaks, subsidy redirection, and legal regulations to make the nature credit market as attractive and secure as possible for private investors. Every euro invested in nature restoration yields an economic return of 5-25 euros in the long term, forming a stable foundation for national fiscal security and job creation. Nature credits are a “big opportunity” for Latvia's prosperity as well.
Sources: European Union and US information websites