The challenge

Colombia is one of the world’s most biodiverse countries, ranking within the top four in at least five biodiversity categories, including mammals, birds, orchids, and reptiles. Despite this richness, the depletion of natural ecosystems is accelerating through changing land use. Between 2016 and 2019, Colombia lost more than 800,000 hectares of forest.

Major development projects have been a driver of this biodiversity loss and historical offsetting options have faced issues, with high transaction costs, scattered project and ineffective projects, and only short-term operations guaranteed.

The country has a well-defined and regulated market to offset, and in 2018 Colombia adopted the National Strategy of Environmental Compensations and under Resolution 256 which lays out a ‘no net loss’ approach. However, currently an estimated 1.6 million hectares and £148 million is pending compensation.

The project

Environmental investment expert Terrasos has pioneered the first habitat bank in Colombia as an environmental offsetting mechanism. As a novel mechanism of environmental compensation, Habitat Banks aggregate compensations and therefore deliver a cost-effective alternative for private conservation and restoration sites. Each hectare generates one biodiversity credit that can be sold to project developers in the infrastructure, mining, oil, and gas projects – with required investments in conservation.

The portfolio of Habitat Banks includes all types of forest ecosystems that need restoration or protection including cloud forest, tropical dry forest or savannah. The solution fills a gap in the current compensation market by creating 30-year projects and grouping offsets together for maximum impact. The Habitat Banks are run through an independently managed trust fund, which gives private investors returns once credits are sold and pays restoration and conservation on projects reaching milestones.

Since piloting the first Habitat Bank in Latin America in 2017, Terrasos has sold more than £1 million worth of biodiversity credits. Using P4F support, the company aims to scale the model to leverage an additional £8.5 million to protect 5000 hectares of endangered ecosystems.

Current impact

Economic and social value:

By November 2022, Terrasos registered six Habitat Banks in various landscapes where ecosystems such as tropical dry forest are being protected. To date, Terrasos has sold £1.2 million in biodiversity credits with the potential to reach £6 million by the end of 2023 – an indication that companies are willing to allocate their compensation resources into innovative and high-integrity solutions. By the end of the year, Terrasos will have tested additional income streams to diversify revenue for landowners and gain a better understanding of how to pursue carbon and biodiversity credits co-benefits.

Environmental value:

Habitat Banks protect land for 30 years under contracts with landowners. Biodiversity metrics, as well as carbon stock, are monitored and reported to the Ministry of Environment. To date, Terrasos has secured 2,676 hectares of land under sustainable management under eight Habitat Banks, ranging between 300- 600 hectares each.

During the P4F intervention, Terrasos has been working towards the registry process of an additional 3,246.42 hectares in six new areas. In this area, Terrasos will protect at least five threatened ecosystems, providing economic benefits to more than 20 landowners and 30 local providers.

P4F support

P4F is supporting Terrasos to:

  • Mainstream Habitat Banks by strengthening regulation around the mechanism, engaging with new clients, and sharing lessons learned with key stakeholders;
  • Structure five new Habitat Banks and secure protection for 5,000ha under the mechanism;
  • Develop and pilot complementary income streams and stacking opportunities with NTFPs and honey;
  •  Understand the biodiversity credit voluntary market and validate a protocol for high quality and integrity.         

Future potential

There is significant potential for Habitat Banks to be replicated by other project developers in Colombia, and Terrasos expects to reach a milestone of 10,000 hectares benefited directly and indirectly by this model by 2030. Lessons in biodiversity protection could be useful for other countries’ biodiversity net gain or no-net-loss strategies (e.g., in the UK, US, and other countries in Latin America). Moreover, stacking of additional income sources can have socioeconomic benefits that could represent an increase of incentives to landowners. By understanding the demand of voluntary biodiversity credits, market potential and protocol suitability to various context, Terrasos will lead the development of this new asset class in financing for nature.