Habitat banks are more than just a niche sustainability term, they’re gaining recognition as a vital and innovative tool in the global effort to reverse biodiversity loss and mitigate environmental degradation. As the bioeconomy gains momentum, habitat banks offer a sustainable path for both ecological restoration and economic growth.

But what exactly are habitat banks?

As Palladium’s Paulo Pulgarin-Restrepo explains it, a habitat bank is a way for landowners to conserve or restore a habitat and ‘bank’ the resulting biodiversity credits. Habitat banks are often developed on degraded land, with long-term goals of ecological restoration that can span decades.

What makes habitat banks unique is their financial model. “By restoring habitats, they generate biodiversity credits.” These credits, while similar to carbon credits, represent a measurable improvement in biodiversity, and businesses can purchase them to offset the environmental harm caused by their operations, such as construction or mining. In addition, habitat banks often mean maintaining land that’s already been restored, setting it apart from restoration models.

In Colombia, Terrasos pioneered the first habitat bank in Latin America and helped to put biodiversity credits and the habitat banks model in the spotlight.

Supported by Partnerships for Forests, Terrasos has already sold US$7 million worth of biodiversity credits, consolidated 12 habitat banks in Colombia, with over 5980 hectares under management in 21 different biomes. The process is relatively straightforward: developers who are required by law to compensate for their environmental footprint can purchase credits from habitat banks instead of directly restoring impacted areas themselves. This approach ensures that restoration is handled by specialised entities with expertise in ecosystem management.

“Habitat banks offer a profitable way to address biodiversity loss by aligning conservation goals with business interests,” Pulgarin-Restrepo adds. The financial incentive for businesses to invest in biodiversity credits is key, turning ecological restoration into a profitable endeavour while helping meet environmental regulations.

At their core, habitat banks address two critical challenges: biodiversity loss and the need for sustainable economic models.

Healthy ecosystems provide services such as clean water, pollination, soil fertility, and climate regulation. However, over recent decades, human activities have led to severe declines in biodiversity. According to the UN, up to one million species are at risk of extinction in the coming decades if current trends continue and habitat banks offer a tangible way to reverse some of this damage.

Beyond environmental restoration, habitat banks also contribute to the bioeconomy—an economic system that derives its growth from sustainable biological resources. By generating biodiversity credits, these projects create new income streams for landowners and local communities. This is particularly evident in Colombia, where the market for biodiversity credits is expected to mobilise up to US$45 million in private investment. These funds not only protect ecosystems but also create jobs in rural areas, including roles in monitoring, maintenance, and ecological management.

In addition, Pulgarin-Restrepo explains, habitat banks offer landowners an alternative to traditional land-use practices like farming or logging, which may be unsustainable in degraded landscapes. By participating in habitat banks, landowners can preserve their land, earning income while contributing to global conservation efforts.

Reversing Biodiversity Loss

One of the greatest advantages of habitat banks is their ability to contribute directly to biodiversity restoration. This is particularly important as ecosystems across the globe face significant degradation. Projects like those managed by Terrasos are expected to protect 10,000 hectares within the next two years, reach US$1 million via the biodiversity unit, and directly benefit more than 450 people. These efforts support the conservation of critical habitats, ensuring that wildlife can thrive and that ecosystems continue to provide essential services for future generations.

By allowing companies to purchase biodiversity credits, habitat banks create a market-driven mechanism for conservation. This system not only holds businesses accountable for their environmental impact but also provides them with a concrete way to meet regulatory requirements or voluntary environmental commitments.

As the world prepares for COP16, the 16th Conference of the Parties to the UN Convention on Biological Diversity, habitat banks are likely to play a key role in discussions. COP16 will focus on advancing global biodiversity targets, including the protection and restoration of ecosystems. Habitat banks offer a market-based mechanism to help achieve these targets by creating financial incentives for the private sector to invest in biodiversity conservation.

“For habitat banks to thrive globally, we need stronger regulatory frameworks and market mechanisms that hold businesses accountable for their environmental commitments,” explains Pulgarin-Restrepo. This will be a critical element of COP16 negotiations, as countries explore innovative ways to finance conservation efforts and scale the habitat banking model.

Challenges and Future Potential

While habitat banks hold great promise, several challenges must be overcome to fully realise their potential. One of the most pressing issues is the need for robust regulatory frameworks. Without clear guidelines, there is a risk that biodiversity credits could be undervalued, or that companies may fail to follow through on their commitments to purchase credits.
Strong regulations are necessary to ensure the integrity of habitat banks and to prevent greenwashing, he adds.

“The market for biodiversity credits is still in its infancy, if we want to foster growth, governments and international organisations will need to create incentives for companies to invest in these credits.” This could include tax benefits or mandatory offset requirements for industries that significantly impact the environment.

Habitat banks represent a promising intersection between environmental conservation, environmental commitments, and economic development. By restoring ecosystems and generating biodiversity credits, habitat banks provide a sustainable way to tackle biodiversity loss while contributing to the bioeconomy. As discussions around global biodiversity targets intensify, particularly at COP16, habitat banks will likely become a central part of the solution.

However, to fully realise their potential, strong regulations, market demand, and increased awareness will be essential. With the right approach, habitat banks can be both environmentally effective and economically viable, offering a clear path towards a sustainable future.

For more, read 'COP16 Lands in Colombia and Palladium is Ready to Meet it' or contact info@thepalladiumgroup.com.