Markets for biodiversity offsets EIANZ National Biodiversity Offsets Conference, Canberra, August 2019 Presenter: Alan Key Managing Director, Earthtrade

What are we wanting to achieve with a “market” for biodiversity offsets? Firstly, some key definitions around markets: An investment is the act of putting money into something to make a profit or return. A liability is “something that takes money out of your pocket”. An asset has been defined as “something that puts money in your pocket”. A market brings buyers and sellers together to trade in assets. A financial market brings buyers and sellers together to trade in financial assets such as stocks, bonds, commodities, derivatives, and currencies. Government and corporate entities use money markets as a means for borrowing and lending. A short-term investment is usually for assets being held for up to a year. Conversely, capital markets are more frequently used for long-term assets, which are those with maturities of greater than one year.

In today’s biodiversity offsets market, you are asking investors to invest in long-term liabilities! Who are the participants in a biodiversity offsets market? Market participants Biodiversity offsets are not risk-free: Policy uncertainty Force majeure events during the term of the offset Maturity risks

What are the requirements of an effective biodiversity offset market? It must be attractive to investors: Return on investment in financial terms Return on investment in corporate social licence terms Scale and volume – institutional investors look at transactions over $100M A term until maturity An exit strategy It must deliver genuine and lasting improvements to biodiversity: Cost-effective management and monitoring of offsets; the financial viability of the offset itself affects the environmental outcome Offsets should drive “big picture” strategic ecological outcomes to achieve landscape scale biodiversity improvement

What needs to be done to make the market attractive and effective? Offset policy frameworks must provide certainty for offset approval Offset policy frameworks to support delivery of “the big picture” require some flexibility Offsets need to be managed to achieve the outcomes required Create a strategic “master plan” for a bioregional area where development is concentrated

Thank you Presenter: Alan Key Managing Director, Earthtrade Environmental Offset Solutions Pty Ltd t/a Earthtrade ACN: 128 110 976 ABN: 87 128 110 976 alan.key@earthtrade.com.au www.earthtrade.com.au +61 7 4194 5009 PO Box 1069, Hervey Bay, QLD 4655