Carbon, Biodiversity, Water: Which Credits Matter — and What Buyers Need to Know
A guide to high-integrity credit markets in a rapidly evolving landscape.
Credit: Callum’s Trees
If you’re a company looking to meet environmental targets or an adviser helping clients improve sustainability performance, you’ll have come across the term "nature-based credits." These credits promise measurable environmental outcomes — carbon removal, biodiversity restoration, cleaner waterways — and are often framed as a way to balance emissions, meet planning requirements, or demonstrate good corporate citizenship.
But beyond the headlines and glossy net-zero brochures, many buyers remain unsure what they’re actually buying, how the markets work, and what counts as a "high-integrity" credit. This article aims to explain the basics: the different types of credits available, how they function, what makes them credible, and why due diligence matters.
What are environmental credits?
Environmental credits are a way of placing financial value on positive outcomes for nature. A credit represents a verified unit of environmental benefit. For example, one carbon credit typically represents one tonne of carbon dioxide removed from or avoided entering the atmosphere. Biodiversity and nutrient credits work similarly but are tied to different ecological outcomes.
In practical terms, companies and developers buy these credits either to meet regulatory obligations or to voluntarily reduce their environmental impact. Landowners and project developers create these credits by delivering projects that enhance ecosystems: planting trees, restoring peatland, creating wildlife-rich habitats, or reducing agricultural runoff into rivers. The main types of credits
1. Carbon Credits
These are the most widely recognised. Carbon credits come from activities that either remove carbon from the atmosphere (like afforestation or soil improvement) or avoid emissions (such as peatland restoration).
There are two main categories:
Voluntary credits: Purchased by companies to offset their emissions as part of net zero strategies.
Compliance credits: Used in regulated carbon trading schemes, though these are less relevant in the UK context.
In the UK, the Woodland Carbon Code and Peatland Code set standards for these projects.
2. Biodiversity Units
Introduced under England's Biodiversity Net Gain (BNG) policy, biodiversity credits represent measurable habitat improvements. Developers must buy units if they can’t deliver enough habitat improvement on-site. These credits must follow strict ecological and spatial rules, ensuring they deliver real gains in biodiversity.
3. Nutrient Credits
These credits are created when landowners reduce nitrogen or phosphorus pollution entering sensitive rivers and lakes. Developers in nutrient-sensitive catchments must buy these to allow new housing projects to go ahead.
4. Water Quality and Resilience Credits
Still an emerging category, these credits relate to activities like wetland creation or natural flood management. They’re often used in partnerships between landowners and water companies or local authorities.
Each market comes with different verification standards, pricing models and contractual requirements. Buyers need to assess not only the type of credit, but the quality of the project behind it.
What makes a credit "high integrity"?
With new markets come new risks. Some early projects in global carbon markets were criticised for overstating benefits or delivering little real impact. That’s why the concept of "high integrity" has become so important.
A high-integrity credit is one that:
Is additional — the outcome wouldn’t have happened without the project.
Has a verified baseline and robust monitoring — so impact is measurable.
Avoids double-counting — no two parties claim the same benefit.
Has legal and financial permanence — the benefit must last, even if ownership changes.
Is transparently reported and third-party verified.
Buyers should ask:
Who created the credit, and under what code or standard?
Is the credit independently verified?
How long will the impact last?
What are the reputational risks?
Why due diligence matters
For corporate buyers, credits are increasingly part of brand reputation, ESG disclosure, and investor scrutiny. A low-quality credit could become a future liability. For advisers, this means guiding clients to ask the right questions, read the fine print, and select credits that stand up to external challenge.
Natural capital markets are not yet standardised. Terminology varies. Pricing is opaque. Project developers have different approaches. This is a market still finding its shape — but the direction of travel is clear: quality, transparency and credibility will win out.
Matching credits to strategy
Not all credits serve the same purpose. A company looking to offset emissions might prioritise carbon credits. A housebuilder in a nutrient-neutral catchment will need nutrient credits. A brand wanting to signal nature-positive credentials might invest in a biodiversity project with community benefits.
The most forward-thinking buyers treat credits not just as a transaction, but as a strategic choice. High-quality projects can help build supplier relationships, enhance landscape resilience, and deliver multiple co-benefits — from improved soil health to flood mitigation.
Final thought
Environmental credits are a tool, not a silver bullet. When well chosen and transparently structured, they can support meaningful change. But they’re not all equal — and the difference between a high-integrity credit and a headline liability is often in the detail.
Understanding the basics, asking the right questions, and aligning credits with broader environmental goals is essential. Because in a world of growing scrutiny and shifting expectations, credibility is now a currency in its own right.
