Singapore Green Finance Centre

Research

Climate & Nature

Opinion: The Market for Biodiversity in Singapore

Published on May 13, 2025

Authored by Maria Teresa Punzi, Darren Marcus Loo

Is biodiversity getting the focus it deserves on the main stage of climate change?

Biodiversity loss is accelerating at an alarming rate, yet funding to address this crisis remains significantly inadequate. The Global Biodiversity Framework (GBF) estimates a US$700B yearly biodiversity finance gap till 2030 (Likhachova et al., 2024). A variety of financial instruments exist to support biodiversity. However, despite the increase in funding, current contributions are still insufficient, lacking a broader, annual US$824B needed for nature restoration. These shortfalls highlight the urgent need for innovative financial solutions to make effective use of available resources (Harrer el at., 2024). As we narrow down to the Asia-Pacific region, approximately 53% of Gross Value Add (~$19.5 trillion), is moderately or highly dependent on natural ecosystems and biodiversity (Kang, 2024).

According to the International Union for Conservation of Nature (IUCN) (2024), COP29 in 2024 provided a vital platform to further the priorities of global biodiversity conservation – accountability, alignment of biodiversity and climate goals, and amplifying resource mobilisation. This was inline with United Nations Convention on Biological Diversity COP16, where Singapore and 43 other countries have submitted revised National Biodiversity Strategy and Action Plans.

Zu Ermgassen and Löfqvist (2024) indicate that estimates suggest more than 80% of conservation finance is provided by public financiers. Nevertheless, the literature also highlights a growing interest from the private sector in investing in nature conservation (Binnie et al., 2022); Flammer et al, 2023); Zu Ermgassen & Löfqvist, 2024). This interest is primarily confined to voluntary credit markets, such as offsetting schemes (Zu Ermgassen & Löfqvist, 2024) and green bonds (Baker et al., 2022; Flammer, 2021).

Additionally, the Principles of Responsible Investment’s (PRI) signatory data confirms a trend toward publicly issued biodiversity financing instruments and an emphasis on green bonds. (Harrer el at., 2024). However, private investors are increasingly recognizing the importance of protecting biodiversity. Since the publication of the Paris Agreement in 2015, the percentage of signatories referencing biodiversity in their investment strategies has gradually increased over the past six years.

Nevertheless, biodiversity-aware investors make up only a small portion of the overall PRI signatory base, representing 11% of the sustainable finance market in 2020. Most of PRI’s biodiversity investors are based in Europe, where over 60% of global investors are registered. The largest concentrations are found in the UK, France, the Netherlands, Switzerland, and Germany. Investors from Oceania, Asia — particularly Indonesia and Singapore — and Africa, especially South Africa, Namibia, and the United Arab Emirates, represent a steady minority. In contrast, the proportion of biodiversity investors from the Americas, particularly the United States, Canada, and Brazil, has seen a slight increase, growing from 3% to 18% by 2020 (Harrer el at., 2024).

Well, Singapore furthered its carbon market development in recent years – with key initiatives such as new Article 6.2 Bilateral Agreements, Singapore-Asia Taxonomy, and establishing a leading carbon exchange platform — Climate Impact X (Bain & Company et al., 2024).

Is climate change and its effects top-of-mind for businesses?

Figure 1: Singapore’s top five risks identified in the WEF (2025) Executive Opinion Survey (EOS).

In reality, the World Economic Forum (2025) believes biodiversity finance have yet to receive the same level of institutional backing and market traction because businesses have difficulty in demonstrating value to its customers. Coupled with high transaction costs, fungibility issues and scattered quality standards, biodiversity credits are currently unfeasible to be scaled to carbon markets.

“I think it'll be very difficult to create a whole ecosystem for water credits and biodiversity credits – side by side with carbon credits… (It is) much better that we work on a reliable carbon credit system with a “stapling on” of water and biodiversity credits.”

– President Tharman Shanmugaratnam, World Economic Forum 2025

Aligning the Three Nature Markets | World Economic Forum 2025

At the 2025 World Economic Forum (WEF), Singaporean President Tharman Shanmugaratnam suggested that biodiversity credits should be integrated into carbon markets, arguing that carbon, biodiversity, and water markets should be “stapled together” rather than developed separately. While this approach acknowledges the “wicked problem” and interconnectedness of nature, biodiversity and climate, it risks sidelining biodiversity conservation by making it a secondary priority to carbon removal, reduction, and avoidance.

However, this is not always the case as Latin America (LATAM) has emerged as a leader in incorporating biodiversity considerations into carbon markets (Blanton et al., 2024). The region’s tropical rainforests rank among the world’s largest carbon sinks, playing a crucial role in the global supply of forest carbon credits. LATAM is well-positioned to develop high-quality carbon offset projects that aim to reduce emissions from deforestation and forest degradation while preserving biodiversity and providing equitable conservation benefits. Both compliance and voluntary carbon markets are expanding in LATAM, fueled by national and subnational initiatives, government incentives, and public demand (Blanton et al., 2024). These developments highlight the dynamic nature of forest carbon markets in LATAM, presenting opportunities for growth and emphasizing the need for robust governance and verification mechanisms to ensure the effectiveness and credibility of carbon offset initiatives. Other countries should consider following these initiatives.

It can work, but only under the right ecological and governance conditions — which Singapore may not currently offer. In a land-scarce, highly urbanised nation with fragmented secondary forests, attempting to bundle biodiversity into carbon credits may lead to trade-offs that undermine biodiversity outcomes.

Hence, this opinion piece argues that Singapore should develop a separate, state-backed biodiversity credit system, similar to that of New South Wales’ Biodiversity Offset System instead. A structured biodiversity finance framework would ensure market credibility, public and private mobilisation towards localised biodiversity conservation, potentially positioning Singapore as a leader in regional biodiversity finance.

What are biodiversity credits?

According to the Biodiversity Credit Alliance (2024), a biodiversity credit is “a certificate that represents a measured and evidence-based unit of positive biodiversity outcome that is durable and additional to what would have otherwise occurred.” A positive biodiversity outcome could generally mean three activities (Biodiversity Credit Alliance, 2024):

  1. Uplift — The improvement in biodiversity from project interventions such as ecological restoration indicated by the changed structure, composition, and function of the target ecosystem or species populations, or reduction in threat measures.
  2. Avoided loss — The prevention of decline in biodiversity resulting from project interventions such as preservation or land designation indicated by the prevention of changed structure, composition and function of the target ecosystem or species populations, or prevention of increase in threat measures. Avoided loss projects will typically have demonstrable, imminent threats to biodiversity.
  3. Maintenance — The maintenance of intact biodiversity through project interventions such as implementation of conservation management plans, effective recognition and protection of Indigenous rights and customary uses aligned with conservation objectives, conservation designations and sustainable financing of conservation, indicated by the prevention of changed structure, composition and function of the target ecosystem or species populations, or prevention of increase in threat. In maintenance projects, biodiversity will be threatened by medium- or long-term threats.

Biodiversity credit projects should also exhibit durability and additionality (Biodiversity Credit Alliance, 2024):

  • Durability — The ability of a project to ensure that biodiversity outcomes on which credits are based are likely to endure for an extended and defined period.
  • Additionality — A requirement that credits can only be assigned to biodiversity outcomes that are attributable to the project intervention, and would not have otherwise happened.

Schwerdtner Manez and Clifton (2025) discuss the emergence of biodiversity credits as a financial instrument to support conservation efforts. The authors examine the potential to generate net biodiversity gains, differentiate these credits from biodiversity offsets, and highlight the importance of standardized methodologies and governance frameworks to ensure their effectiveness.The article by Peng et al. (2024) presents the conceptual framework of biodiversity credits, emphasizing their similarities and differences with biodiversity offsets and carbon credits. It outlines the principles of biodiversity credits, including accounting methods and governance systems, and addresses challenges such as pricing standards, the risk of greenwashing, and regulatory requirements.

Wauchope et al. (2024) examine how biodiversity credit operators define units of nature and tackle the challenges of developing standardized, fungible metrics for biodiversity. The study delves into the complexities of measuring biodiversity across various ecosystems and discusses the implications for conservation efforts.

These publications offer comprehensive analyses of biodiversity credits, their implementation, and the challenges associated with their development and application, emphasizing the crucial role these mechanisms play in supporting and preserving biodiversity.

Why integrating biodiversity into carbon markets may not be ideal after all.

To put matters into perspective, I believe Singapore’s vision of regional carbon neutrality is largely misaligned. Even in Singapore’s Article 6 Carbon Credits Eligibility List, Article 6.2 Host Countries (Ghana and Papua New Guinea) cannot use general Afforestation & Reforestation (ARR) projects to generate eligible International Carbon Credits (Singapore’s Carbon Markets Cooperation, 2024). What happened to addressing the three nature markets as a whole?

Should biodiversity outcomes be tied to carbon credits, funding could likely be prioritised towards carbon-rich ecosystems such as the conservation of mangroves and peatlands, leaving out biodiversity-rich, low-carbon areas like secondary forests. This imbalance could lead to a loss of critical biodiversity in areas that do not yield relatively high carbon sequestration potential since the funding gap is still prevalent.

In addition, carbon markets often prioritize fast-growing tree plantations over diverse ecosystems, potentially leading to biodiversity loss rather than gains. Some projects might focus on biodiversity hotspots at the expense of less charismatic but ecologically crucial areas.

One of the biggest challenges integrating biodiversity into carbon markets is the difficulty of standardizing measurement and verification methods. Carbon credits are already controversial due to difficulties in verifying real emission reductions. Adding biodiversity credits could further complicate valuation, leading to market inefficiencies. Máñez and Clifton (2025) discuss the emerging concept of biodiversity credits, distinguishing them from biodiversity offsets, and examine their potential role in financing conservation efforts. The authors highlight the necessity for standardized methodologies and emphasize the importance of respecting the rights of local and Indigenous communities in implementing such schemes.

Biodiversity measurement is also multi-dimensional with different flora and fauna species. Given that current biodiversity measures are still largely unaligned, this introduces an increased risk of greenwashing where companies may overstate biodiversity benefits in carbon projects, making it difficult to verify or attribute actual conservation outcomes. Integrating biodiversity into carbon markets may also lead to “premiumisation” of carbon credit prices beyond the stipulated carbon tax (BeZero Carbon, 2024).

Moreover, carbon emissions are also a global pollutant – regardless of where they are emitted, they contribute equally to climate change. Biodiversity loss, on the other hand, is highly localised.  Destruction of a unique ecosystem cannot simply be “offset” by planting trees elsewhere. Ecosystem health, species richness, and genetic diversity are difficult to quantify and compare across projects. Filewod and McCarney (2023) highlight that nature-based offset projects can inadvertently cause carbon leakage, where emissions reductions in one area may lead to increases elsewhere. The authors argue that current methods may underestimate leakage and propose a framework to address it through intentional project design. Carbon leakage potentially disrupts market dynamics, reducing incentives to purchase nature-based credits altogether.

If we examine Singapore’s potential for carbon sequestration and biodiversity conservation, prioritising biodiversity is arguably more vital due to its localised nature.

Dover Forest Case Study

Dover Forest, also known as the Ulu Pandan Forest, is a 33-hectare secondary regrowth forest located next to Singapore Polytechnic. Historically, the area was used for rubber plantations until World War II (AECOM, 2020). When the Housing & Development Board (HDB) announced plans under the Urban Redevelopment Authority (URA) Master Plan 2014, to develop the entire forest for residential purposes, significant public sentiment and scientific pushback cited the site’s biodiversity value and ecological importance (Tan & Ng, 2021).

AECOM’s (2020) Environmental Baseline Study (EBS) for Dover/Ulu Pandan, conducted in 2017 and published in 2020, provides detailed evidence of the site’s biodiversity richness, reinforcing concerns over habitat loss due to planned urban development.

Figure 2: Spatial Distribution of Threatened Flora Species across Dover Forest Study Area (AECOM, 2020).

There were 120 flora species recorded in the study, of which:

  • 5% are native species
  • 5% are classified as threatened
  • 5% are both threatened and likely native in provenance

Figure 3: Recorded Location of Threatened Fauna Species across Dover Forest Study Area (AECOM, 2020).

There were 158 faunal species recorded, including:

  • 82 bird species.
  • 8 mammals (e.g., Long-tailed Macaque, Sunda Pangolin).
  • 11 reptiles, 8 amphibians, and 4 fish species.
  • 23 butterflies and 17 odonates (dragonflies and damselflies).
  • 5 native snail species, including the rare Apple Snail (Pila scutata)

18 species were classified as locally near-threatened or threatened, including:

  • 12 birds (e.g., Changeable Hawk-Eagle, Blue-crowned Hanging Parrot, Oriental Magpie-Robin)
  • 1 mammal (e.g., Sunda Pangolin)
  • 2 reptiles, 1 butterfly, and 2 dragonflies

7 species found in the study area are listed as Critically Endangered, Endangered, or Vulnerable in the Singapore Red Data Book (SRDB), including:

  • Glossy Swiftlet (Critically Endangered)
  • Changeable Hawk-Eagle (Endangered)
  • Blue-crowned Hanging Parrot (Endangered)
  • Violet Cuckoo (Endangered)
  • Oriental Magpie-Robin (Endangered)
  • Grey Heron (Vulnerable)
  • Asian Softshell Turtle (Endangered)

Despite its small area of 33 hectares, the Dover Forest serves as an important biodiversity refuge for Singapore’s highly urbanised landscape, providing a sanctuary for several vulnerable species which relies heavily on the forest for habitat. Additionally, a secondary forest provides carbon sequestration benefits, decreases urban heat island effect of sunny Singapore, and provides a natural barrier against floods or extreme rainfall (Hwang, 2020). A separate National Parks Board (NParks) study confirmed that Dover Forest acts as an ecological corridor for species movement between Bukit Timah Nature Reserve and the Southern Ridges (Tan, 2021).

Figure 4: The Future of Dover Forest (The Straits Times, 2021).

With these benefits in mind, HDB revised the development plan to launch public housing on the eastern half of Dover Forest (11ha) only. The development aims to preserve ecological features by integrating public housing with a green corridor and a park with natural streams. The western half, however, will be retained in the medium term and is due for reconsideration in 2030. Until then, the remaining 22-hectares secondary forest is reserved for biodiversity conservation and will be used to connect our fragmented green spaces (Tan & Ng, 2021).

Is Singapore really trying to be a “City in Nature”?

Chisholm et al. (2023) suggests that 37% of Singapore’s species had been extinct since 1819. Wu (2023) also examined Singapore’s approach to biodiversity conservation and identified a continued trend of secondary forest loss driven by urbanisation:

  • 1,782 hectares of secondary forests have been lost between 2011 and 2021 due to urban expansion​.
  • Another 7,331 hectares — 1.2 times larger than all current parks and nature reserves — are planned for clearance under the Urban Redevelopment Authority’s (URA) 2019 Master Plan​.
  • 80% of remaining secondary forest patches are smaller than 1 hectare, making them highly fragmented and less viable as biodiversity habitats​.

This does not, however, undermine Singapore’s National Biodiversity Strategy and Action Plan which aims to (National Parks Board, 2019):

  1. Safeguard Our Biodiversity
  2. Consider Biodiversity Issues in Policy and Decision-making
  3. Improve Knowledge of Our Biodiversity and the Natural Environment
  4. Enhance Education and Public Awareness
  5. Strengthen Partnerships with All Stakeholders and Promote International Collaboration

This strategy, along with a S$50million SG Eco Fund (Government of Singapore, 2024), culminates in an island-wide green corridor network of more than 360km and large-scale marine-and-wildlife conservation efforts throughout Singapore.While the government has announced initiatives to preserve “green spaces”, urban expansion has almost always been the priority over ecological conservation, especially when the plot is not “significant enough” for consideration (as seen in Dover Forest). Environmental Impact Assessments (EIAs) are also non-binding, with biodiversity conservation efforts easily attributed to an “integration” or “mixed-use” – leading to a loss of public accountability for such urban development projects.As I draw the relationship between priorities of urban development akin to that of a carbon credit project, low-bearing fruits like optimising land for future-use are similar to how carbon project developers would yield the highest sequestration potential – biodiversity becomes an afterthought in both instances.

Since land use is largely driven by the government through the URA Master Plan, I believe it is on the government’s onus to deeply reconsider the priorities of biodiversity. In fact, given Singapore’s recent focus on carbon credit developments, adopting a national biodiversity credit system to address accountability seems more plausible.

Translating New South Wales (NSW) Biodiversity Offset Scheme’s Success

The NSW Biodiversity Credit System is part of the broader Biodiversity Offsets Scheme (BOS). It was established under the Biodiversity Conservation Act 2016 to balance economic development with the conservation of biodiversity by offsetting unavoidable impacts through generating and trading biodiversity credits (NSW Government, 2025).

Biodiversity credits are quantified using the standardized Biodiversity Assessment Method (BAM). Here is a simplified overview of how credits are calculated:

Number of ecosystem credits = (VI gain x area) x 0.25

Number of species credits created for ith fauna/flora species = Hgi x Hai x 0.25

where: 

VI = vegetation integrity – a composite metric consisting of an area’s composition, structure, and function condition score.

Hgi = the gain in condition of the ith fauna/flora species habitat for each vegetation zone in the species polygon, taken as the ∆VI gain.

Ha = the area of habitat determined using the area of each vegetation zone within the species polygon for the biodiversity stewardship site.

A centralized and public registry (managed by the NSW Biodiversity Conservation Trust) transparently documents issued credits, their associated ecological outcomes, and trading activities.

Figure 5: Demand Drivers for Biodiversity Credits (World Economic Forum, 2023).

Therefore, I believe Singapore can drive the demand for biodiversity credits by:

  1. Implementing a National Biodiversity Assessment Framework: Adopt standardized biodiversity assessment protocols similar to NSW’s BAM, tailored to local species and ecosystems such as mangroves, secondary forests, and urban green spaces.
  2. Setting Up a National Biodiversity Credit Calculator: Create a Singapore-specific digital platform similar to NSW’s BAM-C, allowing consistent calculations and standardization of biodiversity credit issuance.
  3. Establishing Monitoring, Reporting and Verification (MRV) public data sources: Utilize technological solutions (satellite imagery, visual and auditory remote sensors, artificial intelligence & analytics) to build a public biodiversity and land-use database, ensuring transparency and ease of verification for projects.
  4. Building a Transparent Central Registry: Develop a biodiversity credit registry similar to NSW, clearly tracking all biodiversity credits issued, traded, and retired.
  5. Mandating Biodiversity Credits for Changing Land-use Projects: Mandate the purchase of biodiversity credits for project developers, ensuring direct accountability for biodiversity impacts and fostering responsible urban development.
  6. Bundling high-integrity carbon credits with biodiversity credits: Introduce policy mechanisms requiring the bundled purchase of biodiversity credits alongside carbon credits to enhance conservation outcomes and streamline market participation.
  7. Encouraging Public-Private Cooperation: Offer incentives to encourage private participation in biodiversity stewardship agreements, leveraging private-sector funding in high-biodiversity-risk economies.

Quétier and Lavorel (2011) have discussed the critical concept of ecological equivalence in BOS, emphasizing the challenges in ensuring that biodiversity losses and gains are balanced. The authors propose solutions to improve the assessment of equivalence in offset schemes.Droste et al. (2022) analyze the development of biodiversity offsetting governance over the past four decades, highlighting the mainstreaming of core principles such as avoidance, no-net-loss, and the mitigation hierarchy, as well as the diversification of institutional designs and actors involved. The authors conclude that while the diversification and mainstreaming of principles in biodiversity offsetting governance indicate progress, they also underscore the need for careful evaluation of the effectiveness of these practices in achieving genuine biodiversity conservation outcomes.

Borges-Matos et al. (2023) examine the various condition metrics employed in biodiversity offsetting, analysing their effectiveness and proposing improvements for more accurate assessments. The authors reviewed 17 different metrics, analysing their attributes and methodologies. They found that most metrics incorporate multiple ecological attributes and often require fieldwork and GIS data for calculation, with fewer utilizing modelling and expert opinion. The study highlights that these metrics were predominantly developed in Global North countries.

To enhance transparency and ecological equivalence in offsetting practices worldwide, the authors recommend that condition metrics should integrate biodiversity, landscape, and ecosystem service dimensions separately and analysed in parallel. They also suggest that incorporating modelling, expert opinion, and GIS could reduce the need for intensive fieldwork, and emphasize the importance of developing tailored metrics, especially in Global South countries where such tools are scarce.

The Way Forward

Funding is just the first step — real conservation impact in Singapore comes from aligning top-down policies with bottom-up action; building partnerships. Biodiversity also doesn’t stop at borders, and neither should biodiversity finance. Singapore has the opportunity to extend a national biodiversity credit system into ASEAN’s regional trading platform, allowing countries rich in biodiversity to tap into sustainable finance.

Figure 6: Conservation finance: Moving beyond donor funding (Huwyler et al., 2014).

Public-private-philanthropic partnerships (PPPPs) could bridge this gap, bringing together governments to set policies, corporations to finance conservation efforts, and nonprofits to ensure the funds translate into tangible ecological outcomes.

The way forward is clear: Singapore must prioritize biodiversity as a core pillar of its sustainability strategy; not well-intentioned but vague commitments that lack enforcement through their National Biodiversity Strategy. If Singapore truly aspires to be a “City in Nature”, biodiversity finance must be at the forefront of Singapore’s sustainability agenda; not “stapled on” to carbon markets.

References:

Acknowledgement

This article was prepared by Singapore Management University’s Sustainable Investment Club and Singapore Green Finance Centre. The principal authors are:

  • Darren Marcus Loo, Research Director, SMU Sustainable Investment Club
  • Dr Maria Teresa Punzi, Senior Research Fellow, Singapore Green Finance Centre