Biotoken Pilot program in Australia
One of the more encouraging developments over the summer was the first tentative movements of the biotoken concept from the ideas stage a little closer to reality. The Commonwealth Bank of Australia (CBA) announced that it will launch an initial biotoken pilot program, a sensible approach since there are so many unknowns to be tested, not least the incentives that will really move people to participate. But first a bit of background.
Biotokens are tradeable, transferrable digital tokens that represent unique biodiversity assets. Biotokens are to living things as carbon offsets are to the environment: a means to solve the free-rider problem when it comes to public goods. If, say, construction of a new hotel means loss of nature and wildlife habitat, the hotel developer trades in biodiversity tokens to offset those losses, much as carbon emissions can be offset through tree-planting or cap and trade. The principle is the same: if your activity eats part of nature in one place, it has to be compensated by cultivation of more nature someplace else.
It is great to see the beginnings of a use case of fintech for biodiversity, which the government has laid the groundwork for by requiring companies to purchase biodiversity credits to offset development impact. Until now most of the mission-driven fintech has famously focused on financial inclusion. The occasional fintech innovation that was happening around biodiversity was mainly driven by private-sector donors focused on rainforest investments. And drivenmay be too strong a word, since the reality is that the biodiversity-aligned Sustainable Development Goals (#14 Life Below Water and #15 Life on Land) have just not been the most crowded fintech innovation spaces.
So even though the Australia experience is a pilot, that it emerges from a clear public sector demand is key. It opens up a welcome rethinking about public values and about how we express those values and live them out. What for instance if everyone – as is the case in China – had a citizen duty to plant a number of trees a year? People who don’t have the time to do it or who are just not interested could then buy biodiversity tokens from other citizens who could do it for them. The number of biotokens in circulation could be determined by the biodiversity needs of the country to keep it within the planetary boundaries. Ultimately, it is this commitment, this intentional way of thinking about how to preserve biodiversity and natural capital, that is now being tokenized and put into circulation.
What’s promising about such a solution is that many people really do want to help tackle our times’ greatest green challenges, but they do not know what to do. If they start acting, they often feel their impacts are too small to really make a difference. A biodiversity token system is a new way to create a collective conscious and a sense of being part of a national green movement. It could be enhanced with the right encouragement: visualisation of the biotokens’ impacts via satellite photos, national nature days, and other incentives developed in consultation with the citizens to see what most moves and inspires them.
So hats off to Australia for its leadership in the fintech for biodiversity and natural capital space, a space currently in its very early stage. Or at least that is our current assumption. To test that assumption and to start to survey the landscape, the Alliance will soon launch a fintech for biodiversity and natural capital challenge. Submitted solutions will all get visibility and be part of a competition for winning a micro-grant. We want to amplify the role models in this space who are pushing the boundaries of fintech beyond frictionless payments and other more obvious and mature use cases – which remain important – and into delivering on biodiversity conservation finance.
Looking forward to sharing more within a short while!