Biodiversity Due Diligence For Finance & Investment

Why Biodiversity Due Diligence Matters

Biodiversity missteps can derail projects – whether through delayed approvals, reputational damage, or lost investor confidence. With Critical Habitat designations and ecosystem impacts under increasing scrutiny, financial institutions and developers need independent, science-based reviews to ensure:

• Accurate identification of biodiversity risks
• Proper application of the IFC PS6 mitigation hierarchy
• Compliance with lender requirements and standards used by the likes of the European Investment Bank.
• Realistic, credible, and effective biodiversity management plans

Whether you’re preparing for financing, entering a new project partnership, or conducting internal ESG checks, independent due diligence is key to identifying red flags early and protecting long-term value.

Our core due diligence services

Our team of biodiversity and ESG specialists provide:

• Independent review of Critical Habitat Assessments
  We assess whether CHA methodologies align with IFC PS6 and biodiversity criteria (for example that used by the European Investment Bank) – evaluating data quality, habitat classification, and species-level assessments.
• Critical appraisal of Biodiversity Management Plans
  We evaluate whether mitigation strategies are viable, appropriately sequenced, and realistically resourced. We review implementation frameworks, offsets, monitoring indicators, and adaptive management systems.
• Compliance checks against biodiversity standards
  We assess reports and management plans for alignment with Environmental and Social Standards – particularly regarding no net loss, EU Birds and Habitats Directives, and the Natura 2000 network.
• Gap analysis and red flag identification
  We highlight shortcomings and provide practical, science-based solutions to address them, ensuring no surprises for lenders or regulators.
• Compliance advice and strategic guidance
  We help clients understand what “no net loss” or “net gain” really means in practice and how to achieve it credibly.

Critical Habitat Assessments (CHA)

A Critical Habitat Assessment is essential for identifying and evaluating the potential risks and impacts to biodiversity in areas designated as critical habitat. By leveraging our knowledge and experience, we provide comprehensive support throughout the CHA process, helping you navigate the complexities of biodiversity conservation and ensuring adherence to regulatory requirements. Our team is equipped to conduct thorough assessments that include desktop reviews, field surveys, and impact evaluations, all aimed at protecting valuable ecosystems and species.

What exactly is a CHA?

A Critical Habitat Assessment (CHA) is a key component of ensuring compliance with the International Finance Corporation (IFC) Performance Standard 6 (PS6), which focuses on biodiversity conservation and the sustainable management of living natural resources.

Under IFC PS6, projects are required to identify and assess risks and impacts to biodiversity, especially when operating in areas classified as natural or critical habitat. A Critical Habitat Assessment determines whether a project site meets the criteria for critical habitat as defined by PS6, and if so, outlines the implications and necessary steps for compliance.

What is a Critical Habitat?

According to IFC PS6, a ‘Critical Habitat’ includes areas with:

1. High biodiversity value, such as:
   • Habitat of IUCN Red List Critically Endangered or Endangered species
   • Endemic or range-restricted species
   • Migratory or congregatory species
   • Unique or threatened ecosystems
   • Key evolutionary processes
2. Internationally or nationally recognised areas of high biodiversity, such as:
   • Key Biodiversity Areas (KBAs)
   • Protected Areas
   • Ramsar Sites, UNESCO Natural World Heritage Sites

Key Elements of a Critical Habitat Assessment

A CHA typically involves:

1. Desktop review of biodiversity data and mapping of key features
2. Field surveys and habitat classification
3. Evaluation of species and ecosystem importance, rarity, and vulnerability
4. Determination of whether the project area qualifies as critical habitat under IFC criteria
5. Impact assessment: identifying potential risks to biodiversity
6. Mitigation hierarchy application: avoid, minimise, restore, offset
7. Development of a Biodiversity Management Plan (BMP), if required

If a project is found to be in or affecting critical habitat, it triggers stricter requirements under PS6:

1. The project must not lead to measurable adverse impacts on the biodiversity values for which the habitat is designated.
2. The project must not lead to a net reduction in the population of any Critically Endangered or Endangered species.
3. The project must achieve net gain of biodiversity for impacted critical habitat.

Biodiversity Management Plans (BMPs)

Biodiversity Management Plans (BMPs) are a key implementation tool within the IFC Performance Standard 6 (PS6) process. They translate the findings of biodiversity assessments—such as the Critical Habitat Assessment (CHA)—into a practical, action-oriented plan that ensures a project complies with PS6 throughout its lifecycle. Here is how a BMP fits into the PS6 biodiversity risk management framework:

1. Screening & Scoping
   • Initial biodiversity risk screening
   • Identify if PS6 is triggered
2. Baseline Data Collection & Impact Assessment
   • Field surveys, CHAs, Ecosystem Services assessments
   • Determination of habitat type (modified, natural, critical)
3. Impact Mitigation Strategy
   • Apply the mitigation hierarchy: Avoid > Minimize > Restore > Offset
4. Development of the BMP
   • The BMP formalises and operationalises the mitigation strategy
   • Becomes the central management and monitoring document
5. Implementation, Monitoring, and Adaptive Management
   • BMP includes monitoring indicators, timelines, responsibilities
   • Adaptive management ensures flexibility as new info emerges

What does a Biodiversity Management Plan include?

A typical BMP includes:

1. Summary of biodiversity risks and impacts
   • Including species, habitats, ecosystem services
2. Mitigation measures
   • Avoidance zones, timing restrictions (e.g., breeding seasons), construction methods
3. Offset strategy
   • If net gain or no net loss is required (especially for critical habitat)
4. Monitoring plan
   • Indicators to track effectiveness of mitigation
5. Roles and responsibilities
   • Who is doing what, including contractors
6. Schedule
   • Timeline for implementing each measure
7. Reporting and review procedures
   • Internal and external reporting requirements
8. Adaptive management protocols
   • How the plan evolves if conditions or data change

BMPs and compliance

For projects funded by IFC or other Equator Principles Financial Institutions (EPFIs), the BMP is often a legally binding document, referenced in Environmental and Social Action Plans (ESAPs) or loan covenants. Lenders may require regular audits to ensure the BMP is implemented effectively.

Without a BMP:

1. There’s no systematic way to ensure mitigation measures are implemented
2. The project risks non-compliance with IFC PS6, which can delay financing or lead to reputational harm

With a BMP:

1. The project can demonstrate it is actively managing biodiversity risks
2. There is a clear framework for achieving no net loss or net gain, as required

Your one-stop Green Transition partner

For Sweco, viewing projects through the Green Transition lens is essential to our mission of ‘transforming society together’, bringing to life our determination to be a leader and role model in the consultancy space in the green transition.

We’re proud to be taking responsibility for, and being a central part of, the solution to society’s sustainability and carbon problems – challenging our clients, and ourselves, to deliver digitally enabled, sustainable, innovative outcomes through technical excellence and expert consultancy across our whole portfolio.