Conflict of Interest - Transparency: The Hidden Detail Holding Back NBS
‘For Transparency lover’
The NBS finance holds great potential. In recent years, interest in investments tied to nature — such as net zero, carbon credits and biodiversity offsets — has grown rapidly. Despite a vibrant ecosystem of NGOs, funds, and developers, nature markets like the voluntary carbon market (VCM) have stagnated under $2 billion since 2021.
One key reason? Lack of trust, fueled by conflicts of interest.
⚠️ What Are Conflicts of Interest in NBS Market Stakeholders?
These misaligned incentives often go undetected but profoundly influence project credibility and investment willingness. Here’s a table summarizing the major types:
| Actor | Conflict of Interest |
|---|---|
| Standards & Registries | Paid per credit issued → Incentive to approve more projects, regardless of quality |
| Validators & Verifiers | Paid by project developers → Bias toward “pleasing” or retention clients instead of rigorous review |
| Rating Agencies | Paid by investor and developers → Incentive to inflate ratings to attract more business or focus review |
| Brokers / Market Intermediaries | Provide buyer guidance while earning commissions → Biased advice |
| Project Developers | Paid per credit → Incentivized to find loopholes and inflate credit volume |
| Self-Assessments | Developers analyze their own projects → “Marking their own homework” |
| Carbon experts | Experts analyze their own projects → “Marking others homework and inflating bad projects” |
| Model experts | Modellers are contracted by projects/VVBs to validate own models → “Marking others homework, acting as a independent modeling expert (IME) looking to inflating project estimations” |
| Methodology Authors | Developers write own standards → Incentivized to lower requirements for easier approval |
⚠️ Where are the Conflicts of Interest in NBS Market Sources and Information and Knowledge?
These misaligned incentives often go undetected but profoundly influence project credibility and investment willingness. Here’s a table summarizing the major types:
| Actor | Conflict of Interest |
|---|---|
| Standards & Registries | Paid per credit issued → Incentive to approve more projects, regardless of quality |
| Validators & Verifiers | Paid by project developers → Bias toward “pleasing” or retention clients instead of rigorous review |
| Rating Agencies | Paid by investor and developers → Incentive to inflate ratings to attract more business or focus review |
| Brokers / Market Intermediaries | Provide buyer guidance while earning commissions → Biased advice |
| Project Developers | Paid per credit → Incentivized to find loopholes and inflate credit volume |
| Self-Assessments | Developers analyze their own projects → “Marking their own homework” |
| Carbon experts | Experts analyze their own projects → “Marking others homework and inflating bad projects” |
| Model experts | Modellers are contracted by projects/VVBs to validate own models → “Marking others homework, acting as a independent modeling expert (IME) looking to inflating project estimations” |
| Methodology Authors | Developers write own standards → Incentivized to lower requirements for easier approval |
🔍 Why It Matters
- These dynamics evolved unintentionally in a young market lacking mature governance.
- Oversight is weak — journalists, not auditors, often serve as the primary watchdogs.
- Even the appearance of bias erodes confidence.
- Result: capital stays on the sidelines.
🛠 How to Build Trust
To unlock nature investment, we must acknowledge, expose, and change these dynamics:
1. 🌞 Radical Transparency
- Encourage open conversation about conflicts.
- Add conflict-of-interest notices to every transaction.
2. 🕵️ Independent Due Diligence
- Buyers, not suppliers, must fund verification.
- Independence is key to unbiased risk assessment.
3. 🔁 Rethink Incentive Structures
| Recommended Action | Goal |
|---|---|
| Certifiers avoid per-credit payment models | Reduce bias toward high-volume approval |
| Buyers select and fund verification bodies | Create independence |
| Developers use third-party, independent assessors only | Avoid self-marking |
| Standard-setters assign verifiers randomly | Avoid cherry-picking favorable reviews |
| Method authors cannot be project proponents | Ensure neutral methodology |
| Ratings funded by buyers | Prevent inflated scores |
🧭 Final Thoughts
transparency and trust are prerequisites for unlocking nature-positive capital flows.
Until trust becomes the norm, capital will stay on the sidelines. But if trust is abundant, capital will flow — and nature will thrive.
📘 Original Source: by Xilva CEO World Economic Forum Article (2025)
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