Biodiversity banking, also known as biodiversity trading, conservation banking, mitigation banking, habitat banking, compensatory habitat, or set-asides, describes a market-based framework for biodiversity offsetting where offsets can be traded in the form of credits to offset negative environmental impacts of development projects or activities. This involves biodiversity banks, areas with biodiversity value. On the site of a biodiversity bank, conservation activities may be carried out to preserve, restore, enhance, or conserve biodiversity. The outcomes of projects carried out at biodiversity banks are valued in the form of credits, which can be purchased as a way to offset unavoidable adverse environmental impacts, often with the aim of achieving no net loss of biodiversity.

Biodiversity banking emerged from wetland mitigation banking in the United States, beginning in the 1980s and arising from the no net loss policies developed with the Clean Water Act in the 1970s. Since then the concept has been extended, including its application to the bond market.

The terms used to describe biodiversity banking are dependent on the focus of conservation aims and the policies of the country or region in which it is applied. Some of the countries where biodiversity banking has been implemented include the United States, Australia, Canada, Brazil, Sri Lanka and Colombia .

Biodiversity banking is distinct from biodiversity offsets, though they are closely related. Biodiversity offsets are measurable conservation outcomes that result from actions to compensate for the significant negative impacts of development projects, once appropriate measures to avoid or minimise these impacts have been taken. Biodiversity offsetting and biodiversity banking are commonly applied with the goal of achieving no net loss of biodiversity, or more ambitiously, a net gain of biodiversity.

Biodiversity banking generally turns offsets into assets that can be stored or traded, through the creation of biodiversity credits that quantify the value of projects undertaken to restore, create, or enhance biodiversity in advance of a development and away from its potential site. The sites where these projects are carried out are referred to as banks. While more than 100 countries have developed requirements for biodiversity offsetting, frameworks for biodiversity banking are less widespread.

The terms used to describe biodiversity banking differ according to the biodiversity that the system aims to conserve. For example, habitat banking, species banking, conservation banking, and mitigation banking are forms of biodiversity banking.

Biodiversity banks and the credits that are generated from them rely on regulations and legal frameworks. When establishing a biodiversity bank, a legal arrangement, such as a conservation easement (also known as a conservation covenant) might be required to set aside the land for conservation and prevent the use of the land for development, either in perpetuity or for a specified time period. This commitment remains in place for future owners of the land. Part of the agreement may involve establishing a trust fund dedicated to funding ongoing conservation on the site and monitoring its outcomes.

To generate credits, conservation activities must be carried out at the site of a potential biodiversity bank so that the credits represent improved outcomes for biodiversity that would not have otherwise happened. This might include activities to preserve, enhance, restore, or create habitat on the site.