In 2021, the UN Environment Programme called for private investment in nature-based solutions (NBS) to triple by 2030 if we are to meet global climate and biodiversity goals. But as highlighted in a recent Naturescapes Collaboratory meeting on collaborative financing, the challenge isn’t just how much private capital is mobilized — it’s also about how that money is engaged, on whose terms, and whether it supports fair and effective transformative change on the ground.
Co-financing nature-based solutions: How, who, and for what future?
A persistent funding gap for NBS
“NBS have potential for addressing climate change and biodiversity loss, but we don’t yet know how to get the financial sector meaningfully involved. Financing NBS is about identifying and/or constructing win-win situations for both impact and profit.”
— James Vaccaro, RePattern
“Who you want to benefit from NBS, and how, determines where and what to do when funding NBS.”
— Robert McDonald, The Nature Conservancy
A persistent funding gap continues to limit the impact and potential of NBS. While private investment is essential to meeting global climate and biodiversity targets, it also risks undermining the NBS promise of fair and effective transformative change. The challenge isn’t just about raising funds — it’s about who participates, how risks are distributed, and how- and by whom — the value of nature is defined within financial arrangements, including through their governance.
Mix and match of financing and funding practices
In practice, a patchwork of approaches is being used to address the NBS financing and funding gap. Governments and regulators are redirecting financial flows through no-net-loss and net-gain policies and updating public procurement criteria in urban planning procedures to favour nature-positive outcomes.
At the same time, not-for-profit resources are being mobilized via offsetting schemes, citizen contributions, and philanthropic funding. Interest in for-return finance is also growing, with cities and municipalities using instruments like green bonds and integrated project finance to attract private capital. In reality, most NBS projects rely on a mix of these funding streams, bundling together scattered resources to become financially viable [1].
Figure 2: Framework for ecologies of segregation in NBS
What are the challenges for financing and funding transformative NBS?
Several challenges surface when considering how NBS co-financing practices shape their transformative potential [2].
The first is understanding what stages of NBS need funding. Projects unfold in phases: planning and design to bring all the relevant actors around the table to organize and NBS and pool their resources; initial investment for launch (tree planting, wetland restoration); followed by long term maintenance — a crucial but often underfunded stage. Eventually, some projects may become financially self-sustaining, but few reach that point without long-term support.
The second challenge is navigating synergies and tensions across actors involved in realizing or sustaining an NBS, including financiers. Tensions can emerge between financial returns expected by investors and transformative aims such as social inclusion, local empowerment, or ecological justice. The pressure to meet financial expectations can sideline these public goals. The risk of gentrification in real estate-financed NBS, for example, is well documented [3], and carbon credit funding risks overruling the values that local communities place on the natural areas that they live in.
Co-financing NBS is far from a neutral, technical exercise. It means negotiating what counts as value, whose priorities shape decision-making, and what futures are facilitated. The way private actors are engaged — and the financial and governance frameworks built around them — fundamentally influences the transformative potential of NBS [4].
The Naturescapes take on co-financing for transformative change
In the Naturescapes project, we explore how co-financing spaces can be places of transformative change — if experimented carefully. This means not only examining who is at the table but asking who is missing. It requires exploring how co-governance arrangements can safeguard just and balanced decision-making regarding NBS, acknowledging the power imbalances that emerge when private actors step in to safeguard the social and ecological values of those whose voices are under-recognized.
Questions remain as to how we can achieve such a financing structure for NBS, such as: What specific co-governance designs and processes support transformative financing? How can different types of financing enable more inclusive and equitable governance? Under what conditions can increased private investment not only ‘bridge the funding gap’, but also become a driver of transformation?
As demand for NBS investment grows, addressing these questions isn’t optional — they’re central to ensuring that nature-based solutions deliver on their promise of fair, effective, and lasting change.
Footnotes
[1] Mayor, B., Toxopeus, H., McQuaid, S., Croci, E., Lucchitta, B., Reddy, S. E., & López Gunn, E. (2021). State of the art and latest advances in exploring business models for nature-based solutions. Sustainability, 13(13), 7413.
[2] Toxopeus, H., & Polzin, F. (2021). Reviewing financing barriers and strategies for urban nature-based solutions. Journal of Environmental Management, 289, 112371.
[3] Perera, C., Toxopeus, H., Klein, S., & Merfeld, K. (2024). Enabling justice for nature-based solutions in real estate development. Nature-Based Solutions, 6, 100148.
[4] Arjaliès, D. L., & Banerjee, S. B. (2024). ‘Let’s Go to the Land Instead’: Indigenous Perspectives on Biodiversity and the Possibilities of Regenerative Capital. Journal of Management Studies.
Author: Charlotte Demonsant
Charlotte is a postdoctoral researcher at the Utrecht School of Economics, where she investigates how to balance fairness and effectiveness in climate action. When she’s not working, you’ll likely find her painting, sewing, cooking, or exploring the underwater world.