Biodiversity finance instruments operate within a broader policy, market and institutional context that ultimately determines their effectiveness and scalability. Despite growing interest from investors and policy makers, biodiversity finance initiatives continue to face significant barriers, including uncertain revenue models, elevated real and perceived risks, and a shortage of investment-ready projects. This chapter examines how governments and other stakeholders can address these constraints by strengthening enabling conditions for investment. It explores how financing instruments interact in practice, how projects can be prepared and aggregated to attract capital, and how data, policy frameworks, governance arrangements and institutional capacity can support the mobilisation of finance for biodiversity at scale.
Mobilising Public and Private Finance for Biodiversity
Abstract
The previous chapter examined a range of financing instruments for biodiversity. In practice, however, these mechanisms do not operate in isolation but interact within broader policy and institutional frameworks that shape investment. Many biodiversity finance initiatives continue to face structural constraints, including uncertain or fragmented revenue streams, high real and perceived risks, and a limited pipeline of investment-ready projects. This chapter therefore explores how systemic conditions determine scalability and effectiveness of biodiversity finance. It discusses how financing tools interact, how to develop projects that attract investment, and the role of data, policy and governance frameworks.
Biodiversity finance instruments often work in combination rather than in isolation. Individual instruments generally address specific constraints, such as revenue generation, price signals, risk reduction or capital mobilisation, but rarely resolve all barriers on their own. Effective approaches therefore tend to combine complementary instruments and sources of capital. These combinations bring together revenue-generating mechanisms, financial instruments and risk-sharing tools to align incentives, manage risks and attract different types of capital.
Real economy instruments, such as PES and biodiversity mitigation banking schemes create revenue streams and price signals linked to biodiversity outcomes. By translating these outcomes into cash flows or compliance‑driven demand, these instruments can help make biodiversity projects more investable, particularly where supported by stable regulatory frameworks, robust monitoring systems and sustained demand. Without such enabling conditions and revenue streams, engagement by financial institutions is likely to remain limited.
Financial instruments such as equity, loans and bonds can be used to mobilise capital. In practice, these are typically combined through layered capital structures that include different forms of debt and equity with varying levels of seniority and risk. Debt is generally suited to activities with established or predictable revenues, supporting scale‑up and refinancing, while subordinated or mezzanine capital can absorb higher risks. Equity serves both a catalytic and an alignment function: providing first‑mover capital for new biodiversity‑positive activities and enabling longer‑term financial alignment through capital allocation and stewardship as markets mature.
Risk‑management instruments, including guarantees, first‑loss or subordinated capital, insurance and other risk‑transfer tools, can then be used to address both real and perceived investment risks. By improving risk‑return profiles, these instruments help crowd in commercial finance and enable participation by actors with lower risk tolerance. Blended finance structures commonly combine these tools, with public or philanthropic capital taking higher‑risk positions.
The effectiveness of these financing structures often depends on sequencing and integration. In many cases, credible revenue streams or policy-driven demand must first be established before risk-sharing instruments can significantly improve investment attractiveness. Derisking measures can help address uncertainty and accelerate capital mobilisation, but they are generally insufficient where underlying revenue models remain weak or unproven. The relative importance of revenue support, risk sharing and concessional finance varies across sectors, jurisdictions and stages of market development (section 4.2.2).
Innovation in both the public and private sectors is finding new models for combining these instruments. Effective combinations of instruments are important for mobilising private finance (discussed further in section 4.2), and for enhancing public finance. For example, securities such as green bonds can allow governments or public entities to access capital markets and secure upfront funding for biodiversity outcomes, as illustrated by frameworks that enable the securitisation of predictable conservation‑related revenues. Securitisation1 of fees and taxes has shown promise in financing climate adaptation (OECD, 2023[1]), and is being considered for biodiversity in countries such as Costa Rica (Box 4.1).
Costa Rica’s proposed Future Flows Securitisation Bill (Law No. 23.896) illustrates a potentially replicable and scalable model for mobilising private finance using public natural‑capital revenues. By monetising predictable revenue streams, the approach front-loads conservation finance.
Under the proposed framework, the National System of Conservation Areas, operating under the Ministry of Environment and Energy, would be authorised to securitise future revenues from protected area entrance fees. Implementation is expected to involve the establishment of a Special Purpose Vehicle (SPV) – a legally separate entity used to ring‑fence assets and manage financial risk – which could issue green bonds backed by these revenues. Proceeds from the bond issuance would be used to finance biodiversity‑related investments in protected areas, while maintaining a clear link between repayment and conservation‑related revenue sources.
A defined share of future entrance‑fee revenues would be earmarked to service the bonds, covering both principal and interest. Anchoring repayment to relatively stable tourism‑based income is intended to strengthen investor confidence while preserving fiscal space for the central government. While the model aims to enhance the long‑term financial sustainability of conservation systems by leveraging domestic revenue streams, early issuances may still require risk‑mitigation measures or blended finance elements, depending on market conditions.
Source: (BIOFIN, 2025[2]), Costa Rica’s Future Flows Securitization Bill for Protected Areas provides a replicable model for unlocking public-private finance; (OECD, 2025[3]), OECD DAC Blended Finance Guidance, 2025.
Mobilising biodiversity finance requires not only suitable instruments, but also a pipeline of bankable projects. Many initiatives are too small, complex or uncertain to attract private investment. They often lack predictable revenues, face high transaction costs, and operate in contexts with unclear land tenure or evolving regulation (zu Ermgassen et al., 2025[4]; Löfqvist, Garrett and Ghazoul, 2023[5]). Weak track records, limited standardisation and the long time horizons of ecosystem recovery further increase perceived risk (Plantinga et al., 2023[6]; zu Ermgassen et al., 2025[4]; Löfqvist, Garrett and Ghazoul, 2023[5]). The result is a persistent mismatch between available capital and investable opportunities.
Public finance therefore remains essential, particularly for activities that generate public goods without direct revenue flows. Yet there remains potential to mobilise additional private capital. Strong project design, diversified revenue models, targeted de‑risking instruments and, where appropriate, project aggregation, can all improve the commercial viability of biodiversity investments. Governments play a central role in this process: as providers of early-stage funding and technical assistance, as risk-sharing partners, and as market creators through policy and regulation (see also section 4.3) (Flammer, Giroux and Heal, 2025[7]; zu Ermgassen et al., 2025[4]). The remainder of this section explores how to build a stronger pipeline of bankable biodiversity projects and the financing structures required to bring them to scale.
4.2.1. Designing impactful, revenue generating projects
Securing sufficient and predictable revenues
Biodiversity projects can generate revenue from both traditional and environmental sources. These include sustainably produced commodities (e.g. timber, agriculture and fisheries) and services such as ecotourism. In many cases, biodiversity functions as a public good and becomes financially viable when bundled with private goods – for example, when conservation enhances tourism value (Flammer, Giroux and Heal, 2025[7]). Sustainable production of commodities and services may benefit from certification premiums, yield improvements and reduced costs through more efficient use of inputs (e.g. synthetic fertilisers) (EIB, 2023[8]; Queru, 2025[9]) (Van Raalte and Ranger, 2023[10]). Additional revenues may come from payments for ecosystem services, carbon credits and nature markets (EIB, 2023[8]; Queru, 2025[9]).
Given the diversity of potential revenue streams, many biodiversity and nature-based solutions projects rely on stacked or diversified revenue models. By combining commodity sales, certification premiums, payments for ecosystem services and revenues from environmental credit markets, projects can strengthen financial resilience and reduce exposure to fluctuations in any single source of income. Diversification can also help better align financial returns with ecological performance, particularly where revenues are linked to verified biodiversity outcomes. When appropriately designed, stacking environmental credit revenues may additionally increase the overall environmental benefits delivered by a project by strengthening incentives for integrated ecosystem management (OECD, 2015[11]).
However, stacked revenue models can also increase governance complexity. Where revenues draw on multiple environmental credit systems, such as nutrient trading, carbon credits or biodiversity offset units, particular care is required to ensure environmental additionality, avoid double counting and maintain regulatory compliance (OECD, 2025[12]; von Hase and Cassin, 2017[13]). Risks are highest in vertical stacking, where multiple credits are generated from overlapping ecosystem services at the same site. Clear regulations, strong measurement standards and a high degree of transparency are therefore essential to safeguard environmental integrity and maintain investor and stakeholder confidence (OECD, 2025[12]).
Governments, alongside other public and private actors, can improve the predictability of revenue streams from biodiversity and nature‑based projects. One of the most powerful levers governments have is to establish compliance frameworks that create sustained demand for environmental outcomes (e.g. United Kingdom’s Biodiversity Net Gain framework and Wetland Mitigation Banking under the Clean Water Act in the United States) (see section 3.1.3).
Where markets for environmental credits remain nascent or illiquid, public and private actors could also support revenue stability through mechanisms such as price floors, guaranteed offtake arrangements or advance purchase commitments. Price‑floor mechanisms can mitigate downside risk by assuring a minimum credit value, while offtake arrangements and advance purchase commitments enhance bankability by securing predictable cash flows or providing early revenue certainty. Corporate buyers may engage in long‑term offtake agreements when these are linked to supply‑chain requirements or net‑zero and nature‑positive commitments.
These mechanisms can reduce revenue uncertainty and help crowd in private capital, provided they are transparent, time-bound and fiscally sustainable. Examples include the UK’s Woodland Carbon Guarantee (Woodland Carbon Code, 2024[14]), and long-term offtake agreements that provide revenue certainty, such as Microsoft’s carbon removal purchases under the Amazon Outcome Bond (World Bank, 2024[15]); and corporate offtake arrangements supporting the Spekboom Restoration Outcome Bond project in South Africa (World Bank Group, 2026[16]).
Integrating projects into landscapes and jurisdictions
Scale matters for both nature and investors. Ecological processes operate across spatial scales that extend beyond individual projects. Effective interventions therefore need to reflect the scale at which ecological interactions occur, including habitat connectivity, wildlife corridors, water flows, and nutrient and energy cycles (University of Canterbury, 2025[17]; Jeanneret et al., 2021[18]). From an investor perspective, scale is equally critical: larger, co-ordinated investment approaches improve cost efficiency, achieve material relevance for large portfolios, and align more readily with institutional governance, risk management, and capital‑deployment requirements.
Landscape approaches aim to address scale mismatches by shifting from fragmented, project‑based investments toward co-ordinated territorial strategies aligned with shared ecological, social and economic objectives (WWF, Conservation Capital, Sustainable Finance Coalition, 2025[19]). By anchoring multiple projects within a common framework, landscape approaches can reduce duplication, diversify risk, and generate cumulative impacts that exceed those of isolated interventions (Dudley et al., 2025[20]; WWF, 2025[21]). They can also strengthen co-ordination among stakeholders and help mitigate social, governance and reputational risks through more integrated planning and implementation (Bertels, Lear and Gutierrez, 2023[22]).
A core feature of landscape approaches is the development of a shared vision and collaborative governance arrangements, typically involving governments, private sector actors, local communities and civil society organisations (Dudley et al., 2025[20]). These approaches can strengthen co-ordination across stakeholders, improve land‑use planning and align incentives across sectors, helping to manage multiple and sometimes competing objectives (Gray et al., 2016[23]).
Although landscape approaches are attracting increasing policy and investor attention, empirical evidence on their effectiveness remains relatively limited and context-specific. Co-ordinating multiple stakeholders across large territories is governance-intensive, and the evidence base on effectiveness remains limited. The complexity of risk allocation, impact measurement across heterogeneous landscapes and the management of competing land-use objectives are persistent difficulties – illustrated even by well-resourced initiatives such as Commonland's work in southern Spain (Box 4.2). These challenges are more acute in lower-income contexts where governance capacity and data infrastructure are weaker. Governments and investors should therefore treat landscape approaches as a promising but demanding model that requires sustained investment in governance and project preparation, rather than a ready-made solution to scale constraints.
For private investors, landscape‑level approaches may help manage climate‑ and nature‑related risks across supply chains and support more stable and diversified investment opportunities (Bertels, Lear and Gutierrez, 2023[22]; Dudley et al., 2025[20]). Furthermore, securing social legitimacy and local ownership through meaningful engagement with local stakeholders is critical to reducing implementation risks, supporting long‑term stewardship, and underpinning the durability and credibility of biodiversity investments (O’Donohoe and Sheenan, 2025[24]; Hull, 2025[25]; Queru, 2025[9]). While still maturing, landscape‑level finance could help deliver integrated biodiversity outcomes at scale, provided governance frameworks, data systems and investment structures are sufficiently robust.
The Commonland initiative illustrates a long-term, landscape-scale approach that integrates ecological, social and economic objectives. Its “4 Returns Framework” – covering inspiration, social, natural and financial capital – guides restoration and development over multi-decadal timescales, recognising that ecological restoration, livelihoods and investment viability are mutually reinforcing.
One of the most advanced European applications is in the Altiplano Estepario of southern Spain, a semi-arid region of around one million hectares affected by desertification, biodiversity loss and rural depopulation. Working with farmers, co-operatives, businesses and public authorities, the initiative supports regenerative land use alongside local economic development through activities such as regenerative almond and olive production, restoration of ecological corridors, improved soil and water management, and development of value chains that capture sustainability-related price premiums.
A key strength of the landscape approach is its ability to co-ordinate action across multiple landholders and align incentives within a defined territory. By addressing ecological and economic challenges at scale, it can reduce fragmentation, support collective action and integrate biodiversity objectives into productive land use. While still evolving, the initiative demonstrates how landscape-scale strategies can help attract blended and patient capital by building investable project pipelines and reducing risks over time, while also highlighting ongoing challenges related to governance complexity, risk allocation and consistent measurement of biodiversity outcomes across large and heterogeneous landscapes.
Source: (Dudley et al., 2025[20]); (Commonland et al., 2024[26]), The 4 Returns Framework in practice: a guidebook for holistic landscape restoration. Amsterdam, the Netherlands.
The role of technical assistance
Technical assistance is a critical enabler of investment readiness, particularly in the early stages of project development. It supports feasibility analysis, business planning, financial modelling, and the development of monitoring, reporting and verification systems (Fabre, 2025[27]; Queru, 2025[9]; Van Raalte and Ranger, 2023[10]). It also strengthens local capacity and ensures alignment with regulatory and market standards. Without this foundation, environmentally valuable initiatives frequently fail to reach investability thresholds.
Beyond early-stage project preparation, technical assistance also plays an important role in supporting scalability by bridging the gap between project design and investment. As projects mature, the focus of support typically shifts towards financial structuring, standardisation and aggregation, enabling projects to meet the requirements of different investor types and facilitating replication and portfolio development. In biodiversity finance, technical assistance often addresses market-creation challenges rather than solely project-level deficiencies. This includes developing regulatory frameworks, improving biodiversity data systems, establishing methodologies and building institutional capacity among public authorities and financial intermediaries.
Many nature‑focused funds and investment platforms operate dedicated, typically grant‑funded, technical assistance facilities that provide pre‑ and post‑investment support to projects (Van Raalte and Ranger, 2023[10]; CPI, 2024[28]). These facilities often operate alongside but remain separate from investment capital. In doing so, they help strengthen project viability, improve impact measurement, and reduce transaction costs and perceived risks without diluting private returns (Convergence, 2022[29]). Some facilities focus primarily on upstream pipeline development. For example, the UK Natural Environment Investment Readiness Fund, which facilitates project development, readying projects for private investment (Green Finance Institute, 2026[30]). An evaluation of its first two rounds found that it delivered good value for money and generated lessons for the design of future nature finance initiatives (ECORYS, 2024[31]).
Public institutions – such as environmental agencies and, in the context of development finance, bilateral donors and multilateral development banks – play an important role in financing and co-ordinating technical assistance alongside private investors and specialised intermediaries (see also next section). Capacity development should seek to be durable, extending beyond an individual project to create individuals, institutions and systems that can support development of a pipeline of projects. Forthcoming OECD research will examine the catalytic role of grants in providing technical assistance to mobilise private sector finance and investment in developing countries (OECD, Forthcoming[331]). By addressing capacity constraints at both project and financing levels, well‑targeted technical assistance can complement financial instruments to support the development of a scalable pipeline of investable biodiversity projects.
4.2.2. Financing models to enable scale
Even well‑designed projects with clearly defined revenue streams struggle to achieve scale without financing models aligned with investor requirements. Institutional capital typically demands scale, liquidity, standardisation, and predictable risk‑return profiles, which are conditions that biodiversity projects rarely meet under current market structures (Flammer, Giroux and Heal, 2025[32]). Addressing these constraints requires financing structures that reduce transaction costs, improve risk-return characteristics and enable larger capital flows, requiring co-ordination across government, business and financial institutions.
Blended finance
Blended finance is among the most prominent mechanisms used to support the scaling of biodiversity investments. Blended structures deploy concessional finance – typically provided by governments, development finance institutions or private philanthropy – to improve the risk‑adjusted returns of biodiversity investments and mobilise private capital. This concessional support may take the form of pure grants and technical assistance, as well as concessional capital and risk‑sharing instruments embedded within investment structures (see examples in Box 4.3).
Evidence suggests that projects with higher expected returns are more likely to attract purely private capital but are typically smaller in scale and deliver more limited biodiversity impacts. By contrast, larger‑scale projects with more ambitious biodiversity outcomes are more commonly financed through blended structures (Flammer, Giroux and Heal, 2023[33]) (Flammer, Giroux and Heal, 2025[32]). Although these projects typically offer lower expected returns, they also exhibit lower risk, suggesting that blending can improve the risk‑return trade‑off and expand the pool of participating investors – pointing not to a lack of opportunity, but to the need for more effective structuring frameworks that can align large‑scale biodiversity outcomes with investor requirements.
Forestry and Climate Change Fund (FCCF): The FCCF illustrates how blended finance can be applied to forestry value chains and smaller-scale assets. Supported by public investors including the Government of Luxembourg, the fund uses a tiered share structure in which public capital is deployed through junior shares that absorb first losses. This structure enables participation by institutional and private investors in sustainable forest management and restoration activities. By targeting small and medium-sized enterprises and investing in local processing and value chains, the fund addresses structural barriers associated with long investment horizons, fragmented project pipelines and limited access to finance in the forestry sector.
Global Fund for Coral Reefs (GFCR): The GFCR a comprehensive example of blended finance applied to marine ecosystems. Established as a public–private partnership involving actors such as the Green Climate Fund, the United Nations Development Programme and private investment partners, the fund combines a grant-based window with a commercial investment vehicle. The Green Climate Fund has committed approximately USD 125 million in junior equity, which absorbs early losses and helps de-risk investments in reef-positive businesses. The overall structure is designed to mobilise significantly larger volumes of private capital into a sector characterised by high uncertainty and limited track record.
Land Degradation Neutrality Fund (LDNF): The LDNF applies a layered capital structure to support sustainable land-use and restoration projects. Managed by Mirova with support from the United Nations Convention to Combat Desertification and other public and development finance partners, the fund mobilises capital from both public and private investors. Public and development finance institutions provide a junior tranche that absorbs initial losses, enabling private investors to participate in higher-risk projects. The fund has raised several hundred million euros and invests in projects that combine environmental restoration with revenue-generating activities in agriculture, forestry and land management.
The National Green Fund (Nationaal Groenfonds): The National Green Fund in the Netherlands illustrates a form of domestic blended finance, combining public catalytic capital and private investment to support biodiversity and broader environmental objectives. Supported by Dutch public funding and policy mandates, the fund provides a range of financing instruments, including subordinated loans, guarantees and revolving finance, for projects related to nature restoration, sustainable agriculture, green real estate and biodiversity‑compatible infrastructure. By improving project bankability and reducing perceived investment risks, these instruments help crowd in commercial bank lending and private capital into projects that generate environmental benefits alongside viable revenue streams. The model illustrates how blended finance approaches can be applied domestically without reliance on international development finance institutions.
Source: (GCF, 2022[34]), GCF partnership with Pegasus set to protect coral reefs across 17 countries; (UNDP, 2026[35]) Global Fund For Coral Reefs: About; (IDH and Mirova, 2025[36]; UNCCD, 2026[37]) Land Degradation Neutrality Fund; FCCF - Investing in business models for the restoration of tropical forests; (Groenfonds, 2026[38]), The National Green Fund, Nationaal Groenfonds.
A central policy challenge is ensuring that concessional finance is used in a targeted and efficient manner. Public resources should address clearly identified market failures and deliver measurable additionality. The public sector should avoid situations in which risks are largely socialised while returns accrue disproportionately to private actors (Löfqvist, Garrett and Ghazoul, 2023[5]; Mazzucato, 2025[39]), or where significant public support mobilises only marginal amounts of private capital, raising questions about whether those resources could have delivered greater impact through direct public investment or targeted payments to land-users. Evidence on the long‑term effectiveness and additionality of blended finance in biodiversity contexts remains limited, and assessments of additionality in blended development finance are not always publicly disclosed and underlying methodologies vary across providers (OECD, 2025[3]). This underscores the need for careful design, transparency, and robust monitoring and evaluation (Löfqvist, Garrett and Ghazoul, 2023[5]).
In the context of blended finance, the World Bank Group’s Cascade Framework (World Bank Group, 2018[40]) offers a guiding logic for sequencing public intervention (Figure 4.1). While the framework was developed for sustainable development more generally, it can be applied to biodiversity financing – both domestic and international. The framework prioritises financing solutions by first assessing whether objectives can be achieved through commercial private finance. If not, it considers whether policy, regulatory or institutional reforms can address underlying market failures and help create demand or revenue streams for biodiversity outcomes. Where such measures are insufficient, public and concessional resources are used to share or mitigate risks, for example through guarantees or first‑loss instruments, to mobilise private capital. In biodiversity contexts, however, many interventions generate public goods that are not fully monetisable, implying that sustained public finance will often remain necessary alongside efforts to crowd in private investment.
Source: Adaptation of World Bank Group (2018[40]), Approach Paper “Creating Markets for Sustainable Growth and Development”.
Pooled finance and investment aggregation
Pooled finance structures and co‑financing arrangements play an important role in addressing co-ordination failures and mobilising capital from multiple public and private sources. By aligning investors and funding streams around shared objectives, they reduce fragmentation across programmes and jurisdictions and lower transaction costs through joint governance arrangements and common investment frameworks. Depending on their design, these structures may combine capital on commercial terms or include concessional elements, without necessarily constituting blended finance.
Within such arrangements, risk‑return profiles are commonly shaped through layered capital structures that allocate risk across different investor classes. Junior or subordinated capital, including equity and, where relevant, mezzanine instruments, absorbs a greater share of early losses, improving the risk profile for senior debt and enabling broader investor participation. Governments and public financial institutions can support these structures not only through blending approaches, but also by convening participants, facilitating alignment across mandates and funding cycles, and promoting consistency with national biodiversity strategies.
Aggregation mechanisms, such as special purpose vehicles, dedicated funds and intermediary financing platforms, translate co-ordination into investable scale by bundling biodiversity projects into diversified portfolios. Aggregation reduces exposure to project‑specific risks, supports the standardisation of contractual, monitoring and reporting arrangements, and enables more efficient capital deployment. By consolidating projects within a single vehicle, aggregation facilitates the practical application of layered financing approaches at portfolio level, without requiring each individual project to meet institutional scale or structuring requirements independently. However, aggregation does not eliminate underlying ecological or policy risks. Portfolios may remain exposed to correlated risks, including commodity price fluctuations, regulatory changes and climate-related shocks affecting multiple projects simultaneously. In practice, aggregation can take multiple forms, including project-level platforms, financial intermediary models and supply-chain-based approaches (see examples in Box 4.4).
Digital technologies are increasingly being explored as complementary tools to support pooled finance structures and the aggregation of biodiversity investments. Tokenisation and related digital approaches – including blockchain and artificial intelligence – can help standardise, track and manage contractual claims linked to biodiversity-related revenue streams. These technologies may also reduce minimum investment sizes and facilitate the pooling of smaller projects, such as community forestry, mangrove restoration or regenerative agriculture initiatives, into investable portfolios.
Digital tools can further strengthen monitoring, reporting and verification, helping to reduce due diligence and transaction costs across fragmented projects. Evidence from adjacent financial and environmental markets suggests that such approaches may improve verification efficiency and enable new financing structures, including tokenised bonds and digital investment platforms (Halden and Cali, 2024[41]; Namoniuk and Matei, 2025[42]; Yao Ge, 2025[43]). However, their applicability depends on reliable revenue streams, robust legal and regulatory frameworks, interoperable standards and sufficient project standardisation.
Mobilising Finance for Forests programme (MFF): MFF illustrates aggregation at the level of supply chains and landscapes. Supported by public actors including FMO, the Dutch entrepreneurial development bank, and the United Kingdom, the programme combines concessional capital, private investment and technical assistance to support sustainable forestry and deforestation‑free commodity production. Operating across multiple projects and jurisdictions, MFF builds investable pipelines and reduces fragmentation. In 2024, a commitment of around USD 40 million to a Latin American reforestation vehicle (The Reforestation Fund) helped mobilise several times that amount in additional investment, illustrating the catalytic role of concessional finance.
Eco.business Fund: The eco.business Fund illustrates aggregation through financial intermediaries. Backed by public and development finance institutions, notably KfW, it mobilises blended public and private capital and channels it through local financial institutions in Latin America, the Caribbean and sub‑Saharan Africa. By leveraging local banking networks, it aggregates numerous small transactions across sectors such as sustainable agriculture, forestry, fisheries, aquaculture and ecotourism –segments typically too fragmented or risky for direct institutional investment. As of 2024, the fund manages close to USD 1 billion in assets, supporting sustainable management across more than one million hectares. Its combination of risk‑taking public capital, local intermediation and technical assistance helps reduce costs, mitigate risk and mainstream biodiversity‑friendly land use.
African Forest Landscape Restoration Initiative (AFR100): AFR100 illustrates how aggregation can be facilitated through co-ordinated platforms rather than a single investment vehicle. It brings together governments, donors, project developers and financiers around a shared restoration agenda across multiple countries, helping organise large numbers of small and heterogeneous projects within a common framework. Through associated funding mechanisms such as TerraFund, the initiative provides grants and early‑stage finance to locally led restoration projects. At the same time, AFR100 has faced criticism for including commercial tree plantation activities under a broad restoration umbrella, highlighting the importance of clear definitions, safeguards and biodiversity‑sensitive project selection criteria in large‑scale aggregation platforms.
Source: (FMO, 2026[44]), About Mobilising Finance for Forests; About MFF - FMO; (FMO, 2024[45]), Mobilising Finance for Forests Programme 2024: Performance; (Eco Business Fund, 2026[46]), Invest in Nature www.ecobusiness.fund/en ; (Finance in Motion, 2026[47]) (Finance in Motion, 2026[48]), Ecobusiness Fund, www.finance-in-motion.com/funds/fund/ebf; (TerraFund for AFR100, 2026[49]), Investing in Africa’s Land Restoration Champions; (AFR100, 2026[50]), People Restoring Africa’s Landscapes; (Parr, te Beest and Stevens, 2024[51]), Conflation of reforestation with restoration is widespread.
Moving along the capital continuum
As biodiversity projects move from incubation toward market integration, the mix of instruments, financing mechanisms and participating actors must adapt to changing risk profiles, capital requirements and market conditions (Figure 4.2) (CPIC, 2023[52]; Dudley et al., 2025[20]). At early stages, when uncertainty is high and projects are not yet investable, public funding can play a particularly important role through grants and technical assistance, supporting project preparation, capacity building and the provision of non-monetisable public goods. As projects mature and revenue mechanisms become established some projects may become suitable for blended or commercial financing. Others may continue to require ongoing public support because the biodiversity benefits they generate cannot be fully monetised. Technical assistance, however, is often needed throughout the continuum given the persistent complexity of biodiversity investments. (CPIC, 2023[52]).
As biodiversity finance moves from project‑level structuring towards broader market development, refinancing mechanisms, secondary markets and, potentially, securitisation could further enhance scale by improving liquidity and enabling capital recycling. As track records strengthen and monitoring, reporting and verification systems mature, portfolios of biodiversity-related assets may increasingly be packaged into investable financial products. Realising this potential, however, will depend on greater standardisation, robust impact measurement, and more stable and predictable revenue streams – priorities for both policy makers and market participants. Where biodiversity investments generate public goods that cannot be monetised, public finance will remain indispensable regardless of market maturity.
Source: Adapted from Capital Continuum (2025[53]), The Capital Continuum https://capital-continuum.com/.
Financing instruments and structures, however well designed, will not mobilise biodiversity finance at scale in the absence of enabling conditions. These encompass the data and measurement systems that allow investors to assess risks and verify outcomes; the policy and regulatory frameworks that translate biodiversity objectives into economic incentives and investable opportunities; and the governance arrangements that co-ordinate action across actors, ministries and jurisdictions. These elements are interdependent. Measurement systems depend on governance to be mandated and funded; policy frameworks depend on data to be credible; and both depend on institutional capacity to be implemented. This section examines each in turn while recognising their mutual reinforcement.
4.3.1. Data, metrics and measurability
Biodiversity data and metrics
Standardised data and metrics are critical to mobilising finance for biodiversity, as they underpin the ability of investors, financial institutions and policy makers to assess risks, measure performance and compare investment opportunities. In the absence of consistent and credible data, biodiversity‑related investments are often perceived as opaque, high‑risk and difficult to evaluate, limiting capital flows. Unlike climate finance, where widely accepted indicators such as greenhouse gas emissions provide a relatively clear common reference point, biodiversity outcomes are inherently multidimensional, location‑specific and context‑dependent. Improving the availability and standardisation of biodiversity data and metrics is therefore a necessary condition for improving the investability of nature‑related activities.
The resulting challenge is not only technical but also normative. Decisions regarding which indicators to prioritise can influence investment allocation, project design and perceptions of success. Policy makers therefore need to balance comparability with ecological relevance and ensure that simplified metrics do not obscure important biodiversity trade-offs.
Importantly, standardisation does not imply a single universal biodiversity metric. Rather, it involves common definitions, minimum data standards and interoperable frameworks that allow comparison across projects and portfolios while retaining sensitivity to local ecological conditions. Clear and credible methodologies for monitoring, reporting and verification are also essential to ensure confidence in reported outcomes and to reduce concerns around greenwashing or impact inflation.
State of nature measurement supports four main use cases for corporates and financial institutions: assessment of nature-related dependencies, impacts risks and opportunities; disclosure under emerging sustainability reporting frameworks; transition planning aligned with the KMGBF; and target setting and tracking. International alignment further reduces fragmentation, lowers reporting burdens for firms operating across jurisdictions, and supports cross‑border investment.
Data, metrics and measurability are also critical to evaluate whether finance is delivering on its intended biodiversity objectives. At the policy, programme or intervention level, the most robust way to evaluate the effectiveness of instruments and mechanisms is via impact evaluation studies. Impact evaluation measures the causal effect of a specific policy, programme or intervention vis-a-vis a credible counterfactual scenario and seeks to understand the conditions under which this effect arises. Less rigorous, non-attributional approaches for monitoring effectiveness are to assess the level of input (e.g. finance), outcome (e.g. area restored) and impact (e.g. ecosystem condition and species) indicators against other benchmarks, such as historical benchmarks, other (similar) jurisdictions, or pre-determined goals or targets.
Impact evaluation studies are still not commonly applied in the field of biodiversity however, with some exceptions including PES programmes at the national or regional level (Karousakis, 2018[54]). In the case of project-level interventions, such as with biodiversity offsets and biodiversity credits, recommended best practice is to develop dynamic counterfactual baselines (sections 3.1.3 and 3.1.5). For financial instruments such as SLBs and SLLs, the data landscape remains fragmented with inconsistent indicators (KPIs) and weak disclosure (WEF, 2025[55]). Reliable monitoring and reporting standards, credible baselines and independent verification are key to evaluating the biodiversity performance of these instruments. Existing standards such as those developed by the ICMA, TNFD and the SBTN can be leveraged to improve this. For example, the ICMA’s Sustainability-Linked Bonds Principles specify that SPTs should go beyond business-as-usual and where possible be compared to a benchmark or an external reference (ICMA, 2024[56]).
A wide range of data and metrics is used across financial instruments to track biodiversity-related performance. These vary by instrument type and issuer, reflecting differences in objectives, data availability and reporting standards.
Sovereign instruments: In France, the funds raised through the sovereign green bonds are used to finance projects in the State Budget that have a positive impact on the environment, such as those quantified and monitored in the French National Biodiversity Strategy 2030 (e.g. 50 K ha restored wetland by 2026, 400 new protected areas by 2027, 300 species protected by 2030).
Corporate instruments: Corporate use-of-proceeds bonds and sustainability-linked bonds (SLBs) employ a range of biodiversity-related key performance indicators (KPIs). Common metrics include hectares of land protected or restored, and the share of sustainably certified inputs. For example, in 2019, CMPC in Chile set its environmental goals relative to a 2018 baseline year, with a biodiversity goal of adding 100K ha of land for conservation and/or protection by 2030 (see Box 3.12). In Portugal, the Navigator Company, a forestry, paper and pulp producer, issued a SLB using certified wood utilisation as a KPI, with a target of achieving 80% use of certified origin wood by 2030 (compared to 61% in 2020). The biodiversity KPIs used in Klabin’s SLB Framework are based on threatened species and species reintroduction (see Box 3.15).
Cross-cutting insights: While a wide range of biodiversity metrics has been developed, their practical application remains limited, pointing to a disconnect between available scientific frameworks and their use in financial markets. For example, the IFC produced a catalogue of 158 biodiversity-related metrics, yet significantly fewer are used in practice. A review of corporate bond issuances in Brazil and five global investment funds found that 33 biodiversity metrics were used in bond issuances and 32 by fund managers. This gap reflects challenges related to complexity, cost and lack of consensus, and suggests a need for greater prioritisation and standardisation. It also highlights the potential role for technical assistance in helping market participants adopt a more consistent and decision-useful set of metrics.
Source: (CMPC, 2024[57]), CMPC's Nature Conservation and Biodiversity Strategy; (The Navigator Company, 2024[58]), Sustainability Linked Bond Framework; (Sayn-Wittgenstein, de Mariz and Leijonhufvud, 2025[59]), Nature Finance: Bridging Natural and Financial Capital Through Robust Impact Measurement.
Numerous guides are emerging providing recommendations on what to monitor and report, such as the IFC Biodiversity Finance metrics for impact reporting (IFC, 2024[60]), IFC Guidelines for Blue Finance (IFC, 2025[61]), the IDB Financing Nature: A Practitioner’s Guide to Results Metrics Selection (Lacey et al., 2025[62]) and F4B’s Biodiversity Measurement Approaches for financial institutions (Finance for Biodiversity, 2025[63]). Over time, standards bodies issuing mandatory and voluntary standards can drive convergence on KPIs, ideally using multiple KPIs for biodiversity covering ecosystem extent, condition, as well as species indicators. Building on work of the Nature Positive Initiative to co-develop and foster consensus on a small set of aligned metrics to evaluate changes in the state of nature (NPI, 2026[64]), the TNFD is working in collaboration with the GRI and SBTN to embed the state of nature outcome metrics within frameworks and standards (TNFD, 2026[65]).
Advances in technology are also greatly improving the ability to monitor biodiversity, while reducing the costs of doing so. Aerial imagery from satellites and drones can provide detailed information on habitat cover and land use change, and on vegetation parameters (e.g. LiDAR), while camera traps, acoustic monitoring and environmental DNA (eDNA) can provide information on fauna (Aide, 2024[66]). In this context, government also has a critical role in supporting R&D in technology and innovation, including as it relates to biodiversity monitoring.
Biodiversity finance data
In addition to the need for more standardised data and metrics for biodiversity, more consistent and comprehensive tracking of biodiversity finance mobilised is also necessary. Identifying good practices for mobilising finance for biodiversity would, ideally, require data on the number of real economy and financial sector instruments and mechanisms in place, and how much finance each instrument or mechanism has mobilised for biodiversity. Yet data availability on finance mobilised by instrument is generally low (Box 4.6).
Taxes and fees: Comprehensive data are available on revenue from biodiversity-relevant taxes nationally, with infrastructure in place to report and consolidate data at the international level through the OECD PINE database. These taxes generate an estimated USD 10 billion annually. However, data on whether – and to what extent – revenue is earmarked for biodiversity is significantly less comprehensive.
Biodiversity offsets: Data on biodiversity offset markets remain fragmented and often outdated; more recent estimates tend to be based on older data that is adjusted for inflation. Some exceptions exist, such as the US Wetland Compensatory Mitigation scheme, which mobilised USD 3.5 billion in 2019. Finance data are easier to collect when biodiversity offsets are implemented through centralised structures (i.e., mitigation banks and payment-in-lieu systems). More broadly, the establishment of national registries would improve transparency and allow for systematic aggregation and disclosure of finance mobilised.
Nature-based carbon credits: Total VCM transaction value in 2024 amounted to USD 535 million, with nature-based credits accounting for around 45% of transaction volume. While biodiversity is often claimed as a co-benefit, it is difficult to ascertain the proportion of projects that are beneficial for biodiversity due to general lack of biodiversity monitoring, reporting and verification.
Voluntary biodiversity credits: The voluntary biodiversity credit market remains very small and at an early stage of development. [B]loomslab has emerged as a market platform that tracks inter alia VBC schemes, finance and the metrics used, with sales in VBC amounting to USD 6 million as of April 2026.
Green and sustainable bonds: Bonds listing biodiversity among their use‑of‑proceeds accounted for approximately USD 317 billion in issuance in 2024. However, biodiversity is typically one of several eligible categories. Adjusting for multiple use‑of‑proceeds categories reduces the estimated biodiversity‑related share to around USD 36 billion. Evidence suggests that actual allocations to biodiversity are significantly lower: one analysis found that only 3.7% of proceeds from bonds listing biodiversity (2021-22) were directed to biodiversity projects, while other estimates suggest biodiversity accounts for less than 1% of total green and sustainability bond allocations.
Biodiversity-themed equity funds: Morningstar estimates that biodiversity-themed equity funds held approximately USD 3.7 billion in assets under management (AUM) in 2024, roughly double their level three years earlier. Separately, MSCI identified 24 “pure play” biodiversity funds with USD 1.6 billion in AUM. However, AUM does not directly translate into annual investment flows, and underlying investment strategies differ. Some funds, for example, focus on managing biodiversity-related risks rather than financing biodiversity-positive activities. In addition, as most of these funds invest in listed companies, their contribution to biodiversity outcomes is indirect, relying on company-level practices and impacts rather than financing specific projects or activities.
Source: (OECD, 2025[12]), Scaling Up Biodiversity-Positive Incentives; (EcosystemMarketplace, 2025[67]), 2025 State of the Voluntary Carbon Market; (BloombergNEF, 2025[68]), Biodiversity Finance Fact Book; (Environmental Finance, 2025[69]), Environmental Finance Data: Sustainable bond issuance allocation analysis; (Bioy and Pucci, 2024[70]), The Landscape of Biodiversity and Natural Capital Funds: An Expanding Universe of Strategies (Gangadia, 2024[71]), Under the Canopy: Shedding Light on Biodiversity Funds.
Across real economy instruments, improvements in finance data tracking are needed in particular regarding payments for ecosystem services, biodiversity-motivated subsidies, and biodiversity offsets. Generally, governments do not request finance data (e.g. across instruments mobilising private finance or under sub-national schemes) or, if they do, the data is not necessarily consolidated and made publicly available. National registries for biodiversity offsets, for example, would be a first step in enabling the collection of finance allocated for NNL or NG biodiversity offset projects. In the case of PES, finance mobilised through government-led programmes is generally easier to track. In the case of mixed government and privately financed PES programmes, the creation of funds that pool finance from public and private sources to make payments, such as the Mexican Forest Fund and the Colombian Fund for Life and Biodiversity can facilitate the tracking of private finance contributions to PES.
Regarding financial sector instruments, governments could encourage reporting on biodiversity allocation in corporate biodiversity UoP bonds and support the development of data infrastructure platforms to collect and consolidate biodiversity finance data. In the case of the EU Green Bond (EuGB), for example - a regulated, voluntary, government-backed label (see Box 3.9), allocation reporting is legally required. Moreover, standard forms and templates have been developed to ensure consistency and comparability across reporting, and the European Securities and Markets Authority (ESMA) is responsible for supervising external reviewers of the EuGBs. Similar approaches could be envisioned specifically for biodiversity-labelled bonds. Overall, greater standardisation and machine-readability in reporting promotes transparency and comparability.
The lack of comprehensive finance data constrains policy evaluation and limits the ability of governments to assess cost-effectiveness across instruments. Improving biodiversity finance tracking is therefore not only a transparency objective but also a prerequisite for evidence-based policy making and resource allocation.
Digitalisation and biodiversity data systems
Digitalisation is playing a growing role in strengthening data, transparency and market infrastructure for biodiversity finance. Technologies such as satellite imagery, remote sensing, environmental sensors and artificial intelligence are improving biodiversity data collection and supporting more robust MRV systems. Distributed ledger technologies can complement these approaches by enhancing the traceability and integrity of environmental claims through verifiable digital records, helping to reduce information asymmetries and strengthen investor confidence (Yao Ge, 2025[43]; Schulz and Feist, 2021[72]).
Combined with real-time and geospatial data sources, digital tools can also improve the detection of inconsistencies, non-compliance and potential fraud in environmental markets, while supporting more transparent sustainability and ESG reporting (Kalola, Makwana and Makadiya, 2025[73]; Oluwafemi Elias et al., 2024[74]; Yao Ge, 2025[43]). However, digital systems cannot substitute for robust ecological metrics, scientific baselines or effective governance frameworks. Realising the benefits of digitalisation therefore depends on complementary investments in data standards, interoperability, regulatory clarity and institutional capacity.
4.3.2. Policy, regulatory and governance frameworks for mobilising biodiversity finance
Policy and regulatory frameworks are decisive for mobilising public and private finance for biodiversity. They shape whether biodiversity outcomes can be translated into investable opportunities with predictable risk-return profiles, and whether incentives support or undermine biodiversity-positive activities. Compared to climate finance, biodiversity finance still lacks the scale of public commitment and market infrastructure needed to attract private capital. Closing this gap requires coherent frameworks spanning real economy policies, financial sector policies, and the governance arrangements that link them.
National Biodiversity Strategies and Action Plans (NBSAPs) are the primary vehicle through which countries implement the Kunming-Montreal Global Biodiversity Framework. However, they are often insufficiently integrated into fiscal policy, public investment frameworks and financial sector regulation. Strengthening this integration, so that national biodiversity priorities shape public budgets, inform investment strategies and provide a credible basis for financial instrument design, is a key priority. This could include developing methodologies and guidance to translate biodiversity commitments into measurable key performance indicators (KPIs) and outcome metrics relevant to credit and capital markets, thereby supporting the design, implementation and monitoring of financial instruments.
Effective policy frameworks encompass both real economy and financial sector policies (Table 4.1), which are mutually reinforcing. Real economy policies determine whether biodiversity outcomes generate economic value and investment opportunities, while financial sector policies influence how capital flows toward them. Without robust policy frameworks, private finance may favour low-risk, high-return projects such as monoculture plantations, neglecting high-priority restoration areas and undermining long-term sustainability outcomes (Löfqvist, Garrett and Ghazoul, 2023[5]). Well-designed policy frameworks can instead redirect capital towards biodiversity-positive investments, support new markets.
Source: Authors, adapted from (OECD, 2024[75]), OECD Review on Aligning Finance with Climate Goals, Assessing Progress to Net Zero and Preventing Greenwashing, https://doi.org/10.1787/b9b7ce49-en.
Real economy policies
Real economy policies, typically led by environment ministries, sectoral ministries and planning authorities, directly shape the activities that generate biodiversity outcomes and associated economic value. They play a critical role not only in mobilising finance, but also in reducing overall financing needs by preventing biodiversity loss in the first place and by steering economic activity toward more sustainable pathways. From an economic perspective, preventing biodiversity loss is often more cost-effective than financing subsequent restoration. Regulatory and planning instruments therefore contribute to biodiversity finance not only by creating investment opportunities, but by lowering future financing needs and reducing pressure on public budgets.
Tools such as land-use and marine spatial planning, protected areas, environmental impact assessments (including strategic environmental assessment), environmental standards and permitting regimes define acceptable uses of land and ecosystems and set binding constraints on harmful activities. When applied consistently and enforced effectively, these instruments reduce environmental degradation, limit future restoration costs and create a stable operating environment in which long-term investments can be assessed and financed. Performance and technical standards further strengthen regulatory frameworks by clarifying what constitutes biodiversity-positive activities and supporting alignment between real economy practices and investment decisions.
Economic instruments complement regulatory approaches by influencing incentives and internalising environmental externalities. Taxes and fees can generate revenue that can invested in biodiversity (section 3.1.1); while increasing the cost of harmful practices, helping level the playing field. Reforming environmentally harmful subsidies is particularly important. Both direct budgetary transfers and implicit support through price controls can encourage unsustainable practices and undermine investment in nature-positive alternatives (Lankoski, Nales and Valin, 2025[76]) (OECD, 2025[12]). Reform requires close co-ordination across finance, trade, sectoral and environment ministries to ensure it is fiscally sound, socially just and ecologically effective.
Government procurement and public investment can also shape markets by creating demand for biodiversity-positive goods and services (OECD, 2025[77]; OECD, 2024[78]). Integrating biodiversity criteria into public spending decisions can accelerate sustainable technology adoption, support early-stage markets and reduce long-term remediation costs. As of 2023, almost all OECD countries had green public procurement frameworks in place, although these do not necessarily address biodiversity objectives explicitly, and only 11 countries were developing methodologies to measure the environmental impacts of public procurement (OECD, 2025[77]).
Information‑based policy instruments support biodiversity‑positive finance by improving transparency and shaping market behaviour. Labelling and certification systems can strengthen demand for biodiversity‑friendly products, enable market differentiation and reduce information asymmetries between producers, consumers and investors (Mameno, Kubo and Shoji, 2021[79]). Evidence suggests that such instruments can raise biodiversity performance beyond regulatory baselines in some contexts (Lehtonen et al., 2021[80]), and contribute to positive outcomes (Campos‐Cerqueira et al., 2019[81]; Burivalova et al., 2016[82]; Matias, Cagnacci and Rosalino, 2024[83]). While insufficient on their own to drive systemic change (Meis-Harris et al., 2021[84]), labelling and certification play a supporting role when aligned with public policy.
Voluntary standards for biodiversity finance and nature markets are also emerging across the real economy and financial sector, seeking to improve market integrity, comparability and investor confidence. At the global level, these include guidance such as the IFC Biodiversity Finance Reference Guide (IFC, 2023[85]), which supports the structuring of biodiversity‑related financial instruments, and the IAPB Framework for High Integrity Biodiversity Credit Markets (IAPB, 2024[86]), which establish core principles for high‑integrity biodiversity credit markets. International standard‑setting has also advanced through ISO standards,2 notably ISO 17620 on the design and implementation of biodiversity net gain at the project level and ISO 17298 on integrating biodiversity considerations into organisational strategy and operations, both providing globally applicable, voluntary frameworks relevant to investment decision‑making and risk management. Similar approaches are also emerging at the national level. For example, in the UK, the British Standards Institution, with support from DEFRA and extensive industry engagement, launched a suite of voluntary standards for nature markets, including standards specifically addressing the supply of biodiversity benefits in nature markets and overarching principles and for nature markets.
Financial sector policies
Financial sector policies, led by finance ministries, central banks and financial regulators, influence how financial institutions assess risks and allocate capital. Biodiversity loss poses material physical, transition and liability risks through ecosystem degradation, supply chain disruption and future policy tightening, yet these risks remain underpriced in many financial decisions. Addressing this gap is essential to mobilising private finance at scale.
Transparency and information measures, such as nature-related disclosure frameworks and sustainability taxonomies, help financial institutions and investors identify biodiversity-related risks, dependencies and opportunities, improving risk pricing. Disclosure and due diligence requirements can also encourage financial institutions to incorporate biodiversity considerations into lending and investment decisions. Emerging evidence supports this role. For example, stronger nature-related policies in banks’ home jurisdictions are associated with higher interest rates and longer maturities for biodiversity-exposed firms in Colombia, with effects driven primarily by disclosure and principles-based measures (D’Orazio et al., 2026[87]).
Sustainability taxonomies are a key instrument for providing a common classification system for defining environmentally sustainable activities, improving market clarity and enabling tracking of sustainable finance flows (OECD, 2020[88]). However, more than 50 national and regional taxonomies exist globally (Taxonomy Roadmap Initiative Partners, 2025[89]; Zetzsche and Pflücke-Mahoux, 2026[90]), and their proliferation can lead to fragmentation and inconsistencies, increasing complexity for financial institutions operating across jurisdictions. These challenges are compounded by the multidimensional and location-specific nature of biodiversity, as well as data gaps and difficulties in measuring impacts.
Addressing these challenges requires a pragmatic and co-ordinated approach. Recent efforts to improve coherence include the launch of the Principles for Taxonomy Interoperability in 2025, which aim to enhance alignment across frameworks while allowing for jurisdictional flexibility (Taxonomy Roadmap Initiative Partners, 2025[89]). Priorities going forward include improving interoperability across taxonomies, ensuring that classification systems remain decision-useful and adaptable to different ecological and policy contexts, and improving co-ordination between finance and environment authorities. When designed effectively, taxonomies can help bridge real economy activities and financial decision-making, supporting more consistent capital allocation and improving alignment with biodiversity objectives. Platforms such as the Luxembourg Green Exchange can complement taxonomies by enhancing transparency, standardising disclosures and facilitating investor access to taxonomy-aligned instruments (Box 4.7).
Prudential and supervisory policies can further embed biodiversity considerations within the financial system. Supervisory expectations can encourage financial institutions to integrate nature-related risks into governance, risk management and internal controls, including through scenario analysis and stress testing. Although prudential approaches are still evolving, integrating biodiversity-related risks into existing supervisory practices could strengthen financial resilience and systemic awareness without prescribing asset allocation. Important methodological challenges remain regarding the measurement, transmission and time horizon of biodiversity-related financial risks. Policy makers therefore need to balance efforts to improve risk management with the current limitations of evidence and data. Monetary authorities may also influence financing conditions indirectly through broader policy settings that shape long-term investment behaviour.
Launched in 2016 by the Luxembourg Stock Exchange as the world’s first dedicated sustainable finance platform, the Luxembourg Green Exchange enhances transparency and visibility for sustainable instruments such as green, social, sustainability and sustainability-linked bonds, as well as gender-focused bonds and EU Taxonomy-aligned funds. By applying eligibility criteria, requiring pre-issuance external reviews and ongoing reporting, LGX helps direct capital towards credible environmental outcomes, including climate resilience, biodiversity protection and ecosystem restoration. As of April 2026, more than EUR 1.3 trillion had been issued through LGX-listed securities, including over 2 400 labelled bonds.
Supported by its LGX Academy, DataHub and advisory services, the platform provides issuers with technical guidance and investors with standardised, accessible documentation. This structured and transparent approach contributes to mobilising private finance towards sustainable development objectives, including biodiversity, by reducing information asymmetries and strengthening investor confidence.
Source: (LUXSE, 2026[91]), Luxembourg Green Exchange.
Policy co-ordination and governance
Strong alignment between real economy and financial sector policies is essential. Real economy policies shape demand, revenue streams and risk profiles for biodiversity investments, while financial policies enable capital to flow efficiently. Weaknesses in either domain can constrain outcomes: strong disclosure requirements will have limited effect if biodiversity-positive activities lack viable business models, while well-designed incentives may fail if financial institutions are not equipped to assess or manage biodiversity-related risks. Co-ordinated policy action across environment and finance ministries is therefore critical.
Effective governance arrangements are central to co-ordinating fiscal, financial and environmental policies. Finance ministries play a key stewardship role, ensuring macroeconomic coherence and efficient allocation of capital. Environment ministries, in turn, set biodiversity objectives and safeguard ecological integrity. Central co-ordinating bodies can support coherence by reconciling trade-offs, aligning timelines and monitoring progress.
Given the diversity of actors involved, dedicated co-ordination mechanisms and supporting market infrastructure are often needed to operationalise them and reduce transaction costs. Multi‑stakeholder platforms, public-private partnerships and landscape‑level governance arrangements can facilitate dialogue, align incentives and co-ordinate action across sectors and jurisdictions. Examples include the Tropical Forest Alliance and jurisdictional programmes under the BioCarbon Fund Initiative for Sustainable Forest Landscapes.
National project platforms, accelerators and matchmaking mechanisms can strengthen links between investable project pipelines and finance by improving visibility, standardising information and project eligibility, and enabling project aggregation. Examples include the UK’s Natural Environment Investment Readiness Fund (UK), AFR100, South Africa’s Biodiversity Sector Investment Portal and FONAFIFO. When aligned with national biodiversity priorities, these mechanisms can reduce fragmentation and enable more efficient investor engagement.
Transparency, accountability and the rule of law are essential for investor confidence. Clear property rights and tenure arrangements, predictable permitting and effective dispute resolution reduce regulatory and political risks, particularly in land- and resource-based sectors. Robust monitoring, reporting and verification systems are needed to track biodiversity outcomes. Public registries can further enhance transparency and market efficiency by reducing information asymmetries and supporting due diligence. Transparent public financial management and anti-corruption measures also strengthen the credibility of public interventions.
Finally, policy makers must remain realistic about the limits of private finance. Many biodiversity investments generate public goods whose benefits cannot be fully monetised. In such cases, sustained public funding will remain indispensable. The objective of mobilising private finance is not to replace public action, but to increase the volume of finance flowing towards biodiversity objectives. With coherent, stable and well-aligned policy and regulatory frameworks, governments can reduce risks, improve returns and enable private finance to contribute at scale.
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← 1. Securitisation is a financial technique in which predictable future cash flows, such as fees, receivables or loan repayments, are pooled and transformed into tradable securities that are sold to investors. Investors are repaid from the cash flows generated by the underlying assets, allowing future revenues to be leveraged to raise capital upfront.
← 2. ISO has identified 549 relevant standards across 94 technical committees that support various aspects of the GBF's Global Targets. https://www.iso.org/biodiversity.