Scaling Up Private Action for Nature

Annex B. Findings from consultations on the state of development co-operation to support the private sector and nature

Research for this report included around 70 consultations with development co-operation actors1, among them DAC members, DFIs and MDBs, as well as other stakeholders2, complemented with desk research. While development co-operation actors have different roles, responsibilities and institutional setups - and should not be considered homogeneous - the consultations nevertheless yielded valuable and comparable insights for the purpose of this report.

This annex reflects how development co-operation is adapting internally to help overcome investment barriers, mobilise additional finance for biodiversity and shift finance away from environmentally harmful activities. Indeed, mobilising private resources for biodiversity is all the more urgent in light of decreasing budgets of development finance (OECD, 2025[1]), and greater emphasis on economic growth and security in national priorities (UK Government, 2026[2]; KfW, 2025[3]).

One key finding is that the term “mobilisation” is used and understood in different ways by development co-operation actors, including to mean enabling, engaging and mobilising private sector activity and finance (as reflected in the entry points in chapters 2, 3 and 4). This broad usage stems from the nature of biodiversity action, which requires not only mobilising finance but also avoiding and reducing harmful practices, and reflects the need for systemic change across sectors and value chains.

Overall, consultations for this report suggest that most development actors are being encouraged by their governments and institutional leadership to mobilise private action more broadly, supported by revised institutional setups including strategies and mandates. In particular, Table A B.1 shows that 22 DAC members are classified as active, reflecting that they are already working to engage the private sector and/or to mobilise private finance for biodiversity in developing countries - yet not all of them are at the same stage, and levels of engagement vary. Nine DAC members are classified as not active, primarily directing biodiversity-related funding through multilateral channels and not yet prioritising private sector engagement or private finance mobilisation for biodiversity, with some only beginning to explore these approaches. All development actors, whether through grants or leveraging mechanisms, can play a role in mobilising and aligning private action with biodiversity objectives.

Table A B.1. Development co-operation and private action: biodiversity perspective

Private activity	Development actors
Active	DAC members: Australia, Austria, Belgium, Canada, Czechia, Denmark, EU, Finland, France, Germany, Italy, Japan, Korea, Latvia, Netherlands, Norway, Slovak Republic, Spain, Sweden, Switzerland, United Kingdom, Luxembourg*, United States* MDBs: ADB, AIIB, EBRD, EIB, IDB*, World Bank* Other: IMF
Not active	DAC members: Estonia, Greece, Hungary, Ireland, Lithuania, New Zealand, Portugal, Slovenia
N/A	DAC members: Iceland, Poland

Note: * indicates that the actor did not participate in consultations and its classification is based on the literature review. DAC members’ activities include efforts by all donor agencies including development agencies and DFIs.

Source: Authors’ elaboration based on results of consultations and desk research.

This first section of the annex looks at how development co-operation providers have been adapting internally to better support the private sector for biodiversity outcomes via (i) mandates and strategies, (ii) instruments and finance, and (iii) institutional capacities and co-ordination. It is followed by a second section that explores the specific operational challenges facing development co-operation providers as they adapt.

Mandates and strategies shaping private action for biodiversity

Institutional mandates and governance structures shape the extent to which development co-operation actors are able to take on catalytic roles, assume risks or engage directly with the private sector. Findings from the consultations suggest that while it is gaining attention, biodiversity is rarely the subject of stand-alone strategies. Rather, most actors address it through broader development, environmental, climate or sustainability frameworks.

Strategic direction is often set by high-level commitments or referenced in speeches linked to international goals such as the KMGBF rather than by explicit written institutional strategies. For instance, Finnfund issued a specific nature and biodiversity statement, a high-level document demonstrating its commitment to fight biodiversity loss (Finnfund, 2024[4]). Countries are also approving national biodiversity finance plans in the context of the CBD, frequently with sub-targets for mobilising private finance. Only a few development actors have explicit biodiversity strategies or statements; most embed biodiversity within broader environmental or corporate strategies (Table A B.2). For example, Korea’s NBSAP includes explicit commitments to promote collaboration with the private sector, including by encouraging Korean companies to participate in ODA funded projects (Government of Korea, 2023[5]). Overall, mobilisation strategies for biodiversity are often sector and geography agnostic.

Table A B.2. Institutional strategies on biodiversity and private action in the context of development co-operation

Strategies	Development actors
Explicit biodiversity strategies	AFD Proparco, EBRD, Dutch Entrepreneurial Development Bank (FMO), France, Japan International Cooperation Agency (JICA), Korea
Embedded within broader environmental (climate, SDGs) strategies	ADB, Australian Department of Foreign Affairs and Trade (DFAT), Austria, Belgian Investment Company for Developing Countries (BIO), Global Affairs Canada, Impact Fund Denmark, EIB, EU, IMF, CDP Italy, SERV Switzerland, Luxembourg*
Embedded within broader development or corporate strategy	AIIB, Czechia, Finnfund, Germany, AICS, KfW, Latvia, Netherlands, Norway Agency for Development Cooperation (Norad), Slovak Republic, AECID, Sweden, Switzerland, United Kingdom, US DFC*

Note: * indicates that the actor did not participate in consultations and its classification is based on the literature review.

Source: Authors’ elaboration based on consultation findings and desk research.

Mainstreaming biodiversity into multi-purpose projects – for instance in climate, water, food security or urban development – is gaining traction. Most initiatives seek co-benefits for climate and nature, often through nature-based solutions (NbS). For example, Italy’s Climate Fund is working to support urban forestry and circular bioeconomy through the Green Cities Initiative in Action for Africa project, which is embedded within the broader framework of the FAO’s Green Cities Initiative (FAO, 2024[6]). Proparco has developed a natural capital strategy to finance projects with both climate and biodiversity co-benefits (Proparco, 2025[7]), while FinDev Canada (2025[8]) recently included climate and nature action as one of its development impact goals. Similarly, the EU is exploring how to integrate nature considerations into its Global Gateway strategy through a landscape approach, embedding nature into infrastructure projects and decision making and partnering with the private sector in partner countries to promote activities such as ecotourism and bioeconomy (European Commission, 2025[9]). In addition, landscape approaches could be the basis for making investments in restoration more suitable for large-scale financial actors (World Bank, 2022[10]).

Lessons from climate-related finance mobilisation, especially mobilising finance to address climate change adaptation where biodiversity is a core component of resilience and risk management, are helping to inform emerging approaches for biodiversity as these are interconnected and opportunities exist to promote synergies (UNFCCC, 2022[11]). Such lessons are also important to developing initiatives to address the climate-biodiversity nexus while accelerating mainstreaming and creating co-benefits.

Mandates of development co-operation actors also determine the extent of their direct engagement with the private sector. While some actors have flexible mandates allowing them to use instruments on a case-by-case basis, mandates generally fall broadly into the following three categories and as illustrated in Table A B.3:

• Clear private sector mandates allow direct engagement with the private sector and the use of a broad set of de-risking instruments (e.g. credit lines, guarantees and insurance). This category is typical of private sector-only DFIs and MDBs.

• Public or sovereign mandates are focused on sovereign lending or grants, where private sector engagement is typically indirect. The mandates of most public development agencies and ministries are in this category.

• No mandate or strategy exists to engage with the private sector.

Table A B.3. Mandates and level of private engagement across development co-operation actors

Biodiversity and development context

Mandates	Development actors
Direct	ADB, AIIB, AFD Proparco, Austria, BIO, Danish DFI, DFAT, EBRD, EIB, EU, Finnfund, FMO, KfW, Korea, CDP Italy, JICA, Sweden, SERV Switzerland,* US DFC,* Luxembourg*
Indirectly	AICS, AECID, Czechia, France, GAC, Germany, Impact Fund Denmark, IMF, Latvia, Netherlands, Norad, Slovak Republic, Switzerland, United Kingdom
None	Estonia, Greece, Hungary, Ireland, Lithuania, New Zealand, Portugal, Slovenia

Note: * indicates that the actor did not participate from consultations and its classification is based on the literature review.

Source: Authors’ elaboration based on consultation findings and desk research.

While Table A B.3 provides a useful overview, it simplifies a more complex institutional landscape. Development agencies, DFIs and MDBs often have multiple operational arms, each with distinct mandates (e.g. public sector, private sector or innovation facilities). In some institutions these functions operate in parallel, while in others engagement may be concentrated in one particular arm.

Mandates may also affect actors’ flexibility to use a spectrum of financial instruments. Some actors have mandates that explicitly allow them to deploy certain instruments for private sector engagement, such as Austria’s business partnerships and strategic partnerships (Austrian Development Agency, 2025[12]); others are subject to internal regulations limiting their ability to offer certain instruments to either sovereign or non-sovereign actors. Risk appetite can also be mandate driven. DFIs, for instance, often operate under commercial-like constraints that aim to preserve high credit ratings (British International Investment, 2024[13]) or prefer senior debt to equity (Global Alliance of Impact Lawyers, 2024[14]). Bilateral DAC donors, on the other hand, may be more willing to share risks, yet hesitate to assume first-loss positions that would fully de-risk projects for private capital or other development actors such as MDBs and DFIs.

Different development actors therefore play different roles. Some position themselves as de-riskers or risk sharers to crowd in private capital; others act as facilitators, anchor investors or bond issuers. MDBs and DFIs can raise funds from capital markets through thematic bonds – for instance, the ADB (2024[15]) supported the issuance of the Biodiversity and Nature Bond – while other donors, particularly development agencies, remain focused on grant provision.

Mobilisation of private finance also can take place through a variety of different channels and forms of development finance concessional and non-concessional. Not all DAC members have DFIs,3 and the involvement of a DFI is not a prerequisite. But where they exist, DFIs are key to launching new mobilisation instruments and partnerships, including for biodiversity. An example is Cassa Depositi e Prestiti (Italian National Promotional Institution) or CDP, Italy’s DFI, which manages Italy’s Climate Fund. In some cases, national development banks may also be involved, for example to administer development guarantee programmes. Some countries, in particular those without a DFI, are exploring how export credit agencies finance projects and promote positive impact for biodiversity in partner countries, for example through green export credits. However, export credits are essentially demand driven and ultimately depend on the willingness of exporters, foreign buyers and banks to seek expanded sustainable financing opportunities (Export-Import Bank of the United States, 2025[16]; Klasen and Vassard, 2023[17]).

Several development actors are updating and reforming rules and instruments to have more flexibility in leveraging finance and engaging with the private sector, which can also be useful for biodiversity objectives. For example, Spain has created the Fund for Sustainable Development (Fondo Español para el Desarrollo Sostenible) to include guarantees (Government of Spain, 2023[18]). Similarly, Norway has amended its regulations to enable the use of grants for first-loss facilities and to enable the use of state-backed guarantees (Government of Norway, 2027[19]). Sweden’s development co-operation agenda also now explicitly states that more effective action will be achieved through engagement with the business sector including by strengthening efforts to ensure that the innovations of Swedish businesses, which are in demand from partner countries, contribute to sustainable transitions, and by mobilising private capital through challenge funds and guarantees, among others (Sweden Ministry for Foreign Affairs, 2024[20]). While internal approval processes for the use of new instruments can be slow, once an instrument has been used for the first time and proven successful, that precedent can help accelerate its application in subsequent transactions.

In addition, at a more strategic level, DAC members can use their positions within the governance structures of DFIs and multilateral institutions to influence institutional policies, strategies and operational frameworks, including for reforms that clarify mandates, reduce internal constraints and enable institutions to collaborate more effectively with the private sector in support of biodiversity goals (Box A B.1). For example, development actors can provide strategic orientation on engagement strategies for institutions such as the GEF and GCF, including through advocating for specific private sector engagement strategies (Global Environment Facility, 2024[21]).

Box A B.1. Policy dialogue to promote good practice and alignment

While development co-operation actors might not have a direct say on the direction of private companies, they can still influence indirectly by advocating for, collaborating with or participating in policy dialogues (e.g. working groups) to promote good practices and ensure the alignment of investments with biodiversity objectives. They can also influence the behaviour of companies that benefit from blending or de-risking mechanisms provided by development actors by requesting that implementing partners and participating financial institutions adopt stronger environmental standards, higher-quality EIAs, thorough due diligence, and clearer monitoring and evaluation plans. For example, Germany’s International Climate Initiative supported the inclusion of environmental and social (E&S) standards, including a set of criteria for deforestation-free production in the credit decisions of financial institutions in partner countries (International Climate Initiative, 2025[22]).

DAC members can also leverage their positions on the boards, councils or advisory committees of DFIs, MDBs, UN agencies and other multilateral organisations, and funds to influence policies as well as changes in corporate or procurement practices. As shareholders or members of multilateral institutions and public-private enterprises, development actors can encourage better practices by exercising their voting rights at annual general meetings, engaging with corporate leadership and/or using their ownership positions to promote good practices. Voting on shareholder resolutions can also be a key tool. For example, resolutions targeting plastics use and deforestation in palm oil and soybeans supply chains have led to company commitments to reduce environmental harm (Principles for Responsible Investment, 2020[23]).

At a multilateral level, they can elevate biodiversity on global agendas through engagement in the CBD, UN Framework Convention on Climate Change (UNFCCC) or related international fora. For instance, donors are helping to structure the Cali Fund for the Fair and Equitable Sharing of Benefits from the use of Digital Sequence Information on Genetic Resources (DSI) – the Cali Fund – aiming to mobilise finance from the private sector entities making commercial use of DSI (CBD, 2025[24]) [an innovative financial multilateral mechanism to which, each year, users of DSI should contribute a percentage of their revenues (0.1%) or profits (1%)], launched at the resumed sessions of COP16 of the CBD. The Cali Fund encompasses informal processes and discussions with private sector actors related to the DSI decision, to develop a strategy to engage private sector organisations to voluntarily invest in and become part of the Fund.

Translating mandates into practice: Operational approaches and internal incentives

Turning mandates and strategies into action requires internal systems that shape how development actors mobilise and align private finance for biodiversity. This process often involves setting incentives, adopting operational approaches and applying common standards.

Internal incentives and performance frameworks. Development co-operation actors are increasingly embedding biodiversity into their internal performance systems. Mobilisation targets are being integrated into results measurement frameworks, often by tracking the leveraging effect of private sector finance. Some institutions use the OECD biodiversity Rio Marker to set internal targets. For example, the Belgian DFI BIO requires 10% of annual investments to be biodiversity Rio Marker 1 (OECD DAC, 2019[25]). Other actors complement volume-based metrics with impact-based targets. For instance, Sida has made the mobilisation of capital to climate, environment and biodiversity as one of its four operational priorities (Swedish International Development Cooperation Agency, 2025[26]). The methodological guidance for its Green Toolbox calls for looking for opportunities to increase the mobilisation of capital for biodiversity through innovative financing for biodiversity (Sida, 2022[27]), mainstreaming biodiversity into carbon markets (Sida, 2024[28]) and guarantees for biodiversity impact (Sida, 2023[29]).

Dedicated tools. Some actors are developing specific approaches for private finance mobilisation in biodiversity. These include biodiversity credit roadmaps, KPIs, nature-positive finance corporate results indicators, evaluations, extra financial reporting, biodiversity footprinting. In effect, they may develop their own or use existing frameworks and standards (e.g. ICMA Green Bond Principles). For instance, Finnfund’s Sustainability Bond Framework and Planetary Boundaries Investing Framework provide guidance on the allocation of green bond proceeds to projects focused on environmentally sustainable management of living natural resources (explicitly including biodiversity-relevant investments) and for leveraging cofinancing for biodiversity from private investors (Finnfund, 2025[30]; Valto, 2024[31]).

Standards and safeguards. Taxonomies are considered useful to define eligible activities (e.g. for green or nature bonds) and harmonise reporting. Other tools to align private action with environmental standards include disclosure of nature-related financial risks and opportunities, transition guidance, E&S policies, environmental safeguards and environmental impact assessments. When finance is channelled to non-sovereign actors, these actors are also required to comply with environmental standards and safeguards, offering entry points to shape private practices. At the same time, development co-operation laws establish the baseline, often mandating climate and environmental considerations and a “do no significant harm” approach.

Instruments to catalyse private action for biodiversity

Development actors have access to a range of financial instruments and mechanisms to mobilise private finance and support businesses for biodiversity in partner countries (OECD, 2025[32]). These include grants as well as debt, equity and risk-sharing instruments such as guarantees.4 Recent trends show that guarantees5 accounted for a substantial share (43%) of private finance mobilised for biodiversity in 2023 (OECD, forthcoming[33]). Other leveraging mechanisms applied include direct investment in companies and special purpose vehicles through equity or mezzanine/senior debt (21% and 13%, respectively); simple cofinancing (19%); shares in structured or flat CIVs6 (3%), such as shares in the riskiest tranche, first-loss share and other types of shares; and credit lines (1%). Ultimately, instrument choice depends on the project type, client demand, country financial conditions, sector priorities (e.g. agriculture, water, mining) and intended outcomes and in consideration of debt levels and environmental commitments. Most instruments are deployed on a case-by-case basis and in complementary combinations (e.g. grants for technical assistance facilities embedded in blended finance vehicles). Through these instruments, development actors can lower the cost of capital, provide risk protection, offer credit enhancement, help develop demonstration cases and support early-stage project development.

In addition, grants remain a key tool for donors and are important beyond risk mitigation. Grants can be used to support capacity development (Box A B.2) including technical assistance, enable training on sustainable practices, foster dialogue and raise awareness on nature. They are often embedded within blended finance vehicles or cofinancing proposals, for instance to involve entrepreneurs and business entities (national or from partner countries) by supporting start-up acceleration and incubation programmes. An example is the Slovak Agency for International Development Cooperation (SAIDC), which each year issues a specific call for grant proposals for Slovak business companies under the Private Sector Engagement Program, with SAIDC providing at least the 20% cofinancing required of the grant (SlovakAid, 2025[34]). These grants are mostly used for feasibility studies and for searching for possible partners, which can help identify opportunities for Slovak companies to bring solutions with potential biodiversity co-benefits (e.g. sustainable agriculture and water management). In addition, Austria is supporting the EU-Green Agriculture Initiative in Armenia (EU-GAIA), delivered through grant-based projects that support policy development and farmers’ technical capacities to adopt sustainable agricultural practices, provide technology for green agribusinesses, support organic certification processes and facilitate market access for organic products (Austrian Development Agency, 2024[35]). By promoting organic production and reducing reliance on harmful inputs, these measures contribute to biodiversity by fostering more sustainable land use and protecting ecosystems.

Box A B.2. Catalytic role of grants and capacity development for biodiversity

In the context of biodiversity, capacity development is the process by which people, organisations and societies unleash, strengthen and maintain the capabilities required to achieve biodiversity outcomes. Most DAC members support capacity development for biodiversity through grants (81%) (OECD, 2023[36]), helping to build both institutional and private sector capacities and practices at various levels. This capacity development can include work at the enabling environment level (e.g. policies, law and agreements); the organisational level (e.g. internal structures, leadership and business processes); and the individual level (e.g. technical skills, expertise and awareness).

For instance, development co-operation can support MSMEs to adopt biodiversity-friendly agricultural practices and strengthen sustainability across procurement and implementation. Technical assistance can also assist private actors in project preparation and strengthening commercial viability, including risk assessments, feasibility studies or early-stage design of biodiversity-positive initiatives. Forthcoming OECD research will explore the catalytic role of grants in providing technical assistance to unlock private sector capital in developing countries (OECD, forthcoming[37]). Moreover, knowledge exchange and awareness raising – including among investors, practitioners, researchers, NGOs and policymakers – are critical for addressing capacity gaps, especially given that biodiversity finance (and development co-operation as a whole) can remain relatively new and unfamiliar to many actors.

Institutional capacity and co-ordination

Biodiversity is treated as both a dedicated and a cross-cutting theme, with growing efforts to mainstream it into strategies, operations, risk and impact assessments and investment decisions. As a result, biodiversity-related projects span a wide range of sectors and activities including regenerative agriculture, agrifinance in biodiversity, sustainable agricultural plantations, NbS, bioeconomy, agroforestry, tourism, forestry, water and sanitation, water resources management, water treatment, aquaculture (e.g. sustainable shrimp), sustainable production systems, nature as an infrastructure asset and mining.

Development actors organise their responsibilities for biodiversity in different ways, with projects to mobilise private finance for biodiversity typically requiring contributions from multiple teams. In some cases, biodiversity is addressed by specific biodiversity or nature thematic teams focusing directly on ecosystems, NbS, forests, ocean conservation, environment protection or ecological transition. In other cases, it is integrated within broader environment, climate or sustainability teams. These thematic or broader environmentally focused teams often work alongside financial and private sector-focused teams dealing with blended finance, sustainable finance, investment, financial systems and market development, agribusiness development, and private companies, frequently also in co-ordination with E&S risk management units. Other important roles are played by units dealing with partnerships, global involvement, foreign affairs, sector risk and innovation.

Co-ordination across ministries and departments – such as foreign affairs, finance, environment, private sector development, compliance, legal, sustainability and fiduciary solutions – further strengthens institutional capacity. Policy and co-ordination teams provide the overarching frameworks for aligning biodiversity goals with development co-operation priorities. Cross-team collaboration is useful to ensure that efforts to mobilise private finance for biodiversity are aligned with both environmental and development objectives. Development actors address co-ordination and expertise challenges through several mechanisms:

• Appointing national special representatives or ambassadors for nature. These appointees participate in international negotiations around resource mobilisation related to forests, food, nature and security and to co-ordinate internal work across teams with a view to upscaling investors’ decisions in certain regions. The United Kingdom and France have made such appointments (Government of the United Kingdom, 2024[38]; Ministère de l’Europe et des Affaires Étrangères, 2025[39]).

• Setting up in-house expertise or regional help desks. Some institutions embed specialists such as forestry experts within teams or set up centralised support teams to assist staff and provide solutions for specific requests. Sida, for example, established Vi Agroforestry, an expert desk that provides expertise to Sida staff and Swedish embassies related to carbon markets, sustainable agriculture and land management to support smallholder farmers across sub-Saharan Africa (Vi Agroforestry, 2025[40]).

• Promoting awareness-raising initiatives. This includes internal training and seminars to strengthen staff capacity on biodiversity mainstreaming and seeking opportunities for greater impact when engaging with the private sector. JICA (Japan International Cooperation Agency), for example, is trying to promote internal awareness on the use of safeguards, strengthen understanding of biodiversity considerations throughout its projects (e.g. in water management and agriculture) and foster opportunities to increase biodiversity-positive and development outcomes. The AIIB has organised internal knowledge seminars to educate its staff on how to mainstream and value biodiversity, for example inviting the Landbanking Group to make presentations on nature FinTech and solutions for MRV systems.

• Fostering regional and international co-ordination groups to advance synergies and integration, and to advance international peer learning. For example, Nordic countries and MDBs have created nature working groups, while joint agency groups are fostering collaboration across development agencies, export credit agencies and the private sector. The European Development Finance Institution (EDFI) Association,7 the European Bank for Reconstruction and Development (EBRD), the EIB, and Canada’s DFI FinDev have established an informal biodiversity group to share emerging practices and progress and agree on common commitments (e.g. the Principles for Responsible Finance) as well as an exclusion list for co-financed projects to avoid financing business or trade involving activities deemed illegal such as trading with wildlife or products regulated under the CITES or unsustainable fishing methods (European Development Finance Institutions, 2011[41]).

Challenges for development co-operation to scale up private action for biodiversity: Managing expectations

Development co-operation is increasingly adapting its strategic direction to scale up private action for biodiversity and the sustainable use of natural resources. However, its effectiveness and speed often depend on the specific operational challenges of supporting private actors in developing countries. If development co-operation is to overcome investment barriers and scale up private action for biodiversity, understanding and addressing these challenges is a critical precondition.

Much has already been written about investment barriers in general, whether the perception of high risk and low returns on investment or the lack of a pipeline of bankable and scalable projects (Annex A). But research and stakeholder consultations conducted for this report highlight that the specific challenges that development co-operation actors themselves face in mobilising private finance for biodiversity are less well understood. In response, and drawing on consultations with development actors conducted for this report, the analysis in this second part of Annex B looks at the distinct institutional and operational barriers encountered by development co-operation providers.

Given the scale of the challenge to scale up private action for biodiversity in developing countries, it is essential to manage expectations of what development co-operation can realistically achieve and to recognise the main bottlenecks. For this report, and as outlined in Table A B.4, challenges are grouped into four thematic categories: enabling environments; financial and structural complexity; institutional capacity and partnerships; and measurement and communication.

Table A B.4. Development co-operation challenges to scale up private action for biodiversity

Category	Challenge area	Description
Enabling environments	Developing country contexts & market constraints	Financial instruments (e.g. debt-for-nature swaps) are not always feasible due to debt sustainability, low national priority, or weak or nascent biodiversity markets. The replicability abroad of domestic solutions is limited and a need to be realistic about what can be mobilised.
	Regulatory & policy frameworks	Weak governance, fragmented policies, conflicting ministerial priorities, unclear regulations or tax regimes, and weak contract enforcement deter investment and hinder blended finance.
Financial and structural complexity	Business case	Biodiversity projects often lack predictable returns, clear revenue streams or a proven track record. Upfront costs and risks (e.g. for ecosystem restoration) are high. Readily bankable projects are few, and it can be difficult to pitch biodiversity as investable.
	Structuring & financial complexity	Bespoke blended finance projects are costly, slow, fragmented and hard to replicate. Complex structures around risk sharing, incentives, mandates and safeguards overwhelm limited staff capacity. Investors, DFIs and donors have divergent expectations.
	Additionality & impact integrity	There is tension between mobilisation and biodiversity outcomes; a risk of favouring larger, more attractive markets over LDCs and SIDS; and concerns about market distortion, permanence, attribution and measuring impact. Biodiversity is often treated as a co-benefit, not a core objective.
	Scale & size of investments	Most biodiversity initiatives are small scale (SMEs and smallholders and at community level). Yet donors’ minimum thresholds and cofinancing requirements are often too large for them but too small to interest bigger investors.
Institutional and partnerships	Partnerships	Effective mobilisation requires diverse collaborations. Cultural and/or incentive gaps between development actors and the private sector slow progress. Many donors lack experience working with the private sector, and trust building, co-ordination and knowledge sharing remain weak.
	Institutional capacity gaps	Gaps include a lack of dedicated biodiversity teams, limited institutional presence on the ground, a reliance on consultants, staff turnover, weak biodiversity expertise in finance teams, and slow procurement and deal structuring. Implementing partners may lack local knowledge or technical assistance capacity.
Measurement and communication	Reporting, measurement & taxonomies	There are difficulties demonstrating impacts, inconsistent use of OECD and private mobilisation methodologies, limited standardisation across frameworks, and high reporting burdens. Different actors interpret mobilisation differently.
	Language & terminology	Different spoken languages and technical vocabularies are barriers to communication and measurement. Terms like biodiversity, nature finance, nature positive, etc. are used inconsistently, while there is resistance locally to some terms (e.g. natural capital) due to cultural values.

Note: While not an exhaustive list, the challenges presented in this table summarise the range of difficulties encountered by development actors when engaging with the private sector in the context of development and biodiversity.

Source: Authors’ elaboration based on consultations and desk research.

Enabling environments

Developing country contexts and market constraints. Development actors focus on developing countries and emerging markets. In these contexts, applying certain financial instruments can be particularly difficult. For example, debt-for-nature swaps are not feasible for all countries due to debt sustainability concerns or because biodiversity is not a national priority. Even where political will exists, biodiversity or nature markets may be nascent or entirely absent. Indeed, biodiversity credits, for example, are still being piloted worldwide. Moreover, the potential for replicating or exporting biodiversity finance solutions that have been tested domestically can be limited due to differences in capacity, demand and absorptive readiness. While there is a need for instruments that can enhance returns on investment, development actors must also consider what is realistically feasible in each context. This may limit the scope for mobilising private finance for biodiversity objectives.

Regulatory and policy frameworks. Regulatory uncertainty, weak governance and fragmented jurisdictional frameworks in partner countries often hinders the mobilisation of private finance for biodiversity. Diverging priorities across ministries (e.g. economic development versus environment) can result in incoherent policies that undermine biodiversity objectives and deter investors. Weak contract enforcement and limited clarity on blended finance regulations and tax regimes add to transaction complexity. These challenges are particularly acute for hybrid finance mechanisms that blend concessional and commercial capital and require legal and fiscal predictability. Without a reliable enabling environment, even promising biodiversity-related investment ideas may not move forward, as navigating regulations and taxes in each partner country takes considerable time (Box A B.3).

Financial structure and complexity

Business case. Development actors find it hard to distil a business case for biodiversity private finance. They may struggle to establish a compelling investment narrative around biodiversity as biodiversity projects often lack predictable revenue streams or cannot match commercial rates of return – even when they might generate indirect returns through co-benefits such as integration into carbon sequestration or NbS projects. This holds true both for making a private investor case around biodiversity and among development actors themselves who may have different incentives (e.g. volumes mobilised). A recurring challenge is determining when it is most effective to engage the private sector in biodiversity initiatives. Pitching the case can create frustration for both development and private actors as it can involve comparing biodiversity conservation objectives with activities related to the sustainable use and management of natural resources (which have an economic return). Moreover, development actors often face a shortage of readily investable projects with clear, bankable revenue streams, and many biodiversity initiatives lack precedent or a proven track record of success.

Transitioning to biodiversity-positive practices, such as ecosystem restoration or regenerative agriculture, often requires upfront investment which can be costly or high risk relative to business as usual projects. Although the financial needs may be modest at the individual level, these individual investment needs are context specific and often not replicable at scale. Supporting smallholders to adopt sustainable practices requires tailored, locally informed solutions and strong capacity development components – conditions that can be difficult to meet within standard investment parameters.

Structuring and financial complexity. Mobilising private finance for biodiversity often entails complicated bespoke structures that are costly in terms of time and human resources. Blended finance projects for nature in particular are frequently developed individually on a case-by-case basis (One Planet Lab, 2021[42]), and the resulting fragmentation can be costly and process heavy, with limited replicability (British International Investment, 2024[13]). Calls for proposals may receive many diverse viable applications. Yet each may have a very complex design and revenue model that can overwhelm already stretched development actors that must take time to understand each application. This underscores the need for greater standardisation and project design support.

Designing financial structures also raises challenges around revenue generation, blending ratios of concessional and commercial finance, risk allocation and collateral requirements. Incentives and expectations often diverge across stakeholders: investors seek maximised returns and development actors may prioritise biodiversity and development outcomes over financial returns, whereas impact investors and philanthropic foundations place more weight on environmental and social impacts than traditional investors and may be willing to pay for it (World Bank, 2022[10]). Challenges also can arise when structuring blended finance vehicles, particularly in terms of the position of concessional funding. While development actors may be willing to assume greater exposure and risk, financial intermediaries may choose to not participate because of the potential for losses, preferring instead more conservative risk positions. Similarly, some companies in developing countries accustomed to business-to-business grants may hesitate to take on loans or use development guarantees as this is a riskier step requiring deeper commitment.

Legal or contractual constraints, differing investor mandates and time horizon mismatches further complicate fund structure as development actors typically operate at a slower pace than private counterparts that expect fast, straightforward solutions. Projects may also fail to meet donor risk thresholds or internal standards, safeguards or due diligence requirements. In many cases, development actors are not directly involved in fund management but act as investors, which limits their influence, and instead leave operational responsibilities to fund managers that oversee risk systems and impacts. Co-ordination issues can emerge in multi-partner funds, although these are less pronounced when a donor acts as sole funder.

Development actors’ mandates may limit the extent of private sector engagement, meaning they may have to navigate a series of challenges before effectively supporting biodiversity outcomes in developing countries. Navigating complex legal and regulatory frameworks in partner countries is a recurring issue that can slow down the pace of development interventions and deter private investment (Box A B.3). (How development co-operation can help strengthen enabling environments, is discussed in chapter 2.)

Box A B.3. Navigating legal and regulatory frameworks

Development finance providers often need to navigate complex legal and regulatory landscapes when structuring vehicles across jurisdictions. As a result, they may choose to structure financial mechanisms through a range of legal vehicles8 to better align expectations and mandates across various stakeholders and to address challenges such as limited availability of risk capital (Global Alliance of Impact Lawyers, 2024[14]). Some structures may also require a multi-jurisdictional perspective – for example, where the capital is raised in a different jurisdiction than where it is to be employed (as is the case for most development finance) or where the structure is designed to source capital from multiple jurisdictions with differing legal frameworks or to combine capital with credit support or risk management instruments sourced from other markets.

Further, legal frameworks may lack regulations on blended finance or biodiversity-related investments. This may create uncertainty in deal structuring and may require legal innovation. In effect, in the case of blended finance, legal frameworks are often patchy and unclear, and solutions may involve different lawyers and different kinds of due diligence and documentation compared to traditional transactions (Global Alliance of Impact Lawyers, 2024[14]), making transactions slower and more complex than conventional financing.

There may also be operational barriers when trying to blend different types of capital, such as combining charitable or non-profit funding with commercial or for-profit funding, as each has its own features and constraints that can influence how projects are put together. These arrangements often raise tax, accounting, contractual and governance challenges, particularly around how to structure partnerships, distribute returns, or manage stakeholder responsibilities and obligations. In addition, specific legislation or authorities under which development actors are established also influence the expectations and requirements they bring to the structuring of a blended finance vehicle or contractual arrangements with commercial banks, pension funds or other private sector participants.

Ultimately, in order to effectively mobilise finance for nature, the purpose and intent for nature should be clearly defined – and consistently revisited – throughout every stage of deal-making; governance for nature’s interests should be embedded into a deal structure; and legal teams should be fully briefed on the intent of the deal to guide them in constructing appropriate documentation (Forever Wild, 2025[43]).

Additionality and impact integrity. Development co-operation providers face the challenge of finding a balance between mobilisation and biodiversity and other development impacts. There is a risk of losing sight of core development (e.g. poverty alleviation) and environmental integrity objectives and of the need to ensure that the revenue and benefits generated are transferred to local communities. These risks are particularly relevant given that efforts may be biased to focus on larger companies (rather than small borrowers) or more commercially attractive emerging markets; consequently, the biodiversity efforts could clash with broader development mandates that prioritise working in LDCs and SIDS. Development actors are also concerned about distorting markets and about promoting solutions with limited or unclear market demand (e.g. who would be willing to pay for nature-related products such as biodiversity credits).

Broadly, constraints encountered by development actors include the need to demonstrate additionality, attribution and permanence related to delivering impact outcomes and the ability to measure impacts (e.g. in terms of conservation impact or NbS impact for development issues such as agricultural production or heatwave reduction). Projects may need to demonstrate that private capital would not have been mobilised otherwise (additionality); that impacts are measurable and lasting (permanence); and that they directly contribute to biodiversity and development outcomes (attribution). Yet identifying and reporting on these outcomes can be complex, especially in blended finance structures where biodiversity is often a co-benefit and ambition levels often fall short (e.g. few initiatives have biodiversity as a core objective). Moreover, determining expected outcomes before the project starts can also prove challenging.

Scale and size of investments. The relatively small size of biodiversity-related investments can be an issue in terms of scaling private finance in developing countries. Many development actors and financial intermediaries have minimum investment thresholds (e.g. EUR 5 million) that can be too big for some partners or cofinancing requirements (e.g. 20% or 50% of grants provided) or they require involvement from a partner country. These conditions make it difficult to support the small-scale transactions involving SMEs, smallholders or community-level actors that dominate the biodiversity space. At the same time, the volumes of development finance offered by some actors may be insufficient to attract larger-scale investors, further limiting interest and narrowing the pool of eligible private actors. As such, available instruments may be too small in scale to interest larger companies yet too big for smaller actors that lack the capacity to meet eligibility requirements. In essence, concerns relate to both the size of the transaction and the size of the companies.

Partnerships. Mobilising private finance and action for biodiversity – particularly for restoration and conservation activities implemented through small-scale projects – often requires collaborative partnerships that bring together a diverse ecosystem of actors including donors, MDBs, NGOs, the private sector and local stakeholders (World Bank, 2022[10]). Finding the right partners is key to sorting practical issues, managing E&S risks, and creating a credible plan for biodiversity. This can be especially challenging in high-risk biodiversity-related sectors or in developing and emerging markets, where private sector appetite is often limited. In addition, differences in priorities, language, incentives and operating styles often hinder effective collaboration – particularly between development actors (e.g. DAC members, DFIs, MDBs or private foundations) and private businesses or financial institutions with limited exposure to development co-operation. Bridging this public-private cultural gap may require education, knowledge-sharing or platforms that bring stakeholders together (One Planet Lab, 2021[42]).

Some development actors also have never worked with the private or financial sector before, so it can be time consuming for them to identify suitable investment partners and align concepts, language and interests. Some consider forming alliances with the private sector complicated, costly and not a main priority. Even when development actors see strong potential for collaboration, challenges remain, particularly in building mutual trust and securing long-term commitment. For their part, private actors may not know how or where to engage on biodiversity or development and may be unfamiliar with principles that are central to development co-operation, such as the FPIC requirement when engaging Indigenous communities. In addition, limited co-ordination of private actors (both in donor and partner countries), insufficient consideration of their knowledge and perspectives into development co-operation systems, and gaps in establishing connections further constrain engagement in support of international commitments.

Institutional and partnerships

Institutional capacity gaps. Some development actors lack dedicated nature or biodiversity teams, and may have to rely on external consultants or hire new staff to develop projects. Recruiting locally in partner countries can be time consuming, while political changes or institutional inertia can slow down initiatives involving governments. Reliance on consultancies can create procurement delays, reduce momentum and disrupt continuity. This is especially the case when frequent engagement, training and onboarding are needed and which are further affected by staff turnover. Since biodiversity is a cross-cutting topic, challenges may also appear when working across ministries or departments where institutional awareness of biodiversity mainstreaming may be limited, further slowing progress.

Capacity constraints are also linked to presence on the ground. Development actors without country offices or embassies may struggle to identify entry points at the right time, relying instead on capital market players (e.g. BNP Paribas or JP Morgan) or on sending staff or delegations to partner countries to collect information. Depending on resources and mandates, centralised teams may depend on external implementing partners to mobilise private sector and finance. Yet implementing partners such as fund managers can also lack sufficient understanding of local contexts, face difficulties in developing investment pipelines, or be unable to provide complementary technical assistance. Some also lack the capacity to meet EIAs, SEAs and E&S risk management standards expected by development actors.

Safeguard implementation also presents further difficulties: projects may span large areas and involve multiple intermediaries, complicating monitoring and compliance. Development actors also face technical challenges in standardising instruments and processes, and these challenges can be compounded by limited biodiversity expertise among financial specialists. Staffing bottlenecks – finding the right people to structure deals – further slows progress.

For those donors starting to explore this area, constraints include limited experience using financial instruments for de-risking, limited guidance on how to engage with the private sector – particularly in fragile or higher-risk contexts – and uncertainty around the best sequencing to scale up private action for nature. Even where project opportunities exist, weak agreements with off-takers may render them unbankable even with blended finance support. Development co-operation providers have also acknowledged the need to better articulate and communicate to the private sector the types of partnerships and financial instruments they can support to mobilise private finance and investments.

Measurement and communication

Reporting, measurement and taxonomies. Many development actors struggle with tracking and reporting private finance mobilised for biodiversity and with the measurement and verification of biodiversity and development impacts at project level. Biodiversity interventions have inherent impact-measurement challenges – complex, non-linear and long-term change pathways, high context specificity, time lags and difficulties with attribution, among others. This means that the selection of appropriate indicators and the demonstration of both ecological and social outcomes (including benefits for Indigenous peoples and local communities) can be complicated. In many cases, it is also unclear how private sector engagement for biodiversity should be approached, which makes it difficult to establish concrete criteria or pathways to direct private capital towards desired outcomes. Moreover, discrepancies may exist between the private finance mobilisation activities undertaken by development actors and what is ultimately captured in their reporting.

Although several frameworks and taxonomies are emerging, there is limited alignment across institutions. This lack of standardisation creates confusion and reporting burdens for development and private sector actors alike, especially given differences across sectors and geographies. While the OECD methodology is widely used to report mobilised private finance, practices still vary depending on the instruments applied or the geographical scope. Moreover, the very term mobilisation is interpreted differently, especially regarding whether concessional or commercial resources should be included as being mobilised. Some actors may find it difficult to apply the OECD methodology and report systematically. Or they may only report partially on their efforts (e.g. only reporting mobilised flows by certain agencies or ministries). In the case of some development co-operation actors, such as the Netherlands (Warmerdam and Walstra, 2024[44]), results are tracked through national methodologies for domestic reporting even if they are not submitted to the OECD. Overall, greater harmonisation is needed in defining what constitutes a biodiversity investment.

Language. Development and private stakeholders often do not speak the same language or have command of the same technical vocabulary, which can be a barrier to effective collaboration even among development actors themselves. The term “biodiversity” also is used differently in different places and is often poorly understood or narrowly interpreted, leading to confusion over what constitutes biodiversity finance. For instance, some actors associate it strictly with conservation, while others include under the biodiversity finance umbrella a broader range of activities such as sustainable supply chains, sustainable use of natural resources or the bioeconomy. Similarly, terms like “nature finance”, “nature-positive”, “nature capital”, “green finance”, “green infrastructure”, “nature-based solutions” or “biodiversity-friendly” are sometimes used interchangeably with “biodiversity finance”, although they imply different scopes and levels of ambition. For example, nature finance is increasingly viewed as an umbrella term, while “nature-positive” usually refers to measurable improvements in the state of nature – although it is sometimes used only to signal an intention to contribute positively to nature in the future. Likewise, while nature capital can be a useful term to frame investments, land rights holders may resist to the notion of nature as an investable asset due to nature being associated with tangible and intangible values (Forever Wild, 2025[43]).

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Notes

← 1.  This report draws from consultations with 37 development co-operation actors during 2024-2025, including a range of DAC members and their development aid agencies (Australia, Austria, Belgium, Canada, Czechia, Denmark, Estonia, the EU, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Korea, Latvia, Lithuania, the Netherlands, New Zealand, Norway, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland and the United Kingdom); DFIs and bilateral development banks [AFD Proparco, CDP, Finnfund, FMO, KfW, SNV Netherlands Development Organisation (SNV)]; MDBs (ADB, AIIB, EBRD, EIB); and other institutions including the Development Bank of Rwanda, the Global Fund for Coral Reefs – United Nations Capital Development Fund, Green Climate Fund, IMF UNDP BIOFIN, and UNEP.

← 2.  Beyond development actors, the report also draws from consultations with actors from the private sector, CSOs and academia: Asociación Sustentar, BNP Paribas, Colibri Catalyst; Conservation Alpha, Cornell University; Equilibrium Futures, Federated Hermes, Finance Earth; Finance in Motion, Forest Carbon; Forever Wild, Forum on Trade, Environment and the SDGs (TESS), the Global Alliance of Impact Lawyers and Centre for Social Finance Law, Global Canopy, HSBC, Imperial College London, ING Bank, Institut du Développement Durable et des Relations Internationales (IDDRI), KPTL, Mirova, NbS Hub, Swedish Confederation of Enterprises, Wilderness Foundation Africa; and World Wide Fund for Nature.

← 3.  Of the 33 OECD DAC members, 16 have a bilateral DFI: the Austrian Development Bank (OeEB); the Belgium Investment Company for Developing Countries (BIO); FinDev (Canada); Impact Fund Denmark; Finnfund (Finland); Proparco (Société de Promotion et de Participation pour la Coopération Economique), a subsidiary of AFD; the German Investment and Development Company (DEG/KfW); Cassa Depositi e Prestiti and Simest (CDP, Italy); the Dutch Entrepreneurial Development Bank (FMO); the Norwegian Investment Fund for Developing Countries (Norfund); the Portuguese Society for Financing Development (SOFID); the Spanish Development Finance Company (COFIDES); Swedfund International AB (Sweden); the Swiss Investment Fund for Emerging Markets (SIFEM); the British International Investments (BII); and the US Development Finance Corporation (DFC).

← 4.  For further information on instruments used to mobilise private finance through official interventions, see DCD/DAC/STAT(2025)25/REV1.

← 5.  Guarantees refer to legally binding agreements under which the guarantor agrees to pay part of or the entire amount due on a loan, equity or other instrument in the event of non-payment by the obligor or, in the case of an investment, loss of value. The term guarantee refers to both guarantee and insurance scheme.

← 6.  Funds or CIVs can be structured, that is, “have its capital divided in tranches with different risk and return profiles, e.g. by different order of repayment entitlements (seniority), different maturities (locked-up capital versus redeemable shares) or other structuring criteria”. For more information on CIVs, see https://one.oecd.org/document/DCD/DAC/STAT(2025)25/REV1/en/pdf.

← 7.  The 15-member EDFI Association comprises DFIs from 14 DAC countries, including 2 two separate DFIs from Italy.

← 8.  A multitude of different legal vehicles are used in blended finance structuring across DAC members. For instance, corporations (e.g. limited liability companies), trusts (unit or charitable), partnerships, non-profit associations, endowment funds, and commercial/hybrid companies. Other alternative models can include community ownership models such as cooperatives, community land trusts and real estate investment trusts. For more detail, see https://gailnet.org/unlocking-legal-pathways-for-blended-finance/.