This chapter sets out why the private sector is essential to halting and reversing biodiversity loss and achieving the targets of the Kunming-Montreal Global Biodiversity Framework. It shows how biodiversity underpins economic resilience, livelihoods, trade and development, while unsustainable production and consumption patterns continue to drive ecosystem degradation and amplify nature-related risks. The chapter identifies key constraints to private action - market failures, policy gaps and investment barriers - such as misaligned incentives, information asymmetries, limited technical capacity, and thin pipelines of investable projects. It introduces three entry points for development co-operation to help scale up private action for nature in developing countries: strengthening enabling environments, promoting private sector engagement and mobilising private finance through development finance. The chapter explains why a whole-of-system approach is needed to align business practices and financial flows with biodiversity objectives and highlights the catalytic role of development co-operation in de-risking investments, strengthening institutions, and advancing nature positive transitions through partnerships, policy dialogue and blended approaches.
Scaling Up Private Action for Nature
Abstract
Biodiversity is fundamental to development, economic activities and human well-being (OECD, 2021[1]). The private sector, comprising businesses and financial institutions, relies on biodiversity as it underpins the goods and services that support production, supply chains and value creation across multiple sectors and industries. Estimates suggest that more than half of global gross domestic product (GDP) in 2022 was moderately or highly dependent on biodiversity and ecosystem services (Evison, Low and O’Brien, 2023[2]), while billions of people – especially the poorest and most vulnerable – rely directly on healthy forests, wetlands and diverse landscapes for food, water, jobs and income generation (Angelsen et al., 2014[3]; Mayers, Buckley and Macqueen, 2016[4]).
Yet, economic activities and systemic failures continue to drive biodiversity loss by contributing to unsustainable production and consumption patterns, land-use change, pollution and ecosystem degradation. When biodiversity is lost, so too are the ecosystem services that support livelihoods, health, security, national economies and development (IPBES, 2019[5]), with some countries and sectors that heavily depend on nature being affected disproportionately (Johnson et al., 2020[6]). Therefore, addressing biodiversity loss is not only an environmental imperative, but also a core development and economic resilience challenge.
Given biodiversity’s integral role to humanity, the international community has called for greater action to address biodiversity loss. The Kunming-Montreal Global Biodiversity Framework (KMGBF) under the UN Convention on Biological Diversity (CBD) provides a global biodiversity roadmap with targets to 2030 and goals to 2050 to halt and reverse biodiversity loss. It emphasises that achieving these goals requires a whole-of-government and whole-of-society approach, with action and finance from all stakeholders including the private sector (CBD, 2022[7]).
As such, the KMGBF also includes targets calling for private actors to directly or indirectly contribute to the alignment of their activities and finance and to mobilise additional resources for biodiversity. These include:
progressively align all relevant public and private entities and their financial flows with the CBD’s goals and targets (target 14);
assess and disclose biodiversity-related impacts, dependencies and risks to enable private actors to align their operations, supply and value chains, and portfolios to progressively reduce negative impacts on biodiversity and increase positive impacts (target 15);
increase financial resources from all sources – including domestic, international, public and private resources for biodiversity action – by mobilising at least USD 200 billion per year by 2030 (target 19).
Goal D of the Framework also calls for closing the biodiversity finance gap and aligning financial flows with the KMGBF and its vision for biodiversity.
Private action is necessary to address biodiversity loss. This means not only mobilising private finance but also changing business models, supply chains, procurement and sourcing practices, and land use and value chain management so that economic activity sustains rather than degrades nature. However, a range of barriers limit private action for biodiversity (see Annex A), disproportionately affecting small and medium-sized enterprises (SMEs) and financial institutions in developing countries (IPBES, 2026[8]). These investment barriers include low awareness of nature-related risks, lack of capacity and technical expertise, and the absence of investable project pipelines.
Persistent market failures are another significant barrier. The economic value of biodiversity and ecosystem services is often poorly understood or inadequately reflected in decision making and incentive structures faced by individual economic actors. This results in biodiversity’s benefits being treated as free and inexhaustible, and leads to negative externalities where costs are not fully reflected in market prices, with individual actors therefore lacking sufficient incentives to act (OECD, 2025[9]). In addition, access to rival and non-excludable shared natural resources such as fisheries, forests and pastures are particularly vulnerable to over-exploitation, resulting in a “tragedy of the commons” context (Hardin, 1968[10]). Other causes of market failures include the public goods characteristics of biodiversity (non-rival and non-excludable), imperfect information and a lack of well-defined property rights (OECD, 2025[9]). Policy failures, such as incentives that assign a negative price to biodiversity, can further distort markets and promote activities that drive biodiversity loss.
These market and policy failures are reflected in the structure of many economic activities that often degrade the very natural systems they depend on, creating a feedback loop of risk. Agriculture alone is responsible for 80% of global deforestation (IPCC, 2022[11]), uses about three-quarters of freshwater resources (IPBES, 2019[5]) and, when combined with the food and construction sectors, contributes to half the global extinction-risk footprint (Irwin et al., 2022[12]). Globally, about three-quarters of major marine fish stocks are overexploited or depleted, compounded by illegal, unreported and unregulated fishing (IPBES, 2019[5]). The textile and fashion industry is responsible for roughly 20% of global water pollution (Niinimäki et al., 2020[13]); other high-impact sectors include mining, oil and gas, land development and construction, transport, electric energy production (e.g. hydropower) (Worldwide Fund for Nature/Deloitte, 2023[14]) and tourism (European Commission, 2020[15]). Armed conflict also exacerbates environmental degradation, including in protected areas, while land degradation and deterioration of aquatic ecosystems can, in turn, increase the risk of armed conflict (International Union for Conservation of Nature, 2021[16]).
Private sector actors are already experiencing the economic consequences of the depletion and degradation of natural resources, which are affecting profitability and their ability to repay lenders; related costs are therefore expected to grow1 (BlackRock, 2024[17]). Conversion of natural land and ecosystem degradation could lead to the loss of ecosystem services (e.g. pollination, provision of fish stock and timber, and carbon sequestration) that could cost between USD 90 and USD 225 billion of global GDP annually by 2030 under business-as-usual scenarios (Johnson et al., 2021[18]); and businesses and financial institutions also could face input scarcity, price volatility, stranded assets, relocation costs and heightened market, credit, liquidity and business risks (OECD, 2023[19]). Reflecting this, extreme weather events, critical changes to Earth systems, biodiversity loss and ecosystem collapse, and natural resource shortages are perceived to be among the top four most severe global risks over the next decade (World Economic Forum, 2024[20]). These trends associated with nature-related risks2 underscore the urgency of increasing private action to halt and reverse biodiversity loss.
However, while some businesses take actions that benefit biodiversity (and themselves), existing investment frameworks and incentives reinforce these risks and prevent the value of biodiversity from being captured in revenue streams, risk mitigation or cost savings (Holtedahl, Köberle and Koci, 2023[21]). At the same time, uncertainty as to whether consumers will be willing or able to pay a voluntary premium today in the form of higher prices for biodiversity-friendly products, as well as the costs for low-income and small producers to transition to more sustainable production and supply chains (e.g. certification and compliance), may also discourage private action (OECD, 2025[22]).
Addressing biodiversity loss requires a balanced approach that combines policies, incentives, innovation and value creation so that biodiversity conservation and sustainable practices become a viable and attractive part of business models.
Ultimately, it is essential to align policies, economic incentives and investment frameworks to the value of biodiversity, correcting market failures and lowering barriers so that private actors invest in ways that sustain natural capital and deliver tangible economic and societal benefits. Achieving this requires breaking silos across environment, finance, trade and development policies, through whole-of-policy approaches and close co-ordination between public authorities, development agencies, MDBs, DFIs and other development co-operation providers, implementing partners and private actors. However, constraints on resources, capacities and awareness as well as political challenges create significant bottlenecks.
Development co-operation can help overcome these constraints by playing a catalytic role in line with its broader role as a system-shaper in addition to financier. Despite significant increases of official development finance in support of biodiversity from development co-operation providers, mobilisation of private finance through development finance for biodiversity remains limited, reaching USD 1.7 billion in 2023, or just 1.4% of total private finance mobilised through development finance on average over 2017-23 (OECD, forthcoming[23]). These low levels reflect both the aforementioned general barriers to investment as well as specific operational challenges faced by development co-operation providers when engaging with the private sector (Annex B).
Moreover, the low mobilisation is also due to the process of capital reallocation, which can be lengthy and include several steps: identifying unsustainable business practices that drive environmental degradation; integrating nature-related risks into financial risk assessment and credit metrics; progressively adjusting incentives and aligning corporate balance sheets with biodiversity objectives; and mobilising private finance while improving business practices.
Against this background, development co-operation can scale up private action for biodiversity in developing countries via three complementary and interlinked entry points,3 i.e. strengthening enabling environments, promoting private sector engagement and mobilising private finance.
Strengthening enabling environments. Addressing regulatory and policy failures is critical to internalising the economic value of biodiversity. This is because regulatory certainty can act as a market signal by clarifying long-term policy direction and requirements, thereby creating predictable demand for biodiversity-positive solutions. Chapter 2 explores how development actors can support partner country governments to strengthen measures that (re)align incentives, build investor confidence and accelerate change by focusing on environmental policy and regulatory frameworks, economic incentives and market infrastructure (e.g. monitoring and enforcement systems).
Promoting private sector engagement. Private actors often face practical barriers to integrating sustainable biodiversity and natural resources considerations into business models, supply chains and investment decisions. Chapter 3 examines how development actors can engage with private actors in donor countries and from partner countries – either directly or indirectly through (financial) intermediaries, multi-stakeholder platforms or embassies – to scale private action for biodiversity and natural capital. Such engagement can include strengthening local capacities; facilitating trade and market access; enabling responsible and traceable supply chains; fostering innovation and entrepreneurship; promoting RBC, technology and data; raising awareness; and supporting knowledge exchange and policy dialogue.
Mobilising private finance. Traditional private investment faces constraints because many biodiversity investments deliver limited financial returns and current frameworks undervalue nature. Still some opportunities exist to mobilise private finance. Chapter 4 shows how development actors are using various financial instruments and mechanisms (e.g. structured vehicles, guarantees and thematic bonds); supporting financial structures (e.g. debt-for-nature swaps) and helping aggregate revenue streams to improve project cashflows and de-risk investments. Strategies can be tailored to the type of asset (e.g. nature, green, other), expected financial return, and intended biodiversity outcomes, with development finance used to balance and share risks and leverage private finance for biodiversity.
These entry points help development co-operation providers address market failures and investment barriers by strategically using policy dialogue, capacity development and development finance to streamline the capital reallocation process; create investment opportunities; and increase activities that support biodiversity (Table 1.1). Through these entry points, mainstreaming biodiversity considerations across all development strategies and programmes offers the potential to reinforce conservation and sustainable use objectives, generating co-benefits with other policy goals (e.g. food and water security, natural infrastructure, ecotourism).
While the first two entry points aim to align private sector activity with biodiversity goals, the third focuses on mobilising additional financial flows towards biodiversity objectives. Efforts across all three can help make biodiversity-related projects more attractive and bankable for private actors. As such, all development actors can play a role in scaling up private action for biodiversity, whether through grants (including for capacity development and technical assistance) or leveraging mechanisms (Annex B). Indeed, support for strong and stable regulations to strengthen strategic partnerships and reduce risks when investing in developing countries is key to transitioning to sustainable pathways (Swedish Enterprise, 2024[24]).
A final point relates to the continued centrality of the public sector for achieving certain environmental conservation objectives in developing countries (OECD et al., 2024[25]). Given limited incentives and low profitability for the private sector, public efforts remain indispensable to provide direct conservation funding and ensure robust oversight of emerging nature-related finance mechanisms, including regulation of new asset classes (Kedward et al., 2023[26]). In this context, public, private and blended finance can have complementary roles across different stages of biodiversity projects (Beverdam et al., 2025[27]), combining policy direction, risk sharing and investment to deliver sustained impact.
|
✓ Entry Points |
✓ Mechanisms |
✓ Priorities |
✓ Key Considerations |
|---|---|---|---|
|
Strengthening enabling environments
|
Regulatory frameworks Economic instruments Market infrastructure (e.g. monitoring and enforcement systems) |
Support design and implementation of coherent policy and regulatory frameworks (e.g. trade policies, sectoral regulation) that steer private decisions towards biodiversity‑positive outcomes Help reform incentives, including subsidies harmful to biodiversity and scale up biodiversity‑positive economic instruments/incentives Strengthen tenure and innovation systems, especially for local actors, SMEs and communities Invest in data, MRV (monitoring, reporting and verification) and market infrastructure underpinning biodiversity‑related decisions |
Strong enabling environments are a prerequisite for effective private sector engagement and private finance mobilisation Domestic political commitment and ownership are critical for sustained reform Policy coherence across ministries and sectors is essential to avoid conflicting signals |
|
Promoting private sector engagement
|
Trade facilitation and market access Building productive capacity Sustainable supply chains Fostering innovation and entrepreneurship Traceability Enabling informed private sector decision making Supporting knowledge exchange and policy dialogue |
Use convening power to build partnerships with firms, financial institutions and local actors around biodiversity‑positive pathways Provide capacity development and technical assistance to mainstream biodiversity in corporate strategies and risk management Support uptake of certification, traceability and disclosure frameworks Strengthen capabilities of MSMEs and farmers to meet standards and participate in sustainable value chains |
Private momentum is increasing, but alignment of business models and financial flows with the KMGBF remains limited Engagement must be grounded in safeguards and RBC, including respect for Indigenous peoples and local communities Expectations on speed and scale of private responses should be realistic Support for transitions as private actors require long-term support to transition towards more sustainable practices |
|
Mobilising private finance
|
Direct investment in biodiversity-related activities Integrating biodiversity into other sustainable investments and re-directing revenues for biodiversity objectives Integrating biodiversity into existing market mechanisms (e.g. carbon markets) |
Use blended finance and other risk‑sharing instruments to mobilise private finance for biodiversity Support development of pipelines of bankable biodiversity‑positive projects, including addressing small ticket sizes and high transaction costs Integrate biodiversity objectives into climate and sustainable finance instruments and market mechanisms Ensure mobilised finance delivers measurable biodiversity outcomes and strengthens local systems |
Mobilised private finance for biodiversity is still modest relative to needs and scaling up will require replication and learning Revenue streams and risk‑return profiles can be uncertain; instruments must be adapted to local contexts Integrity and avoidance of greenwashing are critical when using innovative instruments and markets Co-ordinated action across enabling environments, private sector engagement and finance are needed to reach scale |
Source: Authors’ elaboration.
References
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← 1. The reciprocal relationship is captured by the concept of double materiality, which refers to the idea that nature-related issues can be material both financially (i.e. how nature affects the organisation) and environmentally or socially (i.e. how the organisation affects nature). For more details, see https://tnfd.global/wp-content/uploads/2023/08/Recommendations-of-the-Taskforce-on-Nature-related-Financial-Disclosures.pdf?v=1734112245.
← 2. Nature-related risks include physical risks (e.g. water scarcity, pollinator loss); transition risks (e.g. regulatory changes, shifting consumer preferences); and liability risks (e.g. legal or reputational consequences) that affect businesses and financial institutions. Transition risks are accelerating due to stricter environmental regulations, taxation of harmful activities, shifting consumer preferences and new sustainability standards. Liability risks also are intensifying with rising public awareness on biodiversity. For further discussion, see OECD research at https://doi.org/10.1787/d52137a5-en; a report for the Coalition of Finance Ministers for Climate Action at https://www.financeministersforclimate.org/sites/cape/files/inline-files/Bending%20the%20Curve%20of%20Nature%20Loss%20-%20Nature-Related%20Risks%20for%20MoFs_2.pdf; and the Dasgupta Review at https://assets.publishing.service.gov.uk/media/602e92b2e90e07660f807b47/The_Economics_of_Biodiversity_The_Dasgupta_Review_Full_Report.pdf.
← 3. The identification of these entry points is mainly based on information from individual consultations with development actors including DAC members, DFIs and MDBs (see Annex B). Findings from this report may also be applicable to other stakeholders including South-South and triangular co-operation providers, private philanthropies, and impact investors whose mandates and risk-return profiles are similar to those of the development actors that are the focus of this report.