New Report: Towards Building a Capital Continuum for Nature-Positive Investments

Oct 19, 2023

CPIC Secretariat

Faced with the looming threat of global ecosystem collapse and the risk it poses for the global economy, it is imperative that we urgently divert capital away from activities that deplete and destroy nature, and instead towards sustainable land use and ecosystem restoration. According to the United Nations Environment Programme’s State of Finance for Nature report, investments in nature-based solutions (NbS) must increase to $674 billion annually by 2050 to meet climate, biodiversity, and land restoration targets (UNEP, 2022). 

This financing gap will not be closed without significantly increasing the participation of the private sector. 

Yet, multiple barriers persist, including: systemic economic failures; scalability and replicability constraints of nature-based projects; a lack of investable pipeline with competitive risk-return profiles; mismatch of timelines between funding needs and investor expectations; lack of data-driven impact measurement; and shortages in human capital. These challenges hinder the scaling of private investments in nature-based solutions. 

This paper applies the capital continuum framework to map the financing journey of nature-based projects. This surfaces funding needs, typical challenges, and the diverse risk-return profiles spanning four unique developmental phases. The paper highlights the need for various tools and financing mechanisms to cater effectively to the needs of the projects as they transition from incubation to market integration. A significant investment gap is evident between the incubation and implementation phases, mirroring the ‘valley of death’ from the commercial startup arena. If overlooked, numerous nascent nature investments will struggle to grow. This paper highlights the critical role development finance institutions (DFI) can and should play in bridging the chasm. 

Four promising market innovations and solutions address current barriers to overcoming this ‘valley of death’ appear in the paper:

  • A case study of the Partnerships for Forests (P4F) initiative explains its approach to tackling incubation and implementation challenges through strategic grant funding paired with technical assistance
  • The paper advocates for DFIs to assume a catalytic role in nature-based solutions by moving earlier in the capital continuum funding cycle
  • The introduction of Development Companies (DevCos), adapted from the renewable energy sector, is proposed as a pioneering model for early-stage nature investments. These entities aim to minimize risks associated with incubation and early implementation by offering due diligence, commercial structuring, and boots-on-the-ground support to grow local capacity. 
  • The role of voluntary carbon markets in fostering investments throughout the capital continuum is discussed, highlighting their potential to provide appropriate pricing signals and liquidity to the market. 

We have no time to waste in addressing the twin crises of climate and nature. Presenting both novel perspectives and a range of solutions, this paper endeavors to address investment barriers for nature-based solutions. In this pivotal era, we must harness every available resource, use all the tools in our toolbox. 

As we navigate the complex landscape of emerging nature markets, this paper argues that collaboration—an approach conducive to sharing learnings and coordinated risk mitigation—is a must. 

A prosperous, nature-positive future hinges on the concerted efforts of governments, DFIs, and the private sector. Together, they hold the key to filling the capital continuum gap, unlocking the transformative potential of nature-based solutions to drive meaningful change on a planetary scale.

About the report

  • Title: Towards Building a Capital Continuum for Nature-Positive Investments
  • Authors: Diana Denke, Edit Kiss, Anvitha Prasad, Elmedina Krilasevic, Shaalini Ganesalingam, Karin Berardo, James Pilkington
  • Published by: Coalition for Private Investment in Conservation (CPIC)
  • Prepared by: CPIC Working Group on Nature-Positive Pipeline Development

According to the UNEP’s State of Finance for Nature report, investments in nature-based solutions (NbS) need to reach an annual rate of approximately $674 billion by 2050 to address climate, biodiversity, and land degradation targets. Increasing private finance for NbS is paramount to achieving this goal. This paper employs the capital continuum framework to analyze the financing stages of nature-based projects. It underscores the need for diverse tools and financing mechanisms to meet the requirements of projects transitioning from incubation to implementation, scale-up, and eventual market integration. A significant gap is observed between the incubation and implementation stages in the current investment landscape. Moreover, the paper presents a fresh perspective on solutions to overcome investment barriers related to nature-based solutions. As we traverse the evolving terrain of future nature markets, this paper posits that a synergistic approach, emphasizing mutual learning and synchronized de-risking, is essential to foster nature-positive investment markets. The paper concludes by spotlighting exemplary instances of collaboration and financing models poised to bridge the extant gaps.