Financing Nature’s Adaptive Capacity
Nature-based solutions (NbS) are inherently aligned with climate adaptation. NbS offer cost-effective, locally grounded approaches that enhance ecosystem resilience while protecting communities from climate change impacts. While failure to invest in critical ecosystems poses significant economic and societal risks, investing in nature’s adaptive capacity means investing in long-term resilience, reducing vulnerability to climate risks, and delivering co-benefits such as improved livelihoods and biodiversity conservation, as well as enhanced economic growth.
However, both NbS and adaptation and resilience (A&R) efforts remain critically underfunded, hindering the scale and speed needed to build resilience across ecosystems and communities. Current nature finance flows are not sufficient to cover global needs. Annual global flows amount to just USD 200 billion, one-third of what is required to meet climate, biodiversity, and land degradation goals by 2030 (UNEP 2022). Similarly, adaptation in developing countries faces an annual funding gap of USD 194 billion to USD 366 billion, roughly 10 to 18 times higher than current funding levels (UNDRR et al. 2024). Some of the shared challenges to financing NbS and A&R include difficulties in quantifying outcomes, leading to investor uncertainty regarding returns; identifying an investment-ready pipeline; and communicating value due to associated long-term, non-monetary benefits.
This report examines five case studies of innovative mechanisms designed to mobilize private capital into adaptive NbS across the world through desk research and close interviews with the managers or investment directors of the funds. The cases, which include Forest Carbon, Acumen Resilient Agriculture Fund, Landbanking Group, Impact Earth, and Wildfire Resilience Insurance, provide insights into how NbS projects and investments are increasingly recognized as adaptation investments as these two spaces converge. The findings from these case studies are not exhaustive, but rather provide some lessons and challenges for scaling finance for nature-based adaptation through the design of financial vehicles, including:
(i) Impact measurement is a key challenge for nature and adaptation finance with bottlenecks being (1) the complexity of measuring outcomes in a changing climate; (2) the integration of highly localized impacts; and (3) a lack of strong metrics that capture nature and adaptation impact.
(ii) NbS projects that provide adaptation benefits can have reliable cashflows, however it is critical to understand the incentives for businesses and projects to invest in adaptive and resilient NbS systems.
(iii) Carbon credits are a well-established way to finance NbS, but pricing and valuation must evolve to incorporate broader environmental and social benefits beyond carbon alone.
(iv) New regulatory standards can help drive A&R interventions related to NbS, but there is a risk of market leakage, as producers who do not comply with stricter standards may shift to markets with weaker regulatory requirements.
(v) To build momentum and public support for financing Nbs for adaptation, actors must make the case that investing in activities that prevent future costs (rather than generate immediate cash flows) delivers long-term economic, financial, and social value for the communities and stakeholders involved.
As the impacts of climate change intensify, the convergence of NbS and A&R finance represents a critical opportunity — not just to protect ecosystems and vulnerable communities, but to reshape how we value, fund, and implement long-term resilience strategies. The case studies in this report illustrate that it is possible to unlock private capital for nature and adaptation, but doing so at scale requires targeted action across three fronts: designing finance mechanisms intentionally for adaptation outcomes, developing credible and consistent impact metrics, and aligning incentives to shift behavior and investment.
Looking ahead, stakeholders across sectors, from governments and financial institutions to project developers and communities, must work collaboratively to mainstream NbS for adaptation. This means not only closing the finance gap, but also shifting mindsets – from reactive to preventive, from short-term gains to long-term value, and from siloed approaches to integrated, systemic solutions. While a comprehensive analysis of systemic solutions is beyond the scope of this report, broader enabling conditions for nature and adaptation investments also means reforming the current development finance architecture to support wholistic, large-scale interventions that reflect the interconnected nature of climate, ecosystems, and communities, while also leveraging global frameworks that hold significant potential to scale up adaptation and nature finance by setting shared priorities and aligning incentives.
With the right enabling conditions, finance in support of nature’s adaptive capacities can accelerate, building climate-resilient ecosystems, economies, and societies that are equipped to thrive in an uncertain future.
