A Guide to Different Types of Nature Finance
A Guide to Different Types of Nature Finance
What role can money from private companies play in nature's restoration and the stewardship of the land?
The UK Government has a goal of at least £500 million of private investment to flow into nature recovery every year by 2027. How will this be achieved, and what does this mean for land managers across the UK? What are the opportunities here?
Nature finance in the UK has come a long way in recent years. Yet the topic can still be confusing for land managers - the term ‘nature finance’ can refer to many different types of transaction, and there is no agreed use of terms such as 'nature investment' and 'nature markets'.
This guide outlines the different ways that money can flow from a private company into nature. It is aimed at land managers (farmers, estates, environmental NGOs etc) in the UK, who are looking at what role, if any, private finance can play in their land, and nature restoration.
For each type of finance, the guide sets out where the money comes from, where it goes, how accessible it is for UK land managers, and gives links to case studies and more information. Although focused on the UK, the guide covers nature finance flows that are applicable in the UK and overseas.
The table is organised by scale and accessibility, with the smallest / most accessible first.
- Many of the funding flows listed are relatively new and not well established.
- There are very few instances of nature being wholly funded by the private sector - there is nearly always some public finance as well. A mix of these two is called blended finance.
- The types of funding in this guide are not mutually exclusive - many projects blend different types of nature finance e.g. using sales of carbon credits to repay a loan.
- As well as blending finance, there may be opportunities to receive money from multiple sources, called stacking and bundling.
- There are big differences in how these transactions work - how much will it cost, how much will the land manager get in return (and when) and what are the commitments over time.
To explore this more look at the case studies, and resources at the end.
Photo by Benjamin Davies on Unsplash
Geography / scope
A Guide to Different Types of Nature Finance
What is it? Where does the money come from?
Where does the money go?
Case studies
Useful links
1. CSR (Corporate Social Responsibility) also known as philanthropy
More local / UK Voluntary payments with no return either in credits or a financial return on investment. Often local to the business. Can be financial or inkind.
The CSR team of a company, or the firm's charitable foundation, but can also be marketing budget. In SMEs, often the CEO.
Direct to individual nature projects, often for specific actions within a project.
Law firm provides CSR support
List of firms supporting a Wildlife Trust Nestle support for nature in Derbyshire
2. Payments for Ecosystems Services
More local / UK Voluntary payments for Nature Based Solutions –nature projects which result in a specific outcome e.g. reducing flooding on a railway line. Companies looking to fund a specific outcome nature can provide. Decision made by the team in the part of the business where the need / risk lies.
Direct to individual nature projects, always for the specific actions to address the company need / risk.
Wyre River case study
Network Rail working with landowners
LENs in East Anglia: Firms fund 112 farms
Accessible for UK land managers?
Overview of CSR
Short guide to CSR from University of York Yes. Simpler contracts and variable scale make this accessible. Scale can be significant for an individual project but may be short term.
Defra's Natural Capital Approach guide - see Section 5.5
Longer form guide to PES
Highly variable: location matterscan your land deliver ecosystem services that address a specific need or risk for a specific firm?
3. Nature-based carbon credits (voluntary)
More local / UK The purchase of carbon credits which are delivered through nature. The market benefits from the Woodland Carbon and Peatland Codes, and demand for carbon credits. Companies seeking to offset emissions, with decisions coming through the sustainability team. To nature projects sometimes via an intermediary. Tree for Life in Scotlandcarbon credit sales using the UK Woodland Carbon Code
4. Internal investment ("insetting")
Woodland Carbon Code guide for landowners UK Govt article on carbon credits for businesses
Yes. Scale matters as firms don't want to deal with lots of small providers; location matters too, for example, 80% of Peatland Code projects are in Scotland.
Both UK and non-UK A firm tackles a specific risk or actual problem in its operations through nature. TNFD leads to this sort of action (as opposed to e.g. credits). May be significant money but only in direct operations or supply chain.
Money comes from internal investment budgets, which can be very significant, with decisions made by the team in the part of the business where the risk lies.
Either internally (e.g. if a supermarket owns a farm outright) to finance changes to operations, or to suppliers. The money will be for very specific actions.
Case studies from the Insetting Platform Morrisons supermarket provides beefriendly seed mixes to farmers in its egg supply chain
Explore the Insetting Platform Resources to explore TNFD
Limitedaccessible only to nature projects that are directly in operations or supply chains.
UK Mainly
5. Compliance credits (mandatory)
Biodiversity Net Gain (BNG) or Nutrient Neutrality (NN), these are credits that firms are obliged to buy by regulation to offset harm elsewhere. Firms control which credits they buy. In BNG, developers must restore nature, or pay for it be restored, at a rate of 110%. Developers decide whether to restore nature on the development site or buy credits off-site.
Money goes to sellers of BNG credits, either a nature project or via an intermediary.
Network Rail purchase Biodiversity Units Case studies from a developer
Overview of BNG in plain English
Natural England guide to nutrient neutrality
Reasonably accessible. Market is still developing fully.
Both UK and non-UK
Firms buy credits that represent units of nature restoration. Can also be known as nature credits, nature shares, and other names.
6. Biodiversity credits (voluntary)
Money comes from firms wanting to support nature. There are low volumes of these credits currently. Decisions made by the sustainability team.
To sellers of biodiversity credits who are nature project managers, or an intermediary.
South Downs
National Park voluntarycredits scheme
Nature credits scheme from Creditnature
Beginner's guide to biodiversity credits
UK Govt principles on carbon and nature credits
Nature Markets
Dialogue resources on evolving credit market
Reasonably accessible. Market still in early stages, and demand is low.
Both UK and non-UK
A loan of money to a nature project, which is repaid over time.
Money comes from a bank, which sees the loan as an investment that will earn income (from capital and interest repayments) over time.
7. Financial loans
Large scale nature projects that need up-front investment and can repay the loan over time.
Oxygen Conservation loan from Triodos (repayable from carbon credit sales)
Outline of nature loans products
Mainly nonUK Money invested, by an asset manager for example, in order secure a financial return (and benefits to nature). Normally equity investment. Approx. 0.2% of assets managed globally are in natural capital.
8. Financial investment
Money comes from an asset manager, who invests money on behalf of individual pension savers or investors. Fund managers are the decision makers.
To buy equity in 'naturepositive' companies e.g. a sustainable timber firm or regenerative agriculture company.
UK Nature Fund finance for nature projects and SMEs
Climate
Asset Management
$1bn for natural capital
Federated Hermes
€50m biodiversity fund
Accessible, subject to considerable requirements of financial returns, scale and risk.
Plain English article on nature as an investment
Not very accessible as flows to traded companies; significant requirements of financial returns, scale and risk.
9. Sustainable debt instruments including GSSS Bonds
Both UK and non-UK Green, Social, Sustainability and Sustainabilitylinked Bonds work like normal bonds except the money raised is only used to finance projects with a positive environmental benefit.
Investors, such as asset managers. They are looking for secure bonds that give them a financial return over time. GSSSBs were c.14% of total bonds in 2024, but only a small part of this relates to nature (as opposed to climate).
National and local governments, and businesses can issue GSSSBs, and use the proceeds for environment projects as dictated by the terms of the bond.
Social and Sustainability
Bond case studies Mars, bonds and sustainability
Guide to green bonds
The green bond principlesguidance for firms issuing green bonds
Largely inaccessible; significant requirements for scale, financial returns and organisational structure that can issue bonds.
Non-UK A voluntary transaction in which debt owed by a developing country is cancelled, and the money that would have serviced that debt is spent on conservation.
10. Debt for Nature swaps
Creditors (who cancel the debt) are often other governments but can also be banks or private companies.
Often largescale conservation projects, as dictated by the terms of the debt for nature swap.
Belize's Debt for Nature swap explained
Useful overview of debt for nature swaps
Inaccessible in the UK. Debt for nature swaps are only used in developing countries. Scale is large: c.140 deals have been signed, mostly less than $100m, but with some larger deals.
Non-UK Insurance that pays out once a threshold has been met (as opposed to an event happening).
Threshold examples: wind speed or rain fall.
11. Parametric insurance
The money comes from the insurance company, once the threshold has been met. The insurance payout can pay for nature such as coral reef restoration (which in turn protects coastal towns from storms).
Examples of companies providing parametric insurance
Summary of parametric insurance
Relatively unknown in the UK currently.
Links to Useful Resources
• Ecosystems Knowledge Network nature glossary
• GFI case studies involving private finance
• EKN case studies of NEIRF-funded projects
• GFI Investment Readiness Toolkit
• GFI Farming Toolkit for Assessing Nature Market Opportunities
• Defra Natural Capital case studies
• Ecosystems Knowledge Network Nature Finance Learning Hub
• Defra's Payments for Ecosystem Services best practice guide: a practical 5-step guide for developing payments for ecosystem services
• Taskforce on Nature-related Financial Disclosures (TNFD) Recommendations
• BSI Flex Overarching Principles and Framework, a standard which outlines requirements for the design and operation of high -integrity nature schemes.
• Nature Markets Dialogue
• Bloomberg NEF's Biodiversity Finance Factbook - provides more detail on most financial flows in this guide (global perspective)
This guide was developed by Will McDonald (www.willmcdonald.co.uk) with the support of the Esmée Fairbairn Foundation. Thanks to the many people who contributed to its development. The guide is deliberately high level, and aims to prioritise plain English over technical accuracy so should not be relied upon to make decisions. It is intended that the guide will be updated periodically – feedback welcome.