Explainer: Nature-based solutions — a practical primer for teams that need to ship

Private finance for nature has surged 11-fold since 2020, reaching $102 billion in circulation by mid-2024—yet the gap between current investment and the $384 billion needed annually by 2025 remains $230 billion, according to UNEP's State of Finance for Nature report. This disconnect between momentum and need defines the operating environment for sustainability teams evaluating nature-based solutions (NbS). While nature tech venture capital rose 16% to $2.136 billion in 2024, the voluntary carbon market contracted 25% amid integrity concerns, with only 182 million tons retired—the lowest since 2018. For teams tasked with deploying capital, meeting disclosure requirements, and delivering measurable climate impact, understanding the practical mechanics of NbS has never been more urgent. This primer cuts through the complexity to provide decision-ready frameworks for project evaluation, vendor selection, and implementation.

Why It Matters

Nature-based solutions represent one of the few climate intervention categories capable of delivering multiple co-benefits simultaneously: carbon sequestration, biodiversity protection, water security, disaster risk reduction, and community resilience. The Intergovernmental Panel on Climate Change (IPCC) estimates that NbS can provide up to 30% of the mitigation needed by 2030 to limit warming to 1.5°C—a contribution scale matched by no other single sector.

The economic imperative is equally compelling. The World Economic Forum projects nature loss will cost the global economy $5 trillion within five years, while the transition to nature-positive systems represents a $10 trillion annual business opportunity by 2030. These figures have transformed NbS from a voluntary corporate social responsibility activity into a strategic risk management priority.

Regulatory pressure is accelerating this shift. Over 320 companies have adopted the Task Force on Nature-related Financial Disclosures (TNFD) framework, and the European Union's Corporate Sustainability Due Diligence Directive now requires companies to address nature-related impacts across value chains. The EU Deforestation Regulation, effective since December 2024, mandates that commodities like soy, palm oil, beef, coffee, cocoa, rubber, and timber entering EU markets prove they were not produced on recently deforested land. Similar regulations are advancing in the UK and US.

For supply chain-dependent industries—agriculture, food and beverage, pharmaceuticals, apparel, and construction—nature risk is becoming financially material. Companies with exposed supply chains face procurement disruptions, regulatory penalties, reputational damage, and stranded assets. NbS investments address these risks while generating verifiable climate benefits.

Key Concepts

Nature-based solutions (NbS) are defined by IUCN as actions that protect, sustainably manage, or restore natural and modified ecosystems while simultaneously providing human well-being benefits and addressing societal challenges. Unlike engineered climate solutions, NbS work with natural processes—forests sequester carbon through photosynthesis, wetlands filter water and buffer floods, mangroves protect coastlines from storm surge.

Additionality asks whether climate benefits would have occurred without the intervention. A forest protection project generates additional carbon credits only if that forest faced genuine deforestation threat. The Integrity Council for the Voluntary Carbon Market (ICVCM) approved just 7 methodologies by mid-2024—representing only 1.2% of credits ever issued—signaling that most legacy projects fail rigorous additionality tests. Teams evaluating credits must examine baseline threat documentation, financial analysis proving carbon revenue necessity, and independent validation of reference scenarios.

Permanence concerns whether sequestered carbon will remain stored. Unlike geological carbon capture, nature-based storage faces reversal risks from wildfires, disease, land-use changes, and policy shifts. Forest projects typically require 10-20% buffer pool allocations to insure against reversals. Mangroves and peatlands offer more durable storage than upland forests but face distinct vulnerabilities to sea-level rise and drainage.

Leakage occurs when protecting one area displaces harmful activity elsewhere. Preventing deforestation in one jurisdiction may push agricultural expansion into neighboring regions, negating net climate benefit. Jurisdictional approaches—where entire countries or states take accountability for land-use outcomes—reduce leakage risk compared to project-based approaches.

Measurement, Reporting, and Verification (MRV) has evolved from periodic field audits to continuous digital monitoring. Satellite imagery, LiDAR, acoustic sensors, and environmental DNA now enable real-time project verification. The Nature4Climate Policy Tracker found MRV requirements in government policies doubled from 21% to 44% between 2024 and 2025, reflecting the sector's quality pivot.

What's Working

Digital MRV Transformation

Remote sensing and AI have fundamentally changed project monitoring economics. Companies like Pachama use machine learning with satellite imagery to measure forest carbon stocks continuously, detecting disturbances within days rather than waiting for annual audits. This approach reduces verification costs while increasing accuracy and transparency—critical for rebuilding buyer confidence after integrity scandals.

NatureMetrics has pioneered environmental DNA (eDNA) monitoring, allowing biodiversity outcomes to be verified with genetic sampling rather than labor-intensive species surveys. A single water sample can detect hundreds of species, enabling projects to prove ecosystem health improvements with scientific rigor previously impossible at scale.

Jurisdictional Approaches

National and subnational programs that align carbon finance with government accountability are outperforming standalone projects. Costa Rica's Payments for Ecosystem Services program, operating since 1997, has reversed deforestation while channeling over $500 million to landowners. Gabon became the first African nation to receive REDD+ results-based payments in 2021, demonstrating that jurisdictional frameworks can work in developing economy contexts.

These structures reduce leakage because entire jurisdictions—not just project boundaries—are monitored. They also build institutional capacity and align climate finance with national development priorities.

Corporate Pre-Purchase Commitments

Forward purchase agreements are addressing the fundamental financing gap in nature projects. Unlike manufactured products, forests require years of growth before generating credits. Traditional spot markets don't provide upfront capital for development. Microsoft's Climate Innovation Fund, Stripe Climate, and the Frontier coalition aggregate corporate demand into guaranteed offtake agreements, enabling project developers to secure financing for high-integrity projects.

What's Not Working

Legacy Carbon Credit Methodologies

Evidence is now overwhelming that most credits issued under older methodologies do not represent real emission reductions. A 2024 Nature Communications study analyzing 2,346 projects found forest conservation credits achieved only 25% of claimed impact, while cookstove projects delivered just 11% of stated benefits. The problem wasn't nature-based approaches themselves but unrealistic baseline scenarios that inflated claimed reductions from forests never genuinely threatened.

Corporate response remains inadequate. Research indicates 87% of offsets purchased by the top 20 corporate buyers carry high risk of not delivering real reductions. Companies have begun shifting language from "offsets" to "contributions," tacitly acknowledging that credits don't provide ton-for-ton equivalence.

Voluntary Market Fragmentation

Multiple registries applying inconsistent methodologies create a race to the bottom on quality. Average voluntary market prices of $6.34 per ton in 2024 are insufficient to fund genuinely additional projects in most geographies—high-quality forest restoration can cost $30-50 per ton. Without binding standards or transparent quality ratings, high-integrity projects compete directly against low-cost, low-quality alternatives that buyers cannot easily distinguish.

Community Governance Failures

Projects designed primarily for credit generation often underweight social dimensions. When communities don't benefit equitably from carbon revenues, they lack incentive to maintain project integrity. Land tenure conflicts, unclear benefit distribution, and external decision-making have undermined projects across developing regions. The best projects integrate Free, Prior, and Informed Consent (FPIC) from Indigenous and local communities and establish transparent benefit-sharing mechanisms.

Sector-Specific KPIs

Project Type	Primary Metric	Target Range	Top Quartile
Reforestation	5-year survival rate	70-85%	>90%
Reforestation	Carbon sequestration (tCO2e/ha/yr)	5-15	>20
Forest Protection	Avoided deforestation vs. baseline	50-75%	>85%
Mangrove Restoration	Area successfully restored	60-80%	>90%
Mangrove Restoration	Blue carbon (tCO2e/ha/yr)	8-25	>30
Agroforestry	Yield improvement vs. baseline	15-35%	>50%
Wetland Restoration	Hydrological function recovery	60-75%	>85%
Urban Green Infrastructure	Surface temperature reduction (°C)	2-5	>6
Soil Carbon	Organic matter increase (%/yr)	0.2-0.5%	>0.7%

Verification standards: Require continuous satellite monitoring with quarterly ground-truthing for all forest projects. Demand eDNA biodiversity baselines for restoration projects claiming co-benefits.

Key Players

Established Leaders

The Nature Conservancy (TNC) operates in 76 countries with over 125 million acres protected. TNC pioneered debt-for-nature swaps, converting $553 million in Belize sovereign debt to marine conservation commitments in 2021—a model since replicated in Barbados, Ecuador, and Gabon.

Conservation International brings 35+ years of ecosystem protection experience, now channeled through the Climate Finance Collective that mobilizes private capital for high-integrity nature investments. Their Indigenous Peoples and Local Communities Fund prioritizes community-led conservation.

World Resources Institute (WRI) provides the analytical infrastructure for NbS policy globally. Global Forest Watch offers near-real-time deforestation monitoring, while the Forest Landscape Restoration initiative supports governments implementing national restoration commitments.

Emerging Startups

Pachama (San Francisco) uses AI and satellite imagery for forest carbon verification, becoming a leading platform for corporate credit procurement with transparent, data-driven impact measurement.

MORFO (France) deploys drone-based reforestation at industrial scale—processing 50 hectares daily and planting 180 seed pods per minute in terrain inaccessible to manual crews. Their 2024 Amazon pilot achieved 82% seedling survival rates.

NatureMetrics (UK) pioneered eDNA biodiversity monitoring, enabling scientific verification of ecosystem recovery that was previously impossible at scale.

Terraformation operates the Seed to Carbon Forest Accelerator, providing financing, software, and technical support to early-stage forestry teams bridging the gap from project conception to revenue generation.

Key Investors & Funders

Lowercarbon Capital has made 17 investments in reforestation and ecosystem restoration, backing companies from seed through late-stage with patient capital.

Breakthrough Energy Ventures provides catalytic funding for frontier nature-based solutions with Bill Gates-founded resources and technical expertise.

Global Environment Facility (GEF) has mobilized over $23 billion since 1991, providing grants and blended finance for NbS at governmental scale.

UNDP BIOFIN unlocked $2.7 billion for nature in 2025 through the Biodiversity Finance Initiative, supporting comprehensive national biodiversity finance planning.

Examples

The Nature Conservancy's Belize Debt-for-Nature Swap

In 2021, TNC facilitated a $553 million debt restructuring for Belize, converting high-interest sovereign bonds into a blue loan with Conservation Funding Agreement. Belize committed to protecting 30% of its ocean by 2026 while saving $180 million in debt payments over 20 years. By 2024, marine protected areas covered 50% of territorial waters—achieving 95% of the 2030 target a decade early. The mechanism has since been replicated: Barbados converted $150 million in 2023, Ecuador $1.6 billion in 2023, and Gabon $500 million in 2024. This demonstrates that national-scale conservation can be financed through creative restructuring rather than additional aid.

Microsoft's Carbon Removal Portfolio

Microsoft has deployed over $500 million through its Climate Innovation Fund since 2020, with substantial allocations to nature-based carbon removal. Their approach differs fundamentally from typical offset purchasing: technical due diligence teams evaluate every project, prices range from $20-50+ per ton versus the $6 market average, and multi-year offtake agreements derisk supplier investment. In 2024, Microsoft published Criteria for High-Quality Carbon Credits establishing transparency standards now adopted by other corporate buyers. Their portfolio spans forest restoration in Latin America, mangrove projects in Southeast Asia, and soil carbon initiatives in the US Midwest.

MORFO's Industrial-Scale Drone Reforestation

French startup MORFO has operationalized drone-based reforestation across Brazil and West Africa, addressing a critical scalability bottleneck. The world needs to restore 350 million hectares of forest by 2030 to meet climate targets, but traditional hand-planting capacity falls orders of magnitude short. MORFO drones access steep terrain, flood zones, and remote areas at costs 70% below manual methods. Proprietary seed pods include mycorrhizal fungi, nutrients, and protective coatings that boost survival rates. Their 2024 pilot covering 1,000 hectares in the Amazon achieved 82% seedling survival—comparable to best-practice manual restoration. By 2025, MORFO targets 10,000 hectares annually while proving the model for global replication.

Action Checklist

Conduct nature dependency and impact assessment using TNFD framework across priority supply chains
Screen carbon credit suppliers against ICVCM Core Carbon Principles—eliminate non-compliant methodologies from procurement
Transition from spot-market credit purchases to multi-year offtake agreements with project developers
Require digital MRV with satellite monitoring and quarterly ground-truthing for all nature investments
Verify Free, Prior, and Informed Consent documentation and community benefit-sharing arrangements
Set internal carbon prices above $50/ton to ensure investment quality matches actual abatement costs
Diversify nature portfolio across geographies, project types, and permanence profiles
Engage jurisdictional REDD+ programs rather than standalone projects where available
Build internal NbS evaluation capacity—this is becoming a core procurement function, not CSR

FAQ

Q: Given the integrity scandals, should we avoid nature-based carbon credits entirely? A: No—the problems are methodological, not fundamental. Credits from jurisdictional programs, projects with continuous digital MRV, and those assessed against ICVCM Core Carbon Principles can deliver genuine climate benefits. The market is undergoing necessary quality correction. Buyers should adjust procurement criteria—demanding higher prices, better verification, and transparent baselines—rather than abandoning NbS entirely. High-quality credits will likely trade at $60+ per ton by 2030 as low-quality supply exits.

Q: How do we verify that a project is truly additional? A: Additionality requires examining the counterfactual. Request documentation of baseline threats (historical deforestation rates, agricultural expansion pressure), financial analysis proving carbon revenue is necessary for project viability, and third-party validation of reference scenarios. Jurisdictional programs offer advantages because government-level baselines are harder to manipulate than project-level claims. Ask suppliers specifically about reference area selection methodology and what independent review their baseline received.

Q: What's the relationship between carbon credits and biodiversity outcomes? A: They don't automatically align. Monoculture tree plantations can sequester carbon while providing minimal habitat value; high-biodiversity restoration may initially sequester less carbon than fast-growing commercial species. The best projects integrate both objectives from design phase using native species mixes, maintaining connectivity corridors, and measuring biodiversity KPIs alongside carbon. Credits with certified co-benefits traded at a 37% premium in 2023, reflecting buyer preference for multi-benefit projects. Require eDNA biodiversity baselines for any project claiming nature co-benefits.

Q: How should permanence risk be managed in nature-based portfolios? A: Permanence varies significantly by project type and geography. Tropical forests face lower fire risk than temperate zones but higher deforestation pressure. Mangroves store carbon durably but are vulnerable to sea-level rise. Require permanence buffer pools (10-20% of credits held in reserve), third-party insurance mechanisms, and 25+ year monitoring commitments. Consider valuing nature-based storage appropriately—perhaps not as 100-year permanent removal, but as high-impact near-term mitigation that complements geological storage approaches.

Q: What market developments should we anticipate through 2030? A: BloombergNEF projects voluntary market supply growing from 243 million tons in 2024 to 2.6 billion tons by 2030 under a quality-constrained scenario. Average prices are expected to reach $60/ton as low-integrity supply exits. Article 6 of the Paris Agreement will determine which credits qualify for compliance use, potentially bifurcating voluntary and compliance markets. China invested $26 billion in NbS in 2023—more than the rest of the world combined—signaling where scale is being achieved. Secure long-term supply agreements now while high-integrity projects remain available at current prices.

Sources

UNEP, "State of Finance for Nature 2024: Time to Act," United Nations Environment Programme, 2024
UNEP FI, "Trends and Innovations in Nature Finance: What to Look Out for in 2025," 2025
Callaghan, T. et al., "Systematic assessment of the achieved emission reductions of carbon crediting projects," Nature Communications, 2024
The Nature Conservancy & Forest Trends, "Doubling Down on Nature: State of Investment in Nature-Based Solutions for Water Security," 2025
Integrity Council for the Voluntary Carbon Market, "Core Carbon Principles Assessment Framework," ICVCM, 2024
Nature4Climate, "NbS Policy Tracker 2025: From Pledges to Practice," 2025
World Economic Forum, "The Future of Nature and Business," Global Futures Report, 2024
UNDP BIOFIN, "Global Momentum for Nature Finance: Biodiversity Finance Initiative Annual Report," 2025
Serena Capital, "Nature Tech Report 2025: Investment Trends and Market Analysis," 2025