Financing Nature’s Adaptive Capacity

This report analyzes the convergence of nature-based solutions (NbS) and climate adaptation and resilience (A&R) finance, highlighting a massive funding gap where annual nature flows (USD 200 billion) and adaptation funding for developing countries (gap of USD 194-366 billion) are insufficient. Through case studies like Forest Carbon in Southeast Asia and Wildfire Resilience Insurance in the US, the report demonstrates that NbS can reduce adaptation costs and lower insurance premiums. However, scaling these solutions is hindered by difficulties in impact measurement, a lack of standardized metrics, and perverse government subsidies totaling USD 1.8 trillion annually. The authors argue for a shift from reactive to preventive investment strategies and the development of credible, localized impact metrics to unlock private capital.

• There is a critical funding gap for both nature-based solutions and climate adaptation. Annual global nature finance flows are USD 200 billion, which is only one-third of the amount needed to meet 2030 goals for climate, biodiversity, and land degradation. Adaptation in developing countries faces an annual funding gap between USD 194 billion and USD 366 billion, a figure 10 to 18 times higher than current funding levels.
• Nature-based solutions (NbS) are highly cost-effective for climate resilience and are projected to save USD 104 billion in adaptation costs by 2030 and USD 393 billion by 2050 by reducing the intensity of weather-related hazards and climate change by at least 26%.
• Impact measurement for nature and adaptation finance is hindered by three primary bottlenecks: the volatility of historical baselines due to frequent climate shocks, the highly localized nature of outcomes which makes generalization difficult, and a lack of metrics that integrate both social and ecological impacts.
• The financing of NbS and adaptation is obstructed by several shared barriers, including limited investor familiarity, a lack of standardized transaction structures, and unclear returns on investment (ROI) due to long time horizons and non-monetary benefits. Additionally, environmentally harmful government subsidies total USD 1.8 trillion annually, which disincentivizes nature-positive investments.
• The Landbanking Group's Landler Platform demonstrates how natural capital can be translated into balance sheet assets using a 'biophysical twin' and remote sensing. This allows companies, such as the German chocolate maker Ritter Sport, to identify high-risk regions in their supply chains and implement targeted nature-based interventions to mitigate risks like drought and extreme weather.
• Forest Carbon utilizes carbon finance to protect peatlands and wetland forests in Southeast Asia, arguing that conserving standing forests provides more immediate adaptation results than reforestation. The organization emphasizes community-owned projects and water management (peatland rewetting) to reduce the risk of wildfires and secure clean water supplies.
• In the United States, the Wildfire Resilience Insurance pilot showed that integrating ecological forestry practices into insurance pricing and underwriting can reduce average annual losses by 20-40% and lower premiums by up to 40%. A parametric policy for the Tahoe Donner Association resulted in a 39% lower premium and 89% lower deductible compared to scenarios without nature-based forest management.
• The report highlights that simply investing in NbS does not guarantee resilience, as some agroforestry practices have proven less resilient to wildfires or drought than expected. Investors are encouraged to be intentional, such as by selecting specific species for reforestation or designing stronger buffer zones against wildfires.

APA

Lee, M., Byrd, R., Tessema, E., & Odeh, N. (2025). Financing Nature’s Adaptive Capacity. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/11/Financing-Natures-Adaptive-Capacity.pdf

Chicago

Lee, Michelle, Rosaly Byrd, Edel Tessema, and Nour Odeh. Financing Nature’s Adaptive Capacity. Climate Policy Initiative, 2025. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/11/Financing-Natures-Adaptive-Capacity.pdf.

Wikipedia

{{cite report |last1=Lee |first1=Michelle |last2=Byrd |first2=Rosaly |last3=Tessema |first3=Edel |last4=Odeh |first4=Nour |title=Financing Nature’s Adaptive Capacity |publisher=Climate Policy Initiative |date=October 2025 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2025/11/Financing-Natures-Adaptive-Capacity.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lee2025financing, author = {Lee, Michelle and Byrd, Rosaly and Tessema, Edel and Odeh, Nour}, title = {{Financing Nature’s Adaptive Capacity}}, institution = {Climate Policy Initiative}, year = {2025}, month = oct, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2025/11/Financing-Natures-Adaptive-Capacity.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }