Why Investments in Nature Require Public-Private Partnerships

The funding gap behind nature restoration

The UK needs £56 billion over the next decade to meet its nature restoration targets. That works out at £5.6 billion every year until 2030. Public budgets cannot cover this alone.

This is not just a UK problem. Globally, the money required to reverse biodiversity loss and restore ecosystems far exceeds what governments can allocate through traditional conservation grants. Private capital must fill the gap. However, private investors will not deploy funds at scale without mechanisms that reduce their risk.

That is where public-private partnerships come in. These structures blend public funding with private investment to create conditions where nature projects become financially viable. Without them, the majority of nature restoration work simply will not happen.

How public-private partnerships address the investment problem

Public-private partnerships work by sharing risk between government and commercial investors. Public funds are used strategically to de-risk projects, making them attractive to private capital. This approach can mobilize significantly more money than public spending alone.

The Big Nature Impact Fund in the UK demonstrates this model. Public seed finance is used to reduce risk for private investors, enabling larger flows of commercial capital into nature restoration and carbon reduction projects. The goal is to build a high-integrity nature market that operates at scale.

Internationally, the UNDP Nature Investment Facility targets ecosystems at risk, particularly Natural World Heritage Sites. Around 90% of these sites are Key Biodiversity Areas. The facility focuses on sectors including agriculture, clean energy, forestry, and eco-tourism. It uses a multi-partner trust fund that blends public and private money.

One example is the Tiger Landscape Investment Fund, which supports businesses that generate positive outcomes for nature while delivering financial returns. Profits are reinvested into park management and community support, creating a cycle that sustains both conservation and local economies.

The scale of investment required

Nature-based solutions are part of a broader infrastructure challenge. By 2030, the world needs to invest USD 6.9 trillion annually in climate-resilient infrastructure. This includes green stormwater systems, reforestation, wetland restoration, and other nature-based projects.

Public budgets for climate adaptation are limited. Therefore, private finance must be mobilized through partnerships. These arrangements allow governments to leverage public funds more effectively, attracting multiples of the original investment from commercial sources.

The Green Finance Institute in the UK runs the Natural Environment Investment Readiness Fund, which offers grants of up to £100,000 to help projects prepare for private investment. This type of support addresses a common barrier: many nature projects lack the financial structures and data that investors require.

Meanwhile, the Asian Infrastructure Investment Bank is developing proposals for nature-based infrastructure partnerships ahead of COP30 in Belém. These initiatives reflect growing recognition that nature must be treated as critical infrastructure, not just an environmental concern.

Why private investors remain cautious

Private capital is available, but investors face significant obstacles. Nature projects often lack predictable revenue streams. Returns can be uncertain, and timelines are long. Climate impacts add further unpredictability, making it hard to model financial performance.

In many developing economies, the cost of financing is prohibitively high. Currency risk, regulatory uncertainty, and political instability all increase the perceived danger of investing in nature. Consequently, foreign direct investment through partnerships grows more slowly than needed.

Investors also struggle with the absence of standardized frameworks for measuring natural capital. Without consistent metrics, it is difficult to compare projects or assess risk. This is beginning to change. The Taskforce on Nature-related Financial Disclosures is developing standards that central banks and regulators are now considering.

However, disclosure frameworks alone will not unlock capital. Investors need pipelines of investable projects with clear financial structures. They also need evidence that governments will support these projects through policy, regulation, and public co-investment.

Recent developments in blended finance and policy

Several recent initiatives are addressing these barriers. The Green Finance Institute has called for the UK Green Finance Strategy to be updated with a stronger focus on blended finance. This includes aligning regulation, creating incentives for private investors, and using public capital to de-risk early-stage projects.

The UNDP facility is designed to delink deforestation from commodity supply chains while supporting economic development in vulnerable regions. Returns from successful investments are reinvested into conservation management and peacebuilding, particularly in conflict-affected areas where biodiversity is under severe threat.

In March 2025, Climate-ADAPT published guidance on using public-private partnerships for urban adaptation. The LIFE CITYAdaP3 project, for example, uses corporate social responsibility budgets and partnership structures to finance climate adaptation in cities. This approach is spreading across Europe.

At the international level, the Compromiso de Sevilla emerged from the 4th International Conference on Financing for Development. This agreement calls for partnerships that prioritize long-term impact aligned with the Sustainable Development Goals. It emphasizes the role of blended finance in addressing high capital costs and reducing risk for private investors.

Core facts on partnerships and nature finance

• The UK faces a £56 billion funding gap for nature restoration by 2030, requiring £5.6 billion annually.
• Public-private partnerships use public funds to de-risk projects, making them viable for private investors.
• The Big Nature Impact Fund and UNDP Nature Investment Facility are both operational, blending public and private capital.
• Global infrastructure investment needs total USD 6.9 trillion per year by 2030 to meet climate and nature goals.
• The Green Finance Institute offers grants up to £100,000 through its Natural Environment Investment Readiness Fund.
• The Asian Infrastructure Investment Bank is advancing partnership proposals for COP30 in Belém.
• Standardized disclosure frameworks, such as those from the Taskforce on Nature-related Financial Disclosures, are under consideration by central banks.

What this means for UK businesses

Businesses in sectors such as agriculture, construction, logistics, and energy are increasingly exposed to nature-related risks. Supply chains depend on functioning ecosystems. Water availability, pollination, flood regulation, and carbon sequestration all rely on healthy natural systems.

As disclosure requirements tighten, companies will need to report on their impacts and dependencies related to natural capital. This is already happening in some jurisdictions. The Taskforce on Nature-related Financial Disclosures is building a framework similar to the Task Force on Climate-related Financial Disclosures, which has been widely adopted.

For businesses that supply the public sector, nature considerations are becoming part of procurement criteria. PPN 06/21 requires carbon reduction plans from suppliers bidding for central government contracts above a certain threshold. Similar expectations around nature are likely to follow, particularly as the UK government develops its Environmental Improvement Plan.

There are also opportunities. Companies involved in nature restoration, green infrastructure, or sustainable land management may find new revenue streams as investment increases. Partnerships offer a way to share project risk while accessing public funding or blended finance structures.

However, businesses must prepare. This includes understanding their nature dependencies, collecting relevant data, and developing projects that meet investor criteria. Many companies lack this capability today. Building it now will position them to benefit as nature finance scales.

Risk allocation and delivery models

Public-private partnerships allocate risk according to who is best placed to manage it. Typically, private partners take on design, construction, and operational risks. Public entities manage regulatory, policy, and demand risks.

This division can accelerate delivery. Private partners often bring expertise in project management and efficiency. Public partners provide long-term revenue certainty, policy stability, and access to lower-cost capital through guarantees or co-investment.

Green infrastructure projects, such as sustainable drainage systems or urban wetlands, are well suited to this model. They require upfront capital, ongoing maintenance, and performance monitoring. Private partners can deliver these efficiently if contracts are structured correctly.

Nature-based solutions face additional complexity. Ecological outcomes can be harder to quantify than engineering outputs. Performance depends on factors like weather, soil conditions, and species behavior, which are not fully controllable. Therefore, contracts must allow for adaptive management and include clear metrics tied to ecological and financial goals.

Building capacity for nature investment

One barrier to scaling partnerships is the lack of investment-ready projects. Many nature initiatives are too small, lack financial structuring, or do not produce the data investors need. Addressing this requires capacity building.

The Natural Environment Investment Readiness Fund supports this by helping projects develop business cases, financial models, and governance structures. Similar programs are needed globally, particularly in regions where biodiversity is most threatened but financial capacity is weakest.

Governments can also support pipeline development by creating enabling policy. This includes land use planning that protects natural capital, regulatory frameworks that recognize ecosystem services, and tax incentives for private investment in nature.

Technical assistance is equally important. Project developers need support to measure baselines, monitor outcomes, and report performance. This requires collaboration between ecologists, financial analysts, and legal experts. Few organizations currently have this multidisciplinary capability.

For SMEs, accessing this support can be challenging. Larger companies may have in-house sustainability teams. Smaller businesses often do not. Sustainability compliance services can help bridge this gap, providing the expertise needed to participate in nature finance markets.

Regulatory and market developments

Central banks and financial regulators are beginning to treat nature-related risks as material to financial stability. The Bank of England, for instance, has explored climate stress testing and is considering similar approaches for nature.

If nature-related disclosures become mandatory, businesses will need systems to collect and report data on their impacts. This will affect sectors including agriculture, construction, water, and energy. Companies that prepare early will avoid scrambling to meet new requirements.

Market mechanisms are also evolving. Biodiversity net gain is now a legal requirement for most new developments in England. This creates demand for habitat creation and restoration. Private investment is flowing into projects that generate biodiversity units, which developers must purchase to offset their impacts.

Carbon markets, too, are maturing. Nature-based carbon credits from peatland restoration, afforestation, or soil carbon sequestration are increasingly traded. However, quality varies. Buyers are demanding higher standards, better verification, and assurance that credits represent real, additional, and permanent carbon reductions.

Public-private partnerships can help establish these standards. By combining public oversight with private innovation, they can build credible markets that deliver both environmental and financial outcomes.

Adapting to climate uncertainty

Climate change introduces uncertainty into nature investments. Droughts, floods, and temperature shifts can affect project performance. Species may not respond as expected. Restoration timelines may lengthen.

This makes traditional investment appraisal difficult. Partnerships must build in flexibility. Contracts should allow for adaptive management, where approaches are adjusted based on monitoring data. Performance metrics should reflect ecological complexity, not just financial outputs.

Insurance products are also emerging to cover specific climate risks. Parametric insurance, for instance, pays out when certain environmental thresholds are breached, regardless of actual losses. This can protect investors and make projects more bankable.

Public partners can help by providing guarantees or first-loss capital. If the public sector absorbs some downside risk, private investors are more willing to participate. This is particularly important in regions where climate risks are highest but investment is most needed.

Next steps for businesses and policymakers

For businesses, the priority is understanding exposure. Which parts of your operations depend on natural systems? Where in your supply chain are nature-related risks concentrated? What data do you need to report on impacts and dependencies?

Answering these questions requires expertise. Carbon reporting programs often cover Scope 3 emissions, which include nature-related impacts such as deforestation in supply chains. Training on environmental disclosure can help teams build the skills needed to manage these issues.

For policymakers, the focus should be on creating enabling conditions. This includes updating green finance strategies, aligning regulations, and providing catalytic public funds. It also means building pipelines of investable projects and supporting capacity development.

Public procurement can drive demand. By requiring suppliers to demonstrate positive nature outcomes, governments can stimulate investment and innovation. This is already happening with carbon. Nature is the logical next step.

Where to find further information

The Department for Energy Security and Net Zero publishes updates on the UK’s environmental and climate policy, including financing strategies for nature restoration.

The Green Finance Institute provides resources on blended finance, nature markets, and investment readiness. Their research includes detailed case studies on public-private partnerships in the UK.

For international perspectives, the United Nations Development Programme offers guidance on the Nature Investment Facility and other mechanisms for mobilizing private capital in developing economies.

The Taskforce on Nature-related Financial Disclosures is developing the framework that will shape how businesses report on natural capital. Early adoption can provide a competitive advantage as these standards become mainstream.