Seeding Private Sector Interest in Biodiversity

When changing the ownership structure of his California-based clothing enterprise last summer, Patagonia founder Yvon Chouinard raised the bar for so-called stakeholder capitalism.

“Instead of going public, you could say we’re going purpose,” the billionaire announced after moving to ensure all future profits go toward fighting climate change and preserving biodiversity. “As of now,” he noted, “Earth is our only shareholder. . . . Instead of extracting value from nature and transforming it into wealth for investors, we’ll use the wealth Patagonia creates to protect the source of all wealth.”

Patagonia’s restructuring is worth celebrating, and not just because Statista estimates the company’s annual revenue tops US$1 billion. By specifically associating his company’s corporate purpose with fighting the biodiversity crisis, Chouinard helped raise awareness of a burning issue that is often overshadowed by climate change despite being described as one of the top five threats currently facing humanity.

This is a big deal. After all, as Vox environmental reporter Benji Jones noted last year when covering the UN conference on biodiversity loss in Montreal, “Talks, like COP15, tend to draw far less attention than the big climate conferences—less than, say, COP27 in Egypt. Only a couple of heads of state showed up in Montreal and there were no A- or B-list celebrities.”

Given biodiversity’s relative lack of cachet as a crisis, Chouinard’s high-profile announcement was a much-needed attention generator, one that highlighted the fact that the private sector has an interest in preserving nature because it is essential to our health, well-being, and future prosperity.

The Patagonia announcement called Earth “the source of all wealth.” That might sound like an exaggeration, but biodiversity loss clearly threatens enough economic activity to warrant far more private sector investment than it gets today. As the World Economic Forum put it in a 2020 paper —which outlined why maintaining nature should matter to people who care about business operations, supply chains, and markets—“research shows that US$44 trillion of economic value generation – over half the world’s total GDP – is moderately or highly dependent on nature and its services.”

Unfortunately, Patagonia’s financial contribution to the biodiversity crisis is just a drop in the bucket when it comes to what’s needed to avoid disaster. Estimates vary, but restoring and conserving nature is widely expected to require annual investment of more than US$700 billion, and the money currently being spent doesn’t come anywhere close to that amount.

Indeed, according to John Tobin-de la Puente and Andrew W. Mitchell, authors of The Little Book of Investing in Nature, the biodiversity finance market in 2019 remained under US$150 billion, with the public sector covering about 87 per cent. That leaves a massive gap in funding, which was a hot topic at COP15, where disagreements over who should pay the bill for restoring and maintaining nature threatened to derail the conference. In the end, participating governments committed to working to ensure that by 2030 the world will have at least 30 per cent of all land and sea “effectively conserved and managed through ecologically representative, well-connected and equitably governed systems of protected areas and other effective area-based conservation measures.”

This 30-by-30 goal was widely seen as a positive step. “Finally, we have a north-star target for biodiversity that can provide that same level of focus as the temperature targets do for climate,” noted a Guardian commentary by Craig Bennett, chief executive of The Wildlife Trusts. Biodiversity, he added, finally seems to be taking its place beside climate change as an issue that needs addressing immediately.

But while the UN’s biodiversity talks ended with a collective commitment to reduce subsidies that harm biodiversity by US$500 billion a year, it only targeted new crisis-related spending of $200 billion annually, which as the Vox report noted “only dents the massive finance gap.”

Clearly, if we are serious about protecting our ecosystems, we can’t rely on the public sector alone. In other words, we need private sector players to fill the biodiversity financing gap. And for obvious reasons, we cannot expect many of them to contribute like Patagonia’s self-proclaimed reluctant billionaire.

Therein lies the dilemma—biodiversity desperately needs the support of traditional capitalists who have multiple shareholders and seek a return on their investments.

To help attract the level of private sector investment required to bridge the biodiversity financing gap before it is too late, this article argues governments need to proactively create a conducive investment environment and seed a self-sustaining biodiversity market via a major increase in concessional financing in order to mobilize private sector capital at scale.

Understanding the crisis
The global biodiversity crisis stems from the impact of human activity on ecosystems and all varieties of species, ranging from plants and animals to bacteria. The history of civilization is a tale of survival, and as people across the planet have worked to sustain life, forests and grasslands have been converted into industrial and agricultural systems, which have reduced genetic diversity and deprived native habitats of many animals while damaging or destroying whole ecosystems.

Over the years, biodiversity loss—along with the consumption of natural resources—has accelerated with population growth and the associated increase in economic activities. As things stand, the World Economic Forum reports that one million species are at risk of extinction in the coming decades, while over 8o per cent of wild mammals and half of all plants have already been lost and three-quarters of ice-free land have been severely damaged along with two-thirds of marine environments.

“Nature is on its knees and our leaders are risking catastrophic consequences for people, planet and our economy by failing to act.”

Much of the damage noted above has occurred over the last five decades. According to a World Wildlife Fund analysis, wildlife populations across the planet have decreased, on average, by a whopping 68 per cent since 1970. Freshwater populations have taken the biggest hit, plummeting an average of 83 per cent. On a regional basis, Latin America and the Caribbean have experienced the worst wildlife population decline (94 per cent) followed by Africa (66 per cent) and the Asia Pacific region (55 per cent). North America and Europe/Central Asia have experienced population declines of 20 per cent and 18 per cent respectively.

In the words of Tanya Steele, UK chief executive of the World Wildlife Fund, “Nature is on its knees and our leaders are risking catastrophic consequences for people, planet and our economy by failing to act.”

Barriers to private sector action
Seriously investing in biodiversity would not just help secure a major source of economic prosperity for future generations. As highlighted in a World Economic Forum report, restoring ecosystems and changing human behaviours that drive biodiversity loss can also reduce the risk of pandemics like COVID-19—which killed over seven million people while disrupting society across the planet at a cost counted in trillions.

As noted above, achieving sustainable long-term biodiversity management will require investment of more than US$700 billion annually (according to Tobin-de la Puente and Mitchell, the annual cost could be as high as US$967 billion by 2030). As a result, despite the public sector commitments made at COP15, there is little reason for hope unless we soon see a massive increase in private sector participation beyond the current level of about 13 per cent. And yet, the private sector almost seems afraid to get seriously involved, especially in developing countries, where mitigation efforts are currently most needed.

According to The Little Book of Investing in Nature, only about US$9.8 billion—which is less than 19 per cent of all biodiversity-related financing—is currently deployed to fight the crisis in emerging and developing countries. This is despite the immediate need of vulnerable communities facing scarcity of food and drinking water, not to mention the long-term benefits that more investment in mitigation efforts offer the collective world.

Simply put, with the private sector’s larger access to capital, Tobin-de la Puente and Mitchell argue it must do more than match public sector spending on biodiversity loss mitigation—it must take the lead when it comes to covering the cost of biodiversity protection and recovery. But while doing this is clearly in the collective long-term interest of businesses and all their stakeholders, it hasn’t happened to date.

We believe there are three primary factors behind why the biodiversity crisis in developing countries fails to attract more private capital.

First, scarcity of investible deals is an issue. Although private sector investors are not opposed to biodiversity investments, capital is rarely deployed due to the lack of potential deals with commercially acceptable risk-return ratios. And unfortunately, the lack of entrepreneurial capital prevents the growth of investable deals. Meanwhile, thanks to the nascent market situation, private sector experience with biodiversity investment remains extremely low, which means even identifying investable deals is an issue.

Second, the environment isn’t conducive. Since biodiversity investment is a nascent sector, enabling policies and frameworks have not yet been put in place, which further limits private sector appetite. To attract the required level of investment, an environment that helps ensure sustainable profit can be generated without any regulatory barriers must be in place. However, in the current market, the availability of much-needed tax breaks, de-risking guarantees, and regulatory support is far from encouraging.

Third, risk perception is significant. With limited experience and few track records to study, potential investors naturally perceive biodiversity as a high-risk gamble. As a result, market growth currently depends on leaps of faith, which isn’t a reliable driver. To change this, there needs to be a period of trial and error, but no one wants to be the first to invest and fail, even if that is what it takes to develop a commercially viable market.

So, what can be done to overcome these challenges?
Biodiversity is an adaptation sector that needs to be developed. As things stand, while the private sector provided 49 per cent or US$310 billion in climate finance in 2020, adaptation investment aimed at making infrastructures and ecosystems more resilient to the impacts of climate change attracted only US$1 billion, which is about 2 per cent of the US$45.9-billion market, according to a 2021 report on the global climate finance landscape. In our view, this could change with a greater understanding about how climate accelerators (cohort-based programs offering early equity that have mentorship and educational components) could facilitate and support the growth of adaptation and biodiversity technologies, particularly in developing countries.

Accelerators nurture and raise potentially profitable businesses by providing seed capital while coaching entrepreneurs and introducing them to a broader ecosystem in the sector for knowledge sharing. We see many accelerators with private sector capital in renewable energy, where the market is relatively developed. This is natural, given that accelerators tend to be created in sectors where interested investors aim to nurture the growth of a unicorn company along with a return on investment. There are a few biodiversity focused accelerator programs. The Kenya Climate Innovation Center, for example, actively supports ventures pushing adaptation technologies in agriculture and water, which, according to a UN report , accounted for 39 per cent of the Kenyan accelerator’s total support for entrepreneurs in 2016. But we need many more examples to mobilize private sector interest in adaptation technologies. And to get them, we need a more conducive investment environment that enables the same repetitive process of trial and error that concessional finance enabled renewable energy to go through back in the 1980s.

Concessional finance is capital provided by government, multilateral development programs, or public finance institutions. It can come in the form of equity, loans, guarantees, subsidies, and grants. In fund investments, it can be first-loss capital subordinated to the interests of commercial players, shielding private sector capital from the loss. And when strategically deployed, concessional finance can be an effective tool for attracting private sector interest in a nascent market lacking a mature policy and regulatory framework that supports participants seeking a return on investment.

The renewable energy market once faced the same barriers to growth that currently limit biodiversity investment. Today, thanks to private sector participation, renewable energy is forecast to top US$2 trillion by 2030, according to Statista. And concessional finance initiatives that limited risk while subsidizing technological advances is what turned the tide by enabling private sector participation to scale.

A good example is the development of a sustainable wind energy market in Denmark. When the oil crisis disrupted the global economy in the mid-1970s, the Danes were heavily dependent on fossil fuels and the need to develop alternatives became obvious. By the mid-1980s, the Chernobyl nuclear disaster essentially took the nuclear option off the table. But as luck would have it, Denmark had already started betting on wind. Unfortunately, given the risk involved, few private sector investors were interested in gambling on wind with the government, at least not at the same level of risk, which is why concessional finance was deployed to seed market development in the short and medium term.

“Concessional finance is often called patient capital for a reason. And it took time for the Danish wind market to develop. But wind is now one of Denmark’s most significant renewable energy sources.”

The Danish government achieved this by providing three types of support to foster and accelerate the growth of the wind energy market:

  • To drive supply side innovation and determine which technology worked best in the Danish context, the government first subsidized research and development. In the late 1970s, Denmark then developed a national policy to foster and accelerate growth of the renewable energy market that deployed concessional finance grants to support the building and exporting of wind turbines.
  • To scale the market in the mid-1980s, the Danish government subsidized the purchase of wind energy using feed-in tariffs to offer the utility sector a guaranteed fixed price that was significantly discounted.
  • In the 1990s, a carbon tax was introduced, making renewable energy more commercially viable than fossil fuel. In 2000, the feed-in tariff was replaced with a green certificate scheme, which essentially eliminated the government subsidy, but the wind market continued growing.

Concessional finance is often called patient capital for a reason. And it took time for the Danish wind market to develop. But wind is now one of Denmark’s most significant renewable energy sources, providing almost 50 per cent of the nation’s average electricity demand in 2020 (compared to 16 per among European Union nations and the United Kingdom).

In fact, thanks to concessional finance, the renewable energy market in Denmark is now so developed that the need for subsidies has been eliminated. And this successful deployment of concessional finance as a tool to build a market for renewable energy has been replicated in other countries.

Renewables, for example, account for nearly 40 per cent of India’s installed capacity, a fact attributable in considerable measure to the policy initiatives and investment subsidies that buffeted the renewable sector in its infancy. Initially, a combination of concessional lending, preferred premium feed-in tariffs, and priority dispatch gave the market the ability to scale while attracting commercial interests. Subsequent policy initiatives (such as the introduction of reverse auction procurement modality), aided by a global reduction in equipment prices, helped achieve tariff parity with fossil fuels, making renewables a preferred option for bulk procures.

FIGURE 1: How to Seed Private Sector Interest in Biodiversity Finance


Illustration: Ayaka Fujiwara and Tatiana Kan

In his Guardian commentary, Bennett noted a simple truth when he stated that failing to invest in nature will ultimately “cost us far more than money.”

Unfortunately, even with the tailwind generated by the recent UN biodiversity conference, reality says the biodiversity market is unlikely to attract the private sector champions it needs without them being offered blended finance options and other incentives similar to what was used to attract early commercial investors in the Danish renewable energy market. There are just not enough business leaders who think like Patagonia’s founder to do what is required before it is too late.

We believe that biodiversity market development can follow the renewable energy path as highlighted in Figure 1. And as the short case studies attached to this article show, the funding models required to do this already exist. But if reality says we need traditional capitalists to take on a lead role in biodiversity, then we must get more serious about seeding the market with public funds in the short term.

In other words, governments and other concessional finance providers have considerable work left to do and little time to do it.

CASE STUDY 1: Global Fund for Coral Reefs

Coral reefs don’t just protect coastal communities from extreme weather events such as storms and erosion—they generate jobs and tax dollars for local populations. As a result, the ongoing degradation of coral reefs caused by global warming, climate change, and human activities not only deprives fish and other marine organisms of essential food and shelter—it also threatens the well-being of one million people worldwide. To eliminate this threat, however, coral reefs need to attract private capital that is reluctant to participate given policy and regulator gaps and questionable commercial viability.

Amid this reluctance, the US$500-million Global Fund for Coral Reefs (GFCR) initiative aims to make the blue economy an investable asset class by using a blended capital approach to overcome barriers to private sector participation and create a first wave of investment across Africa, the Asia Pacific region, Latin America, and the Caribbean. This is being done in partnership with the Green Climate Fund (GCF)—established as part of the United Nations Framework Convention on Climate Change (UNFCCC) to serve the Paris Agreement—which has taken a subordinated position in the GFCR and provided US$125 million to de-risk participation by private sector investors.

The GFCR structure has a grant window and an investment window. The grant window exists to enable research, including impact assessment, and help develop an investible pipeline for the investment window, which aims to take equity positions in about two dozen companies. Working together, both windows have a mandate to help create a conducive investment environment supported by market enabling regulations and policies.

Using concessional finance to incentivize private capital, the GFCR initiative will focus on protecting food supplies by addressing unsustainable tourism, overfishing, and destructive fishing, while investing in sustainable infrastructure and waste management to address pollution. By doing this, the fund aims to protect 29,000 hectares of reefs, provide over 12,000 jobs in sustainable businesses for communities dependent on coral reef ecosystems, and benefit about 2.9 million households.

CASE STUDY 2: Nature+ Accelerator Fund

Launched in 2020, the Nature+ Accelerator Fund is the first nature conservation accelerator to focus on delivering “the volume of investments needed to address the daunting scale of nature conservation challenges” by attracting more private sector involvement via “investment opportunities that balance measurable, science-based conservation benefits and positive social impacts with delivering financial returns for investors.”

As explained in a fund backgrounder, “Experience to date with private finance for nature suggests that, while there have been successes, the overall investment volumes have been small, adequate returns have not always been achieved, and the knowledge required to build scalable investment products is dispersed.”

To overcome these challenges, the Nature+ Accelerator Fund combines knowledge; expertise; and resources from the International Union for Conservation of Nature (IUCN), Mirova Natural Capital, and a network of partners within the Coalition of Private Investment in Conservation (CPIC) with financial know-how and US$8 million in “risk-tolerant concessional finance” from the Global Environment Facility (GEF). Using the GEF funding as an anchor, the fund is deploying an investment window mechanism to seed ventures and naturally allow companies that perform well to attract more capital from the private sector in later stages.

By 2030, the fund expects to have US$160 million in co-investment along with a significant investment portfolio of transformational, scalable, and financially viable projects with an adequate risk/return ratio.

CASE STUDY 3: GCF Project Prep Grants

Many concessional finance providers offer grants for project preparation. These grants can be a valuable source of money to conduct feasibility studies and examine other factors to determine whether a project is worth pursuing, especially where there is no established track record. The GCF has a Project Preparation Facility (PPF) that offers up to US$1.5 million along with technical assistance to GCF accredited entities developing climate finance proposals.

In November 2022, for example, the GCF approved PPF support for the Blue-Green Investment Corporation (BGIC), the first green bank in the Caribbean. A partnership between public and private sector players, the BGIC initiative aims to overcome the financing challenges and constraints of climate change adaptation and mitigation in the region. It will invest in private and public enterprises for green, affordable, gender-inclusive housing; energy generation; water conservation; food security; and low-carbon transport. The program will ultimately promote a paradigm shift towards resilient livelihoods and low-carbon technologies, particularly for low-income households and energy, housing, agricultural, and transportation sectors.

According to BGIC, PPF support provided by the GCF will fill gaps in terms of information, stakeholder consultations, and assessment of potential adaptation options, and help fund a feasibility study, along with operational arrangements, legal services, and strategic planning.


  • Baysa Naran, Pedro Fernandes, Paul Rosane, Rajashree Padmanabhi, Sean Stout, Matthew Solomon, Rowena Tolentino, Costanza Strinati, Yaxin Zhu, Elvis Wakaba, and Barbara Buchner, “Global Landscape of Climate Finance 2021,” Climate Policy Initiative, 2021,
  • J. L. Blanchard et al., Living Planet Report 2020: Bending the Curve of Biodiversity Loss, WWF, 2020.
  • United Nations Framework Convention on Climate Change, Climate Technology Incubators and Accelerators, 2018,
  • “COP15 Ends with Landmark Biodiversity Agreement,” United Nations Environment Programme (UNEP), December 20, 2022,
  • Equilibrium Futures, “Nature+ Accelerator Fund, ” March 2, 2021,
  • Green Climate Fund, “FP180: Global Fund for Coral Reefs Investment Window,” November 23, 2021,
  • John Tobin-de la Puente and Andrew W. Mitchell, The Little Book of Investing in Nature, Global Canopy, Oxford, 2021.
  • “Wind Power Takes Flight in Denmark Denmark’s Renewable Energy Policies,” UNESCAP, n.d.,
  • World Economic Forum and PwC, Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy, January 19, 2020.
  • Douglas Broom, “This Is How We Prevent Future Pandemics, Say 22 Leading Scientists,” World Economic Forum, November 27, 2020,

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