Expanding The Market For Nature-Based Solutions

Forbes

24-06-2025

Expanding the market for NbS can address pressing environmental and societal challenges critical to ... More stabilizing and restoring critical ecosystems.
A Zimbabwean farming initiative counters the effects of deforestation from tobacco farming by promoting capacity-building and supporting farmers' efforts to obtain organic certifications and access more lucrative markets.
A living shoreline, made by the Indigenous Pointe-au-Chien tribe of Louisiana using discarded, sterilized restaurant oyster shells, protects culturally significant sites and acts as a defense mechanism against hurricanes.
The conversion of 38,000 hectares of degraded cattle pastures in Colombia into silvopastoral systems — incorporating trees, shrubs, and fodder crops into grazing land — enhances carbon dioxide sequestration, improves biodiversity and soil quality, and increases livestock productivity, providing a critical pathway for reduced emissions while sustaining a vital income source.
These are all real-world examples of Nature-based Solutions (NbS), innovative projects that leverage natural processes to address societal challenges while delivering environmental, social, and economic benefits. Despite the promising potential of NbS, significant financial barriers prevent their widespread growth. Expanding the market for NbS can address pressing environmental and societal challenges critical to stabilizing and restoring critical ecosystems. A new initiative from the Sorenson Impact Institute includes a series of applied research projects and initiatives to help do just that.
'NbS is an emerging sector that recognizes and leverages the power of nature to efficiently address the impacts of climate change and biodiversity loss. It can also improve socioeconomic outcomes in communities along with ecological outcomes,' says Janis Dubno, managing director of impact finance at the Institute. 'But we have a long way to go if we are to harness the power of nature to bring about the needed climate and environmental outcomes and the socioeconomic co-benefits.'
While a few proven financial models for NbS exist, it is estimated that annual investments in NbS must nearly triple to $542 billion by 2030 and quadruple to $737 billion by 2050 to meet the Rio Convention targets. According to the United Nations Environment Programme, only 18% of NbS financing came from private capital in 2023. This presents a significant opportunity for private investors to scale investment in NbS and generate financial returns as well as measurable environmental and social impact.
'Research and practices related to NbS are being driven by an increasing sense of urgency because of the growing threats to ecosystems and people associated with them around the globe,' says Dr. Nalini Nadkarni, a renowned ecologist and Senior Fellow in Residence at the Institute. 'Despite the current 'missing pieces' for effective NbS, this is an exceptionally promising time to pursue the design, implementation, evaluation, and dissemination of NbS efforts.'
Initiatives to Facilitate Growth in NbS
Led by Dubno and Nadkarni, the Institute's NbS initiative is seeking funding and collaboration in four areas to help unlock growth in NbS, including a series of applied research projects and initiatives. These areas are outlined in further detail throughout this article.
In a collaborative approach, the Institute intends to create and demonstrate replicable and scalable models, products, and structures that address the barriers to investment while also leveraging expertise and experience in social impact to align ecological and social outcomes. In addition, bringing together ecologists, scientists, and investors, the Institute hopes to enhance NbS revenue potential, increase returns, and reduce risks — ultimately leading to investment growth.
Valuing Nature's Intangible Benefits
Applied Research Project: Valuing Nature's Intangible Benefits
Goals: Create diversified, sustainable models that attract stakeholders, reduce risk, and enhance the financial viability and positive impact of NbS.
When it comes to investing in NbS, the market has naturally gravitated toward the ecosystem services that are easiest to quantify and monetize, such as carbon sequestration or flood mitigation. Yet by focusing narrowly on these areas, investors risk overlooking a far richer array of socioeconomic co-benefits that carry real economic value. Improved mental health, strengthened community resilience, and the preservation of cultural, spiritual, and Indigenous values all deliver tangible returns, even though they've traditionally been overlooked as assets.
Putting a price tag on these 'invisible' assets elevates nature from a philanthropic line item to a bona fide asset class. A robust monetization framework translates subjective benefits, such as cultural identity, spiritual enrichment, social cohesion, and mental well-being, into hard metrics that speak the language of investors.
Implementing this approach requires synthesizing cross-sector expertise, drawing on ecology, anthropology, finance, and other fields, to codify best practices for capturing intangible values. It also demands the development of fresh indicators that convert overlooked services into quantifiable, market-ready data, followed by real-world case studies that demonstrate how these metrics drive both environmental impact and financial returns.
Equally important is mobilizing the impact-investment community: sharing these tools with fund managers and restoration practitioners to ensure they become industry standards rather than niche experiments. With this expanded vision, NbS investments do more than protect trees or wetlands — they unlock a fuller picture of nature's value, creating healthier people, more resilient communities, and stronger financial performance.
Addressing Barriers to Investment in Nature-based Solutions
Applied Research Project: Addressing Knowledge Gaps and Risks
Goals: Unlock greater NbS investment potential by recognizing an expanded scope of nature's benefits, clearly assessing those values, closing knowledge gaps, and reducing real and perceived risk.
'Some of the barriers to NbS investment are related to a lack of scale, real and perceived risk, and insufficient collaboration between ecological practitioners and investors. Creating economic models for NbS that include additional and predictable revenue sources will be necessary to attract investors to this sector,' Dubno says. 'To date, NbS investments have largely prioritized the ecosystem services that are easiest to measure and monetize, but this means the market is missing out on additional benefits that may also have economic value.'
Further, it is crucial to develop innovative investment structures that address the uncertainty of NbS, such as short-term metrics that are scientifically indicative of longer-term outcomes, or alternative mechanisms for increasing liquidity. Creating financial structures based on short-term indicators has the potential to shorten the duration typically associated with investments in NbS.
Traditional investors, in particular, have limited access to evidence on NbS performance and lack both standardized impact measurement approaches and knowledge about possible revenue models and exit strategies. These gaps contribute to a broader lack of investor confidence, reinforcing perceptions of high risk and uncertain returns and creating a cycle of under-investment in NbS.
'Overcoming these barriers requires more transparent impact and financial data, better risk-sharing mechanisms, aggregation models for scaling investment, stronger economic models, and better connections between investors and on-the-ground practitioners,' Dubno says.
Creating Scalable & Replicable Financial Structures
Outcomes-Based Financing Accelerator for Nature-based Solutions
Goal: Increase private NbS investment by enabling an ecosystem of organizations to leverage Outcomes-Based Financing.
Innovative financing mechanisms can help address key barriers to NbS investment by making these opportunities more attractive, scalable, and financially viable for investors, and are a primary focus of the Institute's work. One tool that can play an effective role in filling these gaps is outcome-based financing (OBF), a model that ensures investors are repaid based on the achievement of measurable ecological and financial outcomes, addressing concerns around risk and return uncertainty. The Institute has been a pioneer in using OBF to grow the market for impact investing.
By capturing the broader value of social, economic, and environmental outcomes, OBF has the potential to significantly enhance NbS revenue potential, increase returns, and reduce risks, leading to investment growth. Yet, despite a few high-profile pilots, there is limited evidence and knowledge around how, when, and where OBF works for NbS. As governments and philanthropies seek to scale investment into nature, a stronger evidence base is urgently needed.
Connecting Investors & Ecologists to Catalyze Nature-based Solutions
Convening: Connecting Investors and Ecologists
Goal: Catalyze market growth by creating pathways to make the work of capital investors and science-driven practitioners mutually transparent.
In January 2025, the Institute began its initial NbS landscape analysis focused on forest and terrestrial ecosystem investment worldwide. Set to be completed in August 2025, the analysis will map out existing investment models, identify what works and what does not, and assess the impact and return profiles of various NbS financing mechanisms. By making this information more transparent, easily digestible, and actionable, the Institute aims to reduce investor uncertainty and increase confidence in the scalability of NbS as an asset class.
The Institute's NbS initiative is motivated by the desire to connect impact investors and project ecologists, aligning financial and ecological frameworks that standardize processes for producing NbS outcome metrics across various programs, organizations, and ecosystems, ultimately building investor confidence.
'This standardization is needed for impact investors to feel confident that projected and reported outcomes are accurate, which decreases perceived and actual risk,' Nadkarni says. 'Few ecologists are conversant with the goals, norms, and 'vocabulary' of impact investors, so they do not frame or describe their work in ways that impact investors can readily grasp. Because the arenas of communication and information exchange have little overlap (different journals, meetings, conferences), the impact investing world and the ecological project world have largely been invisible or blurred to each other.'
'Our research will also help connect investors with ecologists and project developers, ensuring that capital is deployed in ways that are not only financially viable but also scientifically sound and socially equitable,' Dubno says. 'Ultimately, our goal is to create a clearer, evidence-based investment framework that aligns capital with nature-positive outcomes at scale.'
By creating these frameworks, the Institute aims to connect the scientific and financial communities along with groups that have not traditionally been represented, such as Indigenous, faith-based, art, and culture groups. The goal of these efforts is to raise investors' awareness of existing projects/programs, strengthen ecologists' understanding of financial structures, and create pathways to communicate needed outcome metrics for collaboration and investment. Ultimately, the Institute's work seeks to produce exceptional opportunities for both ecological and financial returns.
'Drawing on the power of nature to address pressing environmental and societal challenges is essential to stabilizing and restoring critical ecosystem services and other human values, including health and wellbeing, cultural heritage, community resilience, and ecological biodiversity,' Nadkarni says. 'Nature-based Solutions hold the key to unlock this potential.'