Article written by Anne Cathrine Garde, Chief Investment Officer, Natural Capital, EMFIN’26Feb and Co-authored by Vinika Rao, Director, INSEAD Hoffmann Institute & Africa Initiative
The Nature Financing Gap is growing. This despite the increasingly acknowledged business case for treating nature as an essential component of infrastructure rather than as a mere backdrop to the global economy. Nature makes economic activity and human prosperity possible. Forests regulate climate. Wetlands buffer disasters. Grasslands store water. Deploying capital into sustainable agriculture, forestry and conservation has the potential to yield significant financial returns, besides the obvious environmental benefits and regulatory risk mitigation.
Yet these systems, which quietly support more than half the global GDP, remain financially invisible and hugely underfunded.
The result is one of the most consequential misallocations of capital in modern markets.
Nature as Infrastructure
Natural capital encompasses the world’s stock of forests, wetlands, grasslands and rivers and the ecosystem services that they generate: carbon storage, water filtration, pollination, soil fertility, and disaster protections. More than half of the world’s economies rely on the foundational infrastructure that natural capital provides, yet they continue to be viewed as nothing more than external ecosystems. This disconnect between reliance and recognition is at the heart of the global nature-finance gap. So, what if we started looking at these services and pricing them for the true, economic value that they hold?
Unlike built infrastructure, which deteriorates over time, natural infrastructure is regenerative and consists of assets that can appreciate when protected from external pressures. As ecosystems recover and thrive, the volume, stability, and diversity of the services they provide also increase, which in turn enhances the natural output that underpins durable, long-term returns. The greater the biodiversity within an ecosystem, the more resilient and valuable it becomes. Seen through this lens, conservation is not a sunk cost. It is active management of an appreciating, income-generating asset.
The World’s Largest Capital Allocation Failure
Despite the clear economic logic, capital markets have been slow to respond. Nature underpins 50% of global GDP , it attracts less than 2% of climate finance , and when you account for global capital pools beyond climate-dedicated funds, that number drops almost completely out of sight. This imbalance reflects a startling paradox: nature remains indispensable, yet financially invisible. The result is a widening gap between the value nature provides and the investment required to safeguard it.
The consequences of this misalignment are no longer theoretical but existential. The 2025 World Economic Forum Global Risks Report ranked biodiversity loss among the top five systemic risks, up from 37th back in 2009. As ecological instability translates into supply-chain shocks, food-system disruptions, water scarcity, and growing insurance losses, investors are confronting a mispriced macro risk hiding in plain sight. The most foundational asset class to global productivity remains absent from balance sheets. But to unlock real capital flows, investors must move beyond a risk-only perspective and recognise the substantial opportunity embedded in nature as infrastructure.
The Market Opportunity
As with any undervalued asset with large potential to scale, there is a significant market opportunity. When managed within ecological boundaries, natural assets generate predictable and diversified revenue across several categories:
• Provisioning services: Sustainable forestry, regenerative fisheries, and non-timber forest products;
• Regulating services: Carbon, biodiversity, or water-quality credits, resilience payments, and downstream cost avoidance; and
• Cultural services: Ecotourism, heritage conservation, recreation, and local enterprise development.
These flows convert ecological performance into yielding assets. The key is, however, sustainable management. Natural assets only produce durable revenue when managed for regeneration rather than extraction. When managed sustainably, they create a self-reinforcing flywheel effect, enhancing long-term revenue potential, while simultaneously improving the asset’s efficiency and value through rising biodiversity and ecological capacity. This feedback loop, where healthier ecosystems become more productive assets, sets natural capital apart from any traditional asset class.
The Architecture for Trust is Taking Shape
For natural capital to enter mainstream financial architecture, investors need comparability, transparency, and verifiable data. These conditions are now emerging. Global frameworks such as the Taskforce for Nature-related Financial Disclosures (TNFD), the System of Environmental-Economic Accounting (SEEA), the International Sustainability Standards Board (ISSB), and national natural capital accounts are beginning to standardise how nature is measured and valued, leveraging satellite imagery, geospatial datasets, and locally calibrated field data to ensure permanence, accuracy, and transparency.
But these frameworks are not enough on their own. Local policy initiatives and enabling regulation remain essential to accelerate adoption and convert early frameworks and data into investable markets. For example, clear rules on land tenure, streamlined permitting for conservation enterprises, and recognition of ecosystem-service markets can dramatically reduce transaction costs and unlock private investment.
Innovators are already moving. Natural Asset Companies, environmental-credit markets, and other payments for ecosystem services are converting ecological value into investable financial flows. In doing so, they create the pricing signals required to translate previously invisible ecological value into recognised and tradable market value. As policy alignment strengthens, these structures will further mature, setting the foundation for nature as a formal investment class.
Nature finance is evolving from concept to architecture.
A New Frontier for Resilient Portfolios
A new opportunity set is emerging for investors. One in which nature-based assets play a similar role to infrastructure debt, serving as low-correlation, resilience-enhancing, and inflation-protective components of a balanced portfolio. These assets offer steady, contractable cash flows while strengthening ecosystem resilience, making them attractive to investors seeking stability in an increasingly volatile world. As data improves and market structures mature, nature-based investments become a strategic allocation for long-term institutional portfolios. Early movers who design efficient, transparent, and science-grounded structures stand to capture significant first-mover advantage as this asset class formalises.
This shift also upends the historical extractive paradigm. Instead of treating natural resources as inputs to be depleted, countries rich in biodiversity now have the opportunity to harness natural capital into long-term economic value while strengthening ecological resilience.
Across Africa, home to some of the world’s most intact ecosystems and fastest growing environmental credit markets, this potential is increasingly visible. With the right governance, investment structures, and community partnerships, undervalued landscapes can become engines of regeneration and support livelihoods, build climate resilience, and unlock entirely new forms of economic activity.
The question is no longer whether nature will become part of financial architecture, but who will shape the rules and benefit from the early wave of innovation. Those who integrate natural capital with the same rigour as traditional infrastructure will define the contours of this emerging investment frontier.
Stay tuned for the next article in this series, exploring why Africa is uniquely positioned to lead the development of nature-based finance and what it takes to turn natural capital into a bankable, scalable asset class.
