This is the second article in a three-part series.
By Anne Cathrine Garde, Chief Investment Officer, Natural Capital, EMFIN’26Feb and Co-authored by Vinika Rao, Director, INSEAD Hoffmann Institute & Africa Initiative
The global nature finance gap is not uniformly distributed. It concentrates most acutely where ecological wealth is greatest and financial infrastructure thinnest. Across Africa, some of the world's most intact and biodiverse landscapes sit at precisely this intersection. Not because they have been overlooked by accident, but because the investment frameworks designed to value them were never built with them in mind.
That is beginning to change. But neither fast enough, nor at the scale required.
As the first piece in this series set out, nature underpins more than half of global GDP yet attracts less than 2% of climate finance, a gap UNEP estimates at more than $370 billion annually. Closing it requires institutional capital: the trillions sitting in pension funds, insurers, sovereign wealth funds, and development finance institutions that have the scale the moment demands.
The problem has never been a shortage of capital, nor a shortage of landscapes. It is the lack of structures capable of connecting the two. The part most investors have not yet worked out is what comes next: once you have acknowledged where this value sits, how do you build the financial pathway to unlock it?
Ecological Wealth, Structural Underinvestment
Africa holds an extraordinary share of the world's remaining natural capital. The Congo Basin anchors the second largest tropical forest on earth. East African savannahs support the most complex large-mammal ecosystems anywhere. The Okavango Delta forms one of the world's largest inland wetlands. Together, these landscapes regulate rainfall, store carbon, and sustain wildlife and people across borders that exist on maps but not in ecosystems.
In many African economies, this ecological wealth is not peripheral. It is foundational. Natural capital accounts for a substantial share of total wealth across the continent, underpinning food systems, water security, livelihoods, and climate stability for hundreds of millions of people. These are not marginal ecosystem services. They are critical infrastructure.
And that infrastructure is under acute stress. Africa is losing forest habitat at nearly twice the global deforestation rate. Yet the continent contributes only a fraction of global emissions, while bearing a disproportionate share of the resulting climate burden: desertification, flooding, wildfire, biodiversity loss, and declining ecosystem resilience.
The imbalance extends beyond environmental impacts. Africa receives only a fraction of global nature finance. The structural misalignment between the value these landscapes generate and the capital directed toward protecting them is one of the starkest inefficiencies in global sustainable finance.
What appears as a financing gap is, in many respects, an investment opportunity hiding in plain sight. The same asymmetry that reflects decades of undervaluation creates the conditions for investments that are both financially sound and structurally overdue. Capital that arrives with patience, accountability, and the rigour to price ecological performance accurately is not simply correcting a market failure. It is entering a new asset class before it is fully priced.
Why Capital Has Stayed Away
It would be convenient to explain the underinvestment as simple ignorance, but that would be wrong. Capital has stayed away from African natural landscapes for structural reasons that must be understood before they can be addressed. Strip the three barriers below to their core and a single pattern emerges: single country, single market, single project. Each compounds the others, and together they have kept natural capital below the threshold of an investable asset class.
First, country risk has been treated as undiversifiable. A single-country exposure concentrates political and regulatory risk, leaving investors with limited opportunities for diversification. Moreover, the country risk frameworks investors apply are calibrated on different markets. Political risk premiums designed for extractive industries do not translate cleanly to long-duration natural assets. Uncertainty over land rights is real and manageable, but it is often priced as permanent rather than addressable through good governance. The fix is structural rather than diplomatic: exposure across multiple jurisdictions means that a policy shock, a currency event, or a governance setback in one country is absorbed by the portfolio rather than borne by a single investment.
Second, many projects have been structured around a single revenue stream. Carbon credit projects spent their early years generating legitimate scepticism through weak additionality standards, inflated baselines, and governance failures that harmed both investors and communities. That scepticism was earned, but it also exposed a deeper vulnerability. A project dependent on one credit market inherits all of that market's volatility, methodology risk, and reputational exposure. This matters particularly while many nature-based credit markets, from biodiversity credits to water-quality markets, are still being defined. The more resilient model stacks revenues across carbon, regenerative agriculture, renewable energy, ecotourism, and other types of nature-based revenue streams, so that no single market's growing pains can sink the underlying investment.
Third, the deal sizes were wrong. Natural capital projects structured as one-off, landscape-specific interventions cannot absorb institutional capital efficiently. The transaction costs of deploying millions of dollars into a single project in a frontier market are prohibitive. The transaction costs of deploying hundreds of millions across a diversified portfolio of projects, sharing governance infrastructure, monitoring systems, and investment blueprints, are not.
Here is where Africa's ecological heterogeneity becomes a structural advantage rather than a complication. A portfolio spanning forests, savannahs, peatlands, and coastal systems across multiple jurisdictions naturally distributes country risk, diversifies revenue streams, and creates the deal flow density that institutional portfolio construction requires.
Single country becomes multi-jurisdiction. Single market becomes stacked revenue. Single project becomes a portfolio. The same mosaic of landscapes that made Africa difficult to approach as a single investment thesis is precisely what makes it compelling as one diversified across all three dimensions at once. But identifying the right portfolio logic is only half the work. The other half is building the financial architecture capable of holding it together.
The Financing Architecture That Makes It Work
Most existing nature financing structures still borrow their architecture from private equity: a fixed term, a single risk-return profile, capital deployed and returned on a common timeline. Natural capital investments in emerging market contexts sit outside those standard parameters with time horizons that rarely match conventional fund cycles. Acknowledging that gap is the starting point for designing around it.
Nature finance is less a sprint, but also not quite the marathon many would assume. To stay with the analogy, it works best as a relay. Different types of capital can enter at different stages, each suited to its own risk appetite and mandate, and pass the project forward as it matures. Blended finance, mixing philanthropic, commercial and institutional capital within a single structure, is what makes that handover possible. Philanthopic capital goes first. It does the early work of building governance, engaging communities to ensure alignment around shared goals, and proving the ecological case: work that turns an unbankable project into a credible one. Commercial and institutional capital can then enter at the stage and risk level that suits their own mandate. Grouping several such projects together rather than backing just one, keeps the overall pace steady, even if individual projects move faster or slower than expected.
None of this is new in principle. What has changed in the last five years is that it is becoming demonstrable rather than theoretical. Advances in satellite monitoring, AI, remote sensing, and geospatial biodiversity data mean ecological performance can increasingly be measured with the rigour that financial markets require. Assets once considered intangible can now be monitored, verified, and linked to performance-based revenue streams. A small but growing number of projects across the continent are generating the verified carbon, biodiversity, and revenue data that institutional due diligence actually requires: not yet at scale, but enough to shift the conversation from whether this can work to how to replicate what already does.
That said, blended finance is not a silver bullet. Most capital allocators operate within mandates built for conventional asset classes, and those are not easily rewritten. The more realistic path is to work with those mandates, stretching and adapting it until it fits, rather than waiting for entirely new structures to emerge.
Because nature does not wait for mandates to evolve or systems to be perfected. Ecosystems that took centuries to form are being lost in decades. The structures available today, however imperfect, are the ones that can act now. Holding capital back until the architecture is fully refined is itself a choice, and a costly one. Blended finance may not be the perfect tool, but it remains the most practical mechanism currently available to bridge the gap between ecosystem realities and capital requirements. What matters most now is how that capital can help close the financing gap, and whose interests it serves when it arrives.
The Actual Frontier
When people talk about investing in ‘frontier markets’ like Africa, it conjures an image of discovery: value waiting to be found by those arriving from outside. That framing has always been wrong about Africa, and it is particularly wrong here.
African governments, community land trusts, conservation agencies, and local enterprises have been managing these landscapes, often extraordinarily well, for generations. What they have lacked is access to capital markets on terms that reflect the value they steward rather than the risk premiums calibrated for a different era.
The frontier is not geographic. It is financial. It is the gap between what these assets are worth and what the current market is willing to price them at, and it is closing.
Bridging this gap requires something more specific than good intentions. It requires investment structures built with the institutions and communities that hold tenure, manage land, and bear the long-term consequences of how capital behaves. That accountability is not a constraint on returns. It is the condition that makes them durable. It is also what distinguishes a lasting natural capital portfolio from a well-intentioned pilot that does not survive its first governance crisis.
Africa is not waiting to become a natural capital investment destination. The assets exist, the data is improving, the frameworks are maturing, and the partners are ready. The challenge is moving beyond isolated projects toward replicable, institutional-grade portfolio models capable of attracting capital at scale. The future of nature finance depends on how quickly that transition occurs.
The next and final piece in this series, explores what that structure looks like in practice: a theory of change connecting ecological restoration to inclusive economic growth, and governance designed to deliver measurable outcomes across ecological, social, and financial dimensions.
