Finance Solutions for Nature 2025

2.6 Payments for ecosystem services (PES) PES are contracts to reward ecosystem stewards, with growing private sector interest. Overview79,80 PES are voluntary agreements offering financial incentives for landowners or stewards (and to a lesser extent, marine communities) to manage land in ways that preserve or enhance ecosystem services such as clean water, carbon storage and biodiversity. Payments are typically conditional on verified outcomes, with tiered rewards for overperformance. Public schemes, such as ecological fiscal transfers, often lack revenue generation, while private and market-based PES rely on sustainable revenue streams. Effective PES require strong governance, equitable benefit-sharing and robust MRV – often supported by local conservation partners and independent verification – to ensure community empowerment and livelihood improvements. Potential to mobilize capital for nature PES schemes have unlocked up to $42 billion annually across more than 550 initiatives.81 Scheme size varies widely – from $100,000 to over $10 million – while national programmes in Costa Rica, Mexico and China have mobilized hundreds of millions. A key constraint for private schemes is sustainable revenue generation. While some schemes scale up through links to credits, bonds or funds, most still depend on taxes and subsidies, limiting commercial growth. Structuring complexity differs by context. Public schemes without revenue dependencies are generally simpler, while private PES face legal, land tenure and monitoring challenges. PES are well-suited to local conservation efforts, including reforestation, water catchment protection, agroforestry and pollination, often benefiting community livelihoods. Ability to price nature into markets PES embed ecosystem service values into policy and markets by identifying, monetizing and funding their protection, backed by MRV. PES shift perceptions of nature from a free good to essential infrastructure requiring investment – particularly useful for public planning. Valuation depends on accurately identifying and pricing services and payments, across both local and cross-border ecosystems. Payments for PES must also exceed returns from nature- negative activities to be effective. This is particularly challenging when producers engage in commodity production, where price volatility can make fixed PES-related incentives for conservation less attractive when global commodity prices rise significantly. Pathways to mainstream Standardized public-private PES models with revenue potential can boost private participation, requiring close collaboration between local governments, financiers and conservation groups. Blended finance contracts with layered revenue streams – such as donor funding managed through trust funds and public commitments to future revenue (e.g. from credit markets, impact bonds or public-private partnerships) – can help provide upfront capital and scale. Aggregated schemes with clear benefit-sharing reduce costs and improve scalability, particularly for small projects. Supply chain traceability can link private buyers with upstream stewards to build supply chain resilience – for example, water utilities can pay upstream landowners to protect catchments. PES embed ecosystem service values into policy and markets by identifying, monetizing and funding their protection. Finance Solutions for Nature: Pathways to Returns and Outcomes 26