Finance Solutions for Nature 2025

2.7 Impact funds Impact funds are a proven capital source for nature-related projects and new business models. Overview Impact funds are capital pools designed to achieve environmental or social outcomes, often accepting higher risk or concessionary returns. They may follow private equity or venture capital structures and often use blended finance to combine catalytic and commercial capital. Their flexibility appeals to a wide investor base – including institutional investors, MDBs and family offices – seeking competitive returns, measurable impact and portfolio diversification. Success depends on alignment between investor goals, asset managers, project partners and MRV providers. These funds typically offer long-term, flexible capital to nature-related projects and business models that may take 7-12 years to reach commercial scale. Potential to mobilize capital for nature The global impact investing market reached ~$1.6 trillion in AUM in 2024, with nature and biodiversity-focused funds accounting for less than 10% of total AUM, but growing at a faster rate than any other category.86 Fund sizes range from $20 million to over $1 billion, showing the potential to unlock significant capital for nature. Impact funds are key sources of catalytic, early-stage capital for nature projects not yet commercially viable. They can support diverse sectors and project types with tailored, long-term financing, and accommodate a range of deal sizes from $0.5 million to over $10 million.87 Common focus areas include sustainable land use, agroecology, forest-based supply chains, blue carbon, ecotourism and nature-focused tech. Some funds serve specific functions, such as providing guarantees to unlock commercial finance. Agri3, for instance, has enabled loans to female farmers in India.88 Goldman Sachs recently launched a $500 million biodiversity bond fund.89 Ability to price nature into markets Impact funds play a catalytic role in shaping nature markets, offering early-stage capital and technical assistance to develop revenue-generating nature projects. In principle, they are typically mandated to deliver measurable nature outcomes, tracked using robust metrics. While performance is generally positive, these outcomes are not usually valued through natural capital accounting frameworks. Pathways to mainstream A stronger, investable pipeline is critical to deploy impact fund capital at scale, reduce transaction costs and improve returns – especially for smaller nature-based projects. A 2025 survey of institutional investors found that weak pipelines and internal capacity were key barriers to mainstream uptake.90 Catalytic capital remains vital to curate pipelines, support transaction platforms and de-risk new business models. Innovative structuring – such as special purpose vehicles (SPVs) that bundle mature assets or layered capital structures with impact-linked incentives – can help align interests, enhance outcomes and crowd in private capital. Strategic use of concessional capital is essential to complement, not displace, commercial investment. Standardizing nature metrics, frameworks and data can improve comparability, investor confidence and liquidity. Linking outcomes to natural capital valuation can enhance risk-return analysis and portfolio strategy. A shift towards investing in real-world nature uplift – rather than primarily in tech-driven data tools associated with remote sensing, ecosystem monitoring and data analytics – could improve long- term nature outcomes.91 The global impact investing market reached ~$1.6 trillion in AUM in 2024, with nature and biodiversity- focused funds accounting for less than 10%, but growing at a faster rate than any other category. Finance Solutions for Nature: Pathways to Returns and Outcomes 28