Challenges and explorative pathways3 This chapter is based on interviews and workshops with 17 leading Chinese financial institutions – including banks, funds, insurers and securities firms – which have imparted a deeper understanding of the state of nature finance in China. While financial institutions in China are increasingly recognizing the importance of nature and biodiversity-related issues, practical application remains nascent. Many institutions acknowledge the growing relevance of incorporating nature-related considerations but struggle with identifying the right entry points and integrating these factors effectively into their decision-making frameworks. Based on the responses and insights gathered, three major challenges are evident, which are aligned with the challenges observed in the global market.33 Despite the challenges identified, financial institutions should adopt an iterative mindset and start integrating nature-related considerations into their decision-making by piloting innovative solutions, exploring new investment models, and deepening collaboration with clients and investee companies to support the transition towards a nature-positive future.Challenges Key issues Data bottleneck –Lack of foundational nature-related data (due to fragmented sources and inadequate data-sharing mechanisms). –Insufficient performance metrics (because of a lack of widely accepted methodologies to measure and disclose environmental and biodiversity outcomes). Difficulty in evaluation and pricing –Lack of assessment methodologies and tools applicable in China (and limited standardized approaches for evaluating biodiversity and nature-positive impacts). Unclear business models –Positive externalities undervalued by markets (since nature projects offer social benefits but can have low financial returns and long payback periods). –Lack of viable business models and innovative financing instruments (hence a difficulty in converting environmental and social benefits into sustainable financial returns). 16

Nature Related Sustainable Finance in China 2025