Drawing on the experiences shared and innovations observed, four strategic approaches can address the key challenges hindering the growth of nature finance in China: strengthening policy frameworks, leveraging emerging technologies, innovating methodologies and tools, and designing innovative business models.3.1 Explorative pathways for a systemic shift Adopting an iterative mindset for mobilizing private finance for nature FIGURE 10 PolicyInnovation and technologyMarketData Standards and tools Business models Global experience in tackling climate change highlights the central role that policy plays in driving sustainable finance. A well-defined and supportive policy environment is fundamental to driving private- sector participation in nature finance. Nature- positive projects, such as biodiversity conservation and ecological restoration initiatives, often have the characteristics of public goods, including low returns and long timelines, making them difficult to finance without strong policy support. Government- led policies are crucial in shaping market incentives and risk management mechanisms.34 Strong policy frameworks encourage the development of standardized disclosure practices and the establishment of consistent, comparable biodiversity-related reporting frameworks. This, in turn, helps address all three key challenges. Analysis of the investment direction of China’s ESG funds and its national policies on sustainable finance reveals that policy has had a significant influence on nature-related issues, with climate change policy support far surpassing that for other nature-related topics. The market has reflected this disparity (see Figure 11). Therefore, a more robust policy framework is critical in driving private sector engagement in nature-positive projects, which often have strong public benefits, low returns and relatively high risks.35 Policy should be further enhanced in terms of categorization, nature-related metrics systems and disclosure requirements, drawing from the experience with climate-related policies and starting with measurable metrics. Furthermore, it should establish mechanisms for rewards, penalties, taxes, incentives and markets for nature-related credits. As indicated in Appendix A, a critical opportunity for China is to establish comprehensive sustainability guidance, covering nature-related factors for significant asset owners, such as pension funds.Strengthening policy throughout the sustainable finance ecosystem to drive private finance 1 17

Nature Related Sustainable Finance in China 2025