Introduction As the world’s second largest economy and a nation committed to green and high-quality development,1 China plays a significant role in shifting the global economy towards a climate neutral and nature positive future. Globally, although parties to the Convention on Biological Diversity have agreed to mobilize at least $200 billion a year by 2030 for nature,2 this goal remains both critical and challenging. The effort goes beyond funding for conservation – there is a pressing need to increase investment in business activities that reduce and prevent negative impacts on nature along the entire value chain.3 While government-driven initiatives lead in mobilizing finance for nature in China, a critical topic is mainstreaming nature’s value in decision- making as nature is not yet a viable financial asset either domestically or globally. This briefing paper is a result of a scoping study jointly undertaken by the World Economic Forum’s Nature Action Agenda and the International Institute of Green Finance (IIGF). It aimed at exploring opportunities for financial institutions in China to strengthen nature-related considerations in their portfolios. For the purpose of this paper, some key terms are defined as follows: –Nature is all life on Earth (and the term includes “biodiversity”), together with the geology, water, climate and all other inanimate components that comprise the planet.4 –Sustainable finance refers to the process of taking environmental, social and governance (ESG) considerations into account when making investment decisions in the financial sector, leading to more long-term investments in sustainable economic activities and projects.5 –Green finance is usually considered as included in sustainable finance, and broader than climate finance, in that it also addresses other environmental objectives and risks. Nature and ecosystem services are the cornerstones of the economy, with over half of global GDP highly or moderately dependent on nature.6 In China, this dependence is particularly pronounced, with 65% of the country’s total GDP at risk due to nature loss.7 However, the natural environment continues to deteriorate, due mainly to five direct drivers over the past 50 years: 1. land- and sea-use changes, 2. climate change, 3. natural resource use and exploitation, 4. pollution and 5. invasive species.6 Global efforts to reduce the impacts of these drivers are hampered by governance gaps, conflicting interests and insufficient funding, accelerating the loss of biodiversity.8 To reverse this trend, significant and effective financing is crucial. By 2030, the total global demand for biodiversity conservation finance is expected to be between $722 billion and $967 billion per year, while the current global funding for biodiversity conservation is about $124 billion to $143 billion per year.9 This leaves a funding gap 6-7 times greater than existing investments, requiring strong collaboration between governments, financial institutions and businesses. Currently, as shown in Figure 1, more than 80% of the world’s biodiversity conservation funds come from the public sector, including government budgets and taxes (54%), official development assistance (7%) and natural infrastructure (19%).10 While the private sector’s participation in nature- related investments remains relatively small, its involvement is increasingly diversifying. However, the effectiveness of managing nature- related risks is often overlooked, primarily due to challenges in quantifying their impact. This is a critical issue, as effective risk management is essential to steer private finance away from projects that harm biodiversity.11 In fact, private finance for nature is not confined to investments directly targeting conservation. It also includes broader strategies that integrate nature-related considerations all through various financial sectors, such as biodiversity offsets, sustainable supply chains and risk management practices.A critical moment for mobilizing private finance for nature 4

Nature Related Sustainable Finance in China 2025