Why coral reefs are such a decisive climate investment

Coral reefs around the world make a huge contribution to people's lives and livelihoods — and they protect the climate. Image: Ocean Image Bank / Brook Peterson
The ocean is key to the functioning of multiple planetary systems and represents an untapped frontier for climate-conscious investments.
Yet, when considering climate-resilient infrastructure investments, most investors focus on the obvious: flood defences, renewable energy and drought-resistant agricultural systems. These are all sensible pursuits that offer long-term financial, social and environmental returns.
But, beneath the surface of the ocean lies an investable opportunity that ticks all the right boxes — and it is a critical form of natural infrastructure urgently needing regeneration: coral reefs.
With demand on these biodiversity-derived ecosystem services exceeding Earth's capacity to regenerate by 56%, the potential returns are immense. This investment opportunity, however, is time-sensitive. If we don’t act now, we risk losing it forever.
The urgency cannot be overstated. The world is currently experiencing its fourth mass global bleaching event — its third in the past decade — with heat stress impacting nearly 80% of reefs worldwide.
Investing in coral reef ecosystems
Coral reefs, often referred to as the “underwater cities” of the natural world are ecosystems that have existed for nearly 500 million years. They are vital to the livelihoods of approximately one billion people worldwide and underpin a significant share of global economic output. These hubs act as buffers against storm surges, protecting infrastructure from climate-related damage.
Despite their importance, a sizable funding gap is dangerously delaying global protection efforts. A significant increase in investment is required to help preserve coral reef ecosystems.
This imbalance underscores a compelling business case for investing in corals, given their outsized impact and offer of high returns both economically and environmentally.
Despite their immense value, public and private investment in coral reef conservation is alarmingly small. Least Developed Countries and Small Island Developing States face significant barriers to attracting climate finance due to their risk-profiles and debt burdens. These countries are bearing the brunt of our changing climate yet are largely without the resources required to protect themselves and their economies.
These countries and regions have been chronically underserved by the traditional global financial architecture. In a system governed by credit ratings, private capital resists high-risk markets, and so these countries face serious challenges to crowding-in public and private capital.
But the numbers tell a compelling story.
The value of coral
Coral reefs provide ecosystem services valued at $9.9 trillion annually through fisheries, tourism and coastal protection, underlining their importance for food security, resilience and the blue economy. They are home to more than 25% of marine biodiversity.
They draw millions of tourists annually, supporting local businesses. They serve as natural pharmacies, with compounds derived from reef organisms showing promise in treating diseases such as cancer and Alzheimer’s. Investing in preservation opens doors to sustainable tourism and groundbreaking medical research.
The insurance industry is beginning to recognize the value of reefs.
As an example, the MAR Fund has developed the MesoAmerican Reef (MAR) insurance programme in collaboration with the Ocean Risk and Resilience Action Alliance (ORRAA) and WTW to support rapid recovery efforts following storm damage. Following Hurricane Lisa in 2022, a $175,000 payout allowed reef response brigades in Belize to mobilise within weeks. The MAR insurance programme alone now protects 10,000 hectares of coral and secures more than $3.3 billion worth of assets in the region each year.
Amid the intensifying impacts of climate change, the challenge lies with making climate finance work in areas where climate-resilience investments are needed most. Between 2009 and 2018, the world lost 14% of its coral reefs, and 90% of the remaining reefs are now under threat, facing potential collapse by 2050 if action is not accelerated.
With a unique capital mandate within the UN System, the UN Capital Development Fund (UNCDF) functions as a financing enabler and off-balance sheet de-risker, with a specific focus on high-risk, last-mile markets. Being a non-credit rated agency, it performs a unique function within the international financing system, using grants from donors to provide guarantees and innovative financing instruments that work to unlock domestic capital and create new markets, laying the groundwork for additional streams of investment.
De-risking and financing investment in coral reefs
To scale urgent efforts, we must address key barriers to large-scale investment by mitigating risks and creating favourable market conditions. Innovative financing tools like the Global Fund for Coral Reefs (GFCR), supported by UNCDF and ORRAA’s Sea Change Impact Financing Facility, are already paving the way. By blending public and philanthropic funds to de-risk private investments, GFCR has demonstrated a leverage ratio of $3 for every $1 invested. Similarly, ORRAA’s emerging Blue Guarantee Facility should show returns of $5 for every $1 invested. This dual approach ensures both ecological and economic gains.
Yet, these mechanisms are only scratching the surface. Expanding reef insurance globally, developing coral bonds and scaling impact investments are critical next steps. UNCDF and partners have already shown how catalytic grants can unlock domestic capital. For example, a $1 million UNCDF grant enabled Tanzania’s first green bond, raising $20.8 million in local investments. Earlier this month in the Maldives, the Soneva Foundation convened leaders in science and finance to discuss how to enable large scale coral reef restoration and resilience – and the investment for financing these at scale.
Investing in coral reefs is not an act of philanthropy — it is a strategic business decision. They represent a once-in-a-lifetime investment opportunity that aligns with the metrics of forward-thinking finance: economic viability, social impact and environmental resilience.
Solutions exist, but what we need now is leadership to scale them up — and fast. Initiatives like the GFCR, with its innovative financing and coalition-building approach, and the Soneva Foundation's convening of global leaders to discuss financing large-scale reef restoration, demonstrate that solutions are within reach.
The subsidies coral reefs have provided for centuries — coastal protection, food security, recreation — are running out and running out fast. The time to act is now.
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