China's experience demonstrates how a framework can translate ecological value into standards, data and investable projects to help narrow the nature finance gap.
Nature is not only an environmental concern; it is a productive economic asset. More than half of global gross domestic product (GDP) – around $58 trillion – is moderately or highly dependent on natural systems. Yet the global biodiversity financing gap has widened from about $711 billion a year in 2020 to about $942 billion annually today.
However, ecological value is difficult to translate into finance. Many nature-positive activities generate public benefits over long time horizons, while their revenue streams are uncertain, their risks are poorly understood and their outcomes are difficult to measure. Banks and investors can therefore struggle to distinguish genuinely nature-positive activity from a conventional project carrying a green label.
Closing the gap requires more than new financial products. It requires a system that can translate ecological value into standards, data, investable projects, risk-sharing mechanisms and credible outcomes. China’s experience in extending its green finance architecture into biodiversity finance offers a useful reference point.
So how can nature finance move beyond funding standalone conservation projects and become a mainstream system for financing the transition of the real economy?
Nature finance needs a common language and credible metrics, not just capital. Ecological data must become usable financial information that can influence credit decisions, pricing and portfolio management. Public finance should improve the risk-return profile of emerging projects rather than permanently replace private finance.
Nature markets must also be built around integrity and measurable outcomes, as rapid scale without safeguards could undermine trust.
How China made nature more financeable
China’s experience provides a set of experiments showing how these propositions can be tested in practice.
Building a common language
Policy frameworks set market direction, spatial boundaries and a shared definition of eligible activity. China has built part of this foundation through ecological conservation red lines, national parks and ecological compensation.
In 2025, the People’s Bank of China (PBOC) developed a trial Biodiversity Finance Catalogue covering four categories and 87 economic activities, from sustainable resource use and ecosystem restoration to nature-based solutions and biodiversity-friendly activities in nature-sensitive sectors. It is being piloted in 26 provinces and municipalities.
A catalogue answers only the first question: what may qualify? To demonstrate real benefits, financial institutions also need an “activity + condition + metric” approach. A forestry project, for example, should be assessed on safeguards on land-use change, deforestation, habitat connectivity and community interests, as well as tree planting. Baselines, indicators and independent verification turn a label into evidence.
Financing real-economy transitions
Experience from nearly a year of applying the catalogue suggests that biodiversity finance is expanding beyond stand-alone conservation projects towards the nature-positive transition of agriculture, forestry, mining, infrastructure and ocean-related industries.
Regenerative agriculture, sustainable forestry and mine restoration linked to renewable energy and local livelihoods can connect nature outcomes with the competitiveness and resilience of conventional sectors.
Financial institutions are also looking inward. After Bank of China became one of the first Chinese banks to join the Taskforce on Nature-related Financial Disclosures (TNFD), nearly 40 domestic institutions began nature-related disclosure or pilot work, and more than 20 published reports aligned with TNFD recommendations.
Disclosure should bring land-use change, deforestation and water stress into credit decisions, pricing and portfolio management, recognizing that nature loss can translate into physical and transition risks for banks.
Turning ecological data into financial information
Satellite remote sensing, geospatial data and artificial intelligence can support low-cost screening and ecological monitoring. Some local commercial banks have explored spatial and meteorological information to screen environmental and climate-related risks in their lending portfolios. These tools should complement, rather than replace, field surveys and ecological expertise.
In Guizhou, a biodiversity account uses 19 indicators to assess nature-friendly activities and links the results to preferential “eco-points” loans. By translating dispersed ecological actions into structured information, the approach makes it easier for banks to offer favourable loans to farmers and other actors adopting sustainable resource-use practices.
Matching finance with nature project economics
Financial instruments need to match the cash flow and risk profile of the underlying activity. Biodiversity-themed bonds can fund restoration and sustainable production. Sustainability-linked loans can reward zero-deforestation sourcing or habitat restoration. Forest rights, marine-use rights and ecosystem-service revenues may support lending, while insurance can share extreme-weather and human-wildlife risks.
China’s Ecological-Oriented Development (EOD) model connects ecological restoration with revenue-generating activities like ecotourism, sustainable agriculture and renewable energy. An EOD project can create operating income that supports debt repayment and reduces reliance on one-off public funding.
Commercial finance is rarely sufficient when ecological benefits are high but early cash flows are weak. Public finance can absorb risks that markets cannot initially carry through guarantees, risk compensation, concessional funding, first-loss capital and results-based payments.
China’s Carbon Emission Reduction Facility provides a relevant precedent: banks make their own lending decisions and bear the credit risk, while the PBOC provides low-cost funding against qualifying loans to eligible low-carbon projects.
A similar logic could support biodiversity finance. In Sichuan’s Jiuzhaigou County, a biodiversity conservation fund and risk-compensation arrangements are encouraging lending.
Developing nature markets with integrity
Many conservation activities lack predictable repayment sources. Nature markets can help address this by translating measured, additional and independently verified outcomes into potential conservation income. But integrity must come before scale.
Credits require durable outcomes, transparent claims, safeguards against leakage and double counting, and fair participation by local communities. They should support contributions to nature, not become international offsets or licences to damage nature elsewhere. The International Advisory Panel on Biodiversity Credits emphasizes the importance of verified outcomes for nature, equity for people and sound governance.
China is testing these principles. In the Chishui River Basin, an Asian Development Bank-supported project will combine results-based eco-compensation and nature credits to mobilize finance while restoring forests, wetlands and freshwater ecosystems.
Ya'an, a city in Sichuan encompassing part of the Giant Panda National Park, has adopted a biodiversity credit framework that combines public-sector coordination with market incentives for scientifically verified conservation outcomes. This institutional innovation aims to build high-integrity local nature markets that mobilise private capital alongside public funding and channel benefits back to conservation and local communities.
Making COP17 an implementation milestone
Biodiversity COP17 in Yerevan, Armenia will conduct the first global review under the Kunming-Montreal Global Biodiversity Framework and closing the finance gap should remain central. Three priorities deserve attention:
First, practical and interoperable taxonomies must reflect national ecological endowments, industrial structures, trade links and dependence on ecosystem services. A catalogue should support an economy-wide nature-positive transition, not just identify conservation activities.
Secondly, ecological data needs to be translated into information that supports financial decision-making. This requires better understanding how nature-related risks are transmitted through economic systems and may affect financial stability.
Central banks and supervisors could conduct systemic risk assessments and scenario analyses in priority regions and sectors, while cross-agency collaboration connects ecological, geospatial, industrial and financial data. This will yield indicators that can be used in risk assessment, credit decisions and portfolio management.
Third, align fiscal and financial policies more closely. Public and development finance should reduce early-stage risks, strengthen the pipeline of investable projects and create demand for high-integrity nature outcomes. Rather than subsidizing projects indefinitely, policy incentives should improve their risk-return profile and attract private capital.
China’s experience shows that scaling nature finance requires a connected system: standards to identify, data to verify, public mechanisms to de-risk, financial tools to invest and credible markets to pay for outcomes. In an integrated system, nature can be managed as the productive asset on which economies depend.
