A Defining Moment for Nature Finance

December 2022 marked a turning point that much of the financial world has yet to fully absorb. At COP15 in Montréal, 196 nations agreed to the Kunming-Montréal Global Biodiversity Framework — committing to protect 30% of the planet’s land and oceans by 2030, eliminate $500 billion in environmentally harmful subsidies annually, and mobilise at least $200 billion per year in nature finance from all sources.

The ambition is extraordinary. The implementation gap is equally so. Current annual flows of finance to nature — from public budgets, philanthropy, and the nascent private markets — amount to roughly $200 billion per year, against an estimated annual need of more than $700 billion. That gap of $500 billion per year is not a rounding error. It is the defining financing challenge — and opportunity — of this decade.

For investors willing to engage early with the mechanisms being developed to bridge this gap, the potential is significant: first-mover advantage in a market that is moving from philanthropic to commercial, access to assets that will become increasingly scarce and regulated, and returns that — structured correctly — can compete with conventional asset classes while delivering measurable conservation outcomes.

What Are Biodiversity Credits — and How Do They Differ from Carbon?

The term “biodiversity credit” is used loosely in the market, and that looseness is itself a risk. Before examining the investment opportunity, it is worth establishing what the instrument actually is — and, critically, how it differs from the carbon credits that have dominated conservation finance discussions for the past two decades.

Carbon credits: a reference point

A carbon credit represents one tonne of CO₂ equivalent sequestered or avoided. The unit of measurement is standardised, fungible, and verifiable through established methodologies (Verra’s VCS, Gold Standard, and others). Buyers of voluntary carbon credits are purchasing a measurable, internationally comparable unit that reduces their reported emissions footprint.

Nature-based carbon credits — generated by forests, peatlands, mangroves, and other ecosystems — have grown into a substantial voluntary market, with transactions exceeding $2 billion in 2021 before a significant correction driven by concerns about integrity and additionality in 2022–2023. That correction was painful for the market, but it has ultimately driven the quality improvements that will underpin the next phase of growth.

Biodiversity credits: a fundamentally different instrument

A biodiversity credit does not represent a tonne of anything. It represents a verified, measurable improvement or maintenance of biodiversity outcomes in a defined location — typically expressed through metrics such as species populations, habitat extent and condition, or ecosystem integrity scores derived from established assessment frameworks like the Biodiversity Intactness Index (BII) or IUCN species threat status.

The key distinction is that biodiversity credits are inherently local. A carbon credit from a Kenyan forest and a carbon credit from an Indonesian peatland are both one tonne of CO₂e and are largely interchangeable in a buyer’s portfolio. A biodiversity credit from a Kenyan forest represents a specific improvement to a specific ecosystem — it cannot substitute for a biodiversity credit from Indonesia, because the species, habitats, and ecological relationships are entirely different.

This locality is simultaneously the market’s greatest complexity and its greatest opportunity. It means that biodiversity credits cannot be standardised into a single global commodity market in the way that carbon credits can. But it also means that the supply of high-quality biodiversity credits from any given location is genuinely scarce — creating the conditions for a premium pricing environment for verified, high-integrity projects.

Key terms: a working glossary

The Market Landscape: Voluntary, Compliance, and Everything Between

The biodiversity finance market is not a single market — it is a constellation of overlapping instruments operating across voluntary and regulatory domains, at different stages of maturity, and with very different risk-return profiles for investors. Understanding this landscape is the starting point for any serious investment analysis.

The most immediately actionable opportunities for institutional investors in 2024–2025 are concentrated in voluntary carbon credits with strong co-benefits, voluntary biodiversity credits attached to existing high-integrity conservation projects, and debt-for-nature swaps at the sovereign level. These are the instruments where deal structures are proven, counterparties are established, and capital deployment is achievable within a normal investment horizon.

Africa’s Unique Position in the Global Biodiversity Market

Africa holds a disproportionate share of the world’s remaining biodiversity endowment. The continent contains five of the world’s 36 recognised biodiversity hotspots, hosts the largest contiguous tropical forest system outside the Amazon in the Congo Basin, and supports the world’s last great megafauna populations — elephants, gorillas, rhinos, lions — whose survival has direct implications for global ecosystem services and the integrity of the tourism and nature economies that depend on them.

This biodiversity richness has historically been treated as a global public good that African nations were expected to protect without adequate compensation. The shift that the Kunming-Montréal framework represents — and that the emerging biodiversity credit market is beginning to operationalise — is a fundamental repricing of that expectation. Africa’s biodiversity is not a cost burden; it is a productive asset that should generate returns for the communities and governments that steward it.

Key African markets for biodiversity finance

• Kenya — The most mature nature finance ecosystem in sub-Saharan Africa, with established voluntary carbon markets, a sophisticated conservation finance community, and progressive wildlife legislation that permits community conservancies to monetise biodiversity outcomes. The Northern Rangelands Trust and its member conservancies represent a tested model for investor engagement.
• Gabon — The first African country to receive payment under Article 6 of the Paris Agreement for verified carbon sequestration, and the country with arguably the most credible national biodiversity accounting framework on the continent. Gabon’s CAFI agreement and Blue Carbon initiative have attracted significant institutional interest.
• Democratic Republic of Congo — The steward of the Congo Basin’s tropical forests — the world’s second largest — and the site of some of the most ambitious nature finance experiments underway globally. Complexity is high, but so is the scale of potential.
• Mozambique — The emerging frontier for marine biodiversity finance, with one of Africa’s largest exclusive economic zones, extensive coral reef systems, and a government actively seeking private capital for conservation alongside its post-conflict economic development agenda.
• Tanzania — Home to the Serengeti ecosystem and the largest population of African elephants in any single country, Tanzania has significant potential for species-linked conservation finance instruments tied to its tourism and wildlife sector performance.

Key Financing Mechanisms: How Capital Actually Flows

The gap between the $700 billion annual nature finance requirement and the $200 billion currently flowing will not be bridged by any single instrument. It requires a portfolio of mechanisms, each suited to a different type of conservation asset, counterparty, and investor risk appetite.

1. Voluntary carbon with biodiversity co-benefits

The most immediately deployable mechanism remains the voluntary carbon credit market, but with a critical evolution: the market has shifted decisively toward credits that carry verified biodiversity co-benefits alongside carbon sequestration claims. Verra’s CCB (Climate, Community and Biodiversity) standard and the Gold Standard’s Biodiversity label are both seeing growing demand premiums — credits with strong co-benefit verification can command prices 30–50% above plain carbon-only credits.

For African project developers and investors, this represents a direct route to market that leverages existing infrastructure — verification bodies, brokers, and a corporate buyer base — while adding biodiversity value. The risk is that ongoing criticism of voluntary carbon market integrity has suppressed demand and pricing since 2022, and the recovery trajectory is uncertain. Investors must carefully select projects with robust additionality and non-permanence provisions.

2. Standalone biodiversity credits

Several early-stage market infrastructure players are developing standalone biodiversity credit standards — separating biodiversity outcomes from carbon sequestration and allowing them to be verified, traded, and retired independently. Terrasos (Colombia), BioCarbon (UK), and the IUCN’s own biodiversity credit initiative are the leading efforts, each with different methodological approaches and buyer targets.

The African opportunity here is substantial but the market remains nascent. Corporate buyers motivated by TNFD disclosure obligations — which the ISSB is expected to make mandatory for large companies in most jurisdictions by 2026 — represent the most likely early demand base. Crestmont’s Fund for Nature is actively piloting two standalone biodiversity credit projects in Kenya and Mozambique in partnership with conservation NGOs and local community land trusts.

3. Debt-for-nature swaps

The debt-for-nature swap has experienced a dramatic renaissance in the 2020s, driven by the combination of African sovereign debt distress and the availability of blended finance structures that make these transactions viable for a broader range of countries. In the original model, a bilateral creditor agreed to forgive a portion of a sovereign’s debt in exchange for a commitment to fund domestic conservation — a simple two-party deal that worked but was limited in scale.

The modern debt-for-nature swap is a more sophisticated instrument. The Seychelles Blue Bond (2018), Belize’s Blue Bond (2021), and Gabon’s Ocean Bond (2023) — the largest nature debt swap in history at $500 million — demonstrate how a combination of MDB credit enhancement, private capital, and sovereign commitment can generate significant conservation funding while reducing a country’s debt burden and improving its credit profile.

For Africa specifically, the pipeline of potential debt-for-nature swap candidates is substantial. A number of African sovereigns carry external debt at spreads that reflect credit risk higher than warranted by their natural asset endowments — creating the arbitrage opportunity that makes these transactions work. Mozambique, Zambia, Ecuador’s structure adapted for the Congo Basin, and several smaller island states are among the most actively discussed candidates.

4. Conservation impact bonds

The conservation impact bond applies the social impact bond model to nature outcomes — private investors provide upfront capital for conservation activities, and are repaid by outcome funders (typically governments, DFIs, or conservation foundations) based on verified results. The Wildlife Conservation Society’s Rhino Impact Bond in Zimbabwe and the UK’s Rhino Bond (structured by Zoological Society of London and backed by the World Bank) are the leading precedents.

These instruments are complex to structure but offer a compelling risk-return profile for impact-first investors: the downside is loss of principal if conservation targets are not met, but the upside is a market-rate or above-market return if they are — with the social return of verified conservation outcomes attached. The pipeline of potential conservation impact bonds in Africa is growing, particularly in the elephant, rhino, and marine turtle conservation spaces where both the ecological need and the outcome measurement infrastructure exist.

Emerging Regulatory Frameworks: The Mandatory Market Is Coming

The voluntary biodiversity finance market will be important, but it is the emerging mandatory market — driven by regulatory requirements rather than voluntary corporate commitments — that will ultimately determine the scale of capital that flows to nature. Three regulatory developments deserve particular attention from investors thinking about the medium-term trajectory of biodiversity finance.

Biodiversity Net Gain (UK)

England’s mandatory Biodiversity Net Gain requirement, which came into full effect in February 2024, requires that development projects deliver a 10% net improvement in biodiversity compared to the pre-development baseline. Where this cannot be achieved on-site, developers must purchase off-site biodiversity units from approved providers — creating a mandatory domestic market for biodiversity credits. The UK Office for National Statistics estimates this market could be worth £135 million per year within five years.

The UK BNG market is currently domestic only, but it is already stimulating a broader policy conversation about how equivalent frameworks could be designed at the EU level (the EU Nature Restoration Law contains elements that point toward a similar direction) and in other jurisdictions. The UK model is the clearest evidence that governments are willing to create mandatory biodiversity markets — and it is a template that other regulators will study carefully.

TNFD and corporate nature-related disclosures

The Taskforce on Nature-related Financial Disclosures released its final recommendations in September 2023, and a number of major economies are now considering whether to make TNFD-aligned disclosures mandatory for large companies — following the path that TCFD climate disclosures have taken. If TNFD becomes mandatory in the EU, UK, Australia, and potentially the US within the next five years (a plausible scenario), the corporate demand for nature finance instruments — as companies seek to demonstrate credible action on their disclosed nature dependencies — would increase substantially.

Article 6 of the Paris Agreement

The operationalisation of Article 6 — the Paris Agreement’s framework for international carbon market cooperation — has direct implications for African nature finance. Article 6.2 bilateral trading mechanisms and the Article 6.4 multilateral market both allow host countries to issue tradeable mitigation outcomes that can be used by purchasing countries toward their nationally determined contributions. For African countries with large forest and wetland carbon stocks, Article 6 potentially creates a sovereign-level market that dwarfs the current voluntary carbon market — but with government counterparties rather than corporate buyers.

Risks and Challenges: What Investors Must Navigate

The biodiversity finance space carries real risks that must be understood and managed — not dismissed. The carbon credit market’s integrity crisis of 2022–2023 is a cautionary tale that the biodiversity credit community is working hard to avoid repeating, but the structural conditions that caused it — weak additionality claims, inadequate permanence provisions, limited third-party verification — exist in the nascent biodiversity market as well.

1. Methodological fragmentation and standards proliferation. Unlike carbon, where a small number of dominant standards (Verra, Gold Standard) have created market coherence, the biodiversity credit space currently has multiple competing methodological approaches with no agreed global standard. This fragmentation creates buyer uncertainty, limits market liquidity, and makes due diligence significantly more complex. Investors must currently evaluate methodologies on a project-by-project basis.
2. Non-permanence and additionality. The two biggest integrity questions from the carbon market — would the conservation have happened anyway (additionality) and how do you ensure it lasts (permanence) — are equally acute in biodiversity finance. An elephant population that recovers under a conservation programme but then collapses when funding ends has not generated durable biodiversity outcomes. Robust project design and legally binding land protection are non-negotiable.
3. Community rights and benefit-sharing. Conservation projects in Africa frequently involve indigenous and local communities who have customary rights to land that may not be legally recognised. The reputational and legal risk of conservation finance that dispossesses or marginalises communities is severe — and the conservation outcomes are also likely to be worse without genuine community buy-in. Investors must conduct rigorous free, prior, and informed consent (FPIC) due diligence on every project.
4. Political and regulatory risk. Conservation land designations, wildlife legislation, and the regulatory frameworks that give biodiversity credits their value are all subject to political change. A change of government that is hostile to conservation — or that needs the land in question for agricultural or extractive development — can destroy the investment thesis of a project regardless of its biological integrity. Long-term legal frameworks and contractual protections are essential.
5. Demand development risk. The voluntary biodiversity credit market is still small, and its growth depends on corporate demand that has not yet fully materialised. If TNFD disclosures remain voluntary, if corporate commitments to nature remain soft, or if a significant integrity scandal damages buyer confidence, the market could develop more slowly than the current optimism suggests. Investors cannot assume that project supply will be met by willing buyers at current anticipated price levels.

The Investor Perspective: Where the Opportunity Is Real

The biodiversity finance market is not yet a mature asset class — and investors who approach it expecting the liquidity, standardisation, and price discovery of conventional markets will be disappointed. But investors who understand that they are buying into the early formation of a structural market, with the advantages and risks that entails, will find a compelling opportunity set.

Where Crestmont sees the clearest near-term opportunity

• High-integrity REDD+ portfolios with strong biodiversity co-benefits in Kenya, Tanzania, and Mozambique — existing projects with verification track records that can be enhanced with biodiversity credit overlays for premium pricing
• Debt-for-nature swap structuring and co-investment alongside MDBs in African sovereigns with eligible debt profiles — a complex but large-scale opportunity where Crestmont’s DFI relationships and sovereign deal experience are directly applicable
• Conservation impact bonds targeting specific species and ecosystem outcomes where outcome measurement infrastructure already exists — elephant range monitoring via GPS collar data, coral reef health via remote sensing, and marine turtle population monitoring via satellite tagging are all at sufficient methodological maturity for outcome-linked bond structures
• Early-stage biodiversity credit project development in partnership with conservation NGOs and community land trusts — acquiring the project rights and verification infrastructure now, before the market matures and competition intensifies

Conclusion: The Window Is Open — and It Will Not Stay That Way

The emergence of biodiversity credits and the broader nature finance market represents one of those rare moments in investing when a structural shift in regulatory frameworks, corporate behaviour, and public awareness is creating a genuinely new asset class — before most institutional capital has recognised what is happening.

The comparison to early renewable energy markets is instructive. In 2005, wind and solar investment was considered niche, illiquid, and risky. The investors who built scale and expertise before the regulatory environment matured — before feed-in tariffs were universal, before grid parity was achieved, before institutional capital flooded in — generated returns that have not been replicated since. The same dynamic is beginning to play out in nature finance.

Africa holds a disproportionate share of the world’s remaining natural capital. Its governments are increasingly sophisticated in their approach to nature finance, its conservation communities are among the most experienced in the world, and its biodiversity assets — forests, savannas, wetlands, marine systems — are precisely what the emerging global market will be buying. The investors who build relationships, develop pipeline, and establish verification infrastructure now will be very well positioned when the mandatory markets mature and the voluntary markets scale.

The window is open. It will not stay that way indefinitely.