Since the start of 2025, a quiet yet profound shift has begun to reshape global finance. In January, BlackRock, the world’s largest asset manager, publicly acknowledged that “nature capital” — including biodiversity, water, soil and geology — plays a vital role in sustaining long-term corporate performance. For the first time at this scale, natural capital is being treated not as an externality but as a core asset class.
BlackRock isn’t the only one. In early March, Goldman Sachs Asset Management introduced its Biodiversity Bond Fund: a groundbreaking fixed-income instrument dedicated to financing biodiversity protection and restoration.
Just weeks later, Norway’s Government Pension Fund Global, which manages $1.6 trillion in assets, released an assessment of nature-related risks across approximately 90% of its portfolio, examining how investee companies both depend on and impact ecosystems.
These developments reflect a growing consensus among financial institutions: The current finance system must be reshaped to account for the foundational role of nature.
Putting Nature on the Balance Sheet
Nature is disappearing at a staggering rate. The latest Living Planet Report revealed that wildlife populations plummeted by more than 70% on average over the last 50 years. Forests, the ocean and other critical ecosystems are in peril due to human-driven destruction and climate change. This collapse of natural systems can have devastating consequences both locally and globally, from the disappearance of fisheries and loss of coastal livelihoods to large-scale food system disruptions, natural disasters and economic instability.
Yet despite these growing risks, much of the financial system still prioritizes short-term returns, often at the expense of long-term environmental and economic resilience. As a result, capital continues to flow toward activities that overtax and degrade ecosystems (think: overfishing, unsustainable logging or razing rainforests for agriculture). In 2022, the private sector invested at least $5 trillion in activities that directly harm nature. This was 140 times more than it spent on nature-positive activities, according to the UN Environment Programme.
Even sustainable finance largely passes over nature. While green bonds are a growing asset class, the majority of proceeds are directed toward climate-related projects, with relatively few allocated to biodiversity.
But this status quo cannot hold in the face of ongoing ecosystem decline. With over half of global GDP highly dependent on nature, the risks are not just environmental — they are financial.
From a long-term investment standpoint, failing to account for nature degradation exposes portfolios to escalating material risks and jeopardizes future growth and revenue. One recent study finds that a collapse in key ecosystem services like wild pollination, marine fisheries and timber provision could result in annual economic losses of $2.7 trillion (2.3% of global GDP) by 2030. Another found that physical nature risks could reduce the valuations of seven major U.K. banks by 4%-5% over the next decade.
Financial institutions are also under mounting scrutiny thanks to emerging regulations — such as the EU Sustainable Finance Disclosure Regulation (SFDR) and EU Taxonomy — that mandate the disclosure of nature- and climate-related risks. The cost and consequences of noncompliance are rising and are becoming financially material.
As the financial sector begins to reckon with these risks, growing recognition of nature’s value by influential players like BlackRock and Goldman Sachs signals that the tide is turning. Now, mainstream financial institutions must build on this momentum — leveraging their roles as lenders, investors, insurers and advisers to actively steer capital away from nature-destructive activities. A critical first step is to begin accounting for nature on the balance sheet.
Nature-Based Solutions: A Strategic Response to Growing Nature Risks
There are two powerful ways that banks, asset managers, insurers and other financial actors can drive meaningful change for nature.
For one, financial institutions can act as direct drivers of sustainable finance by allocating capital to initiatives that protect, enhance or restore ecosystems. This includes direct investments in nature-based initiatives through dedicated funds (like Mirova’s Natural Capital Fund) or investing in companies that embed nature-positive practices (such as regenerative agriculture) into their operations and supply chains.
Second, financial institutions can help enable broader, system-level change through their financing decisions. For instance, banks could divest from companies that fail to comply with regulations such as the EU Deforestation Regulation (EUDR). Or they could deploy financing structures that reward nature-friendly business models — from sustainability-linked loans to performance-based finance. In doing so, financial institutions can help reshape markets and realign incentives to favor long-term ecological and economic resilience.
In this context, “nature-based solutions” offer a powerful tool for the finance sector. Nature-based solutions are actions that leverage healthy ecosystems to address some of today’s most pressing issues, such as climate change and disaster risk, while also benefitting people and nature. This could include restoring upstream forests to support climate regulation and improve water flows for hydropower; adopting sustainable farming practices to boost soil health and productivity; installing green infrastructure in cities to manage heat and flooding; or deploying biotech innovations, such as algae for wastewater treatment.
These are real, emerging investment opportunities that can deliver substantial returns and long-term benefits for nature. Take Natura & Co., a global beauty brand that integrates biodiversity-based sourcing from the Amazon into its core business. By investing in supplier communities and nature-positive practices, Natura has not only mitigated supply chain risk, but also tripled its stock price between 2015 and 2020. This surge in market valuation reflects stronger financial returns as well as growing investor and consumer confidence in a nature-positive business model.
Similarly, the AXA WF ACT Biodiversity fund invests in companies contributing to ecosystem preservation and restoration. With reported returns of approximately 10%, it demonstrates the financial viability of such investment approaches.
Investing in solutions like these offers financial institutions an opportunity to align impact with returns and position themselves at the forefront of a rapidly evolving market landscape. Meanwhile, it can help them mitigate nature-related risks, enhance portfolio resilience, and stay ahead of tightening regulatory and sustainability standards.
Unlocking Finance for Nature
While financial institutions increasingly recognize the importance of nature and biodiversity, most still lack the practical tools and guidance necessary to integrate nature-related considerations — and especially nature-based solutions — into their investment and lending decisions.
These investments are often technically complex and require specialized knowledge that remains underdeveloped within mainstream finance. Many institutions struggle with internal capacity constraints, including limited expertise to evaluate, structure and manage nature-based assets effectively. This can make it hard to identify investable opportunities or appropriately assess nature-related risks and returns.
In addition, the investment landscape for nature-based solutions is still immature. There is a limited pipeline of high-integrity, scalable projects. Many are small in size, requiring aggregation or blended finance to be viable, which often comes with high transaction costs. Long time horizons (10-30+ years), uncertain return profiles and limited liquidity present further barriers — particularly when compared to traditional assets, such as equities, real estate or bonds, that offer more immediate financial returns.
But there are ways forward.
New WRI research offers a comprehensive framework to help mainstream investors understand, invest in and leverage nature-based solutions effectively. It shows how financial institutions can leverage existing tools — such as sustainability-linked loans, blended finance structures and high-quality impact measurement frameworks — to begin integrating nature-based solutions into core investment processes today. In doing so, financial institutions can go beyond isolated project-level investments and begin catalyzing broader system change by influencing investee companies to shift entire value chains toward nature-positive outcomes.
Financing Nature Is Financing the Future
Progress this year signals a growing recognition of nature-related risks and opportunities among major financial actors. But this is only the start. To truly turn the tide, we need a systemic shift within the financial sector — one that prioritizes long-term impacts over short-term gains and fully integrates nature-related risks into financial decision-making and balance sheets. It is time to act now, moving from inspiration to operation to prevent ecosystems from passing irreversible tipping points.
For institutions looking to future-proof their portfolios, respond to evolving regulations and stay competitive in a sustainability-driven market, investing in nature-based solutions offers both an opportunity and an advantage. By embedding these solutions into their strategies, financial institutions can send powerful market signals to companies across their portfolios, encouraging nature-positive practices and further investment in ecosystem protection and restoration.
Ultimately, investing in nature is not just about doing good for the planet — it’s a smart strategy to secure long-term value in an era of mounting ecological and financial volatility.
To learn more, read WRI’s new Financial Sector Guidebook on Nature-Based Solutions Investment.