UNEP Finds Biodiversity Markets Now Lead Private Funding for Nature-Based Solutions

Biodiversity offset markets have emerged as the largest source of private funding for nature-based solutions (NBS), outpacing carbon markets by a wide margin, according to a new report from the UN Environment Programme (UNEP).

Biodiversity-rich landscapes. AI generated picture.

In its latest State of Finance for Nature 2026 report, titled Nature in the Red – Powering the Trillion Dollar Nature Transition Economy, UNEP assesses how private capital is flowing into conservation, restoration and sustainable land-use projects. While carbon markets continue to contribute to NBS financing, the report shows they remain at an earlier stage of development compared with more established, regulation-driven biodiversity mechanisms.

Carbon markets channelled around $1.3 billion into NBS projects globally in 2023. Of this, $942 million was generated through compliance schemes, with voluntary carbon markets contributing a further $355 million. These revenues continue to support a range of conservation and restoration activities, although UNEP notes that overall volumes remain modest relative to global needs.

By contrast, biodiversity offset markets attracted approximately $7.1 billion last year, making them the single largest source of private NBS finance. UNEP attributes this scale largely to clearer regulatory mandates, which have helped create more consistent demand and investment flows than those currently seen in carbon markets.

Taken together, private finance for NBS totalled about $23.4 billion in 2023. Beyond carbon and biodiversity markets, capital was mobilised through green and sustainability-linked bonds, payments for ecosystem services, philanthropic funding, certified commodity supply chains and private finance leveraged by official development funds, underscoring the increasingly blended nature of NBS finance.

Within compliance carbon markets, New Zealand’s Emissions Trading Scheme accounted for the majority of NBS-related finance, with cancelled credits valued at $679 million. California’s cap-and-trade programme followed with $195 million in surrendered NBS credits, while Colombia’s carbon tax and Australia’s Carbon Credit Unit Scheme contributed $57 million and $28 million, respectively.

UNEP acknowledged that carbon markets face structural constraints, stating that ‘Integrity challenges, policy uncertainty and limited demand for verified nature-positive outcomes continue to constrain (carbon) market confidence.’ The report added that ‘Strengthening transparency, regulatory coherence and links between private and public finance will be critical to scaling credible and sustained investment in NBS.’

Biodiversity offset markets, meanwhile, benefit from stronger regulatory foundations. The United States accounted for around $6.2 billion of biodiversity offset investment last year, while India ranked second at approximately $860 million, largely through its National Compensatory Afforestation Programme.

Despite recent growth, UNEP warned that current funding levels remain far below what is required. Combined public and private NBS finance reached $220 billion in 2023, but will need to more than double by 2030 and triple by 2050 to meet international targets under the Rio conventions on sustainability, biodiversity and land restoration.