The Perilous Promise of “Nature Markets”
The soil, the water, all our natural ecosystems – the very bedrock on which we thrive – is crumbling and fast – an economic wake-up call of colossal dimensions. By some estimates, global GDP is precariously dependent on the services which nature provides, to an extent of measured value of more than 150 trillion dollars annually. Economies shake when nature fails. It has just taken a tragedy to nature – the breakdown of wild pollination to fisheries inside the seas, for example – to wipe trillions of dollars off worldwide GDP in a matter of years.
The Gargantuan Ecological Account
We have abused biodiversity and ecosystem services for long, treating it as a free-of-charge unlimited resource we are building our industrial empires on. In response, the Kunming-Montreal Global Biodiversity Framework (GBF), one of the largest global biodiversity and ecological agreements, adopted in December 2022 at the UN Biodiversity Conference (COP15) in Canada set out a global roadmap for preserving biodiversity and achieving a world living in harmony with nature by 2050. The GBF includes four goals for 2050 and 23 targets for 2030, aiming to halt and reverse biodiversity loss – a monumental task that will require an extra $200 billion capital every year till 2030, according to UN Secretary-General’s Spokesperson Stéphane Dujarric.
Despite the urgency, the amount spent worldwide on biodiversity is still pathetic. The EU, perceived as a leader, is no better, significantly lagging its own biodiversity budget. This is particularly bad news. Continuing this effort desperately needs supplemental funding – a lot of privately-held capital.
The Market’s Moment
“Nature markets” is an idea with much allure. The concept is simple in its sophistication: design tradable financial assets, nature credits and nature shares, which may symbolize measurable enhancements to the environment. Think of putting investments into high-impact conservation, paying land stewards and, last but not least, putting a price on priceless services nature provides.
Most advocates claim this could unlock a torrent of like-minded and complementary private funding into the conservation scene, providing much needed liquidity. In fact, they are regarded as very important in the facilitation of the delivery and maintenance of these essential services of nature.
The Carbon Ghosts of the Past
The carbon market is a business idea that started with good intentions but has been surrounded by controversy numerous times because of the very word that seems to preface it; credits. And very well so. There are hard lessons that we have to learn. To fulfill such a promise, nature markets require uncompromising principles in its composite: scientific bases, sustainability over time, transparency in its governance and sharing of benefits.
First, additionality. This is not a quant scholarly idea, it is the very currency of legitimacy. Credit sold must only be in terms of an outcome that would otherwise not have occurred had it not been because of that particular intervention. Unless this is well-demonstrated, we run the risk of financing projects which might have occurred anyway, or worse-still, crowding out conservation endeavors in another place. This has been one of the consistent problems in the carbon markets, wherein defenses of claims have been doubted.
Second, durability. The effects of biodiversity should be long-term and provide value over decades. In England, the biodiversity net-gain policies, as one example, require a credited outcome to be at a minimum of 30 years, while the Australian policy requires permanent protection. The idea is to alter the fabric of the ecosystems.
The third and most important, integrity and measurement. This is where most well-meaning plans go wrong. Markets are notorious in terms of opacity: project locations, baselines, even monitoring outcomes are usually concealed or fragmented, making it hard to keep nations in check. We require high-quality, standardized cost-effective monitoring systems with outcome-based metrics, rather than just activity measures – the key to avoiding pitfalls like double counting, over-crediting or outright fraud in verification. The next release on nature credits by the European Commission rightfully states that the standards should be high-quality and the results supported by people in the long run to deliver eco-friendly results.
Beyond Credits
But what if there’s a more fundamental, perhaps more elegant, financial architecture for nature? Several proponents are calling for the creation of “nature shares” rather than the usual credits. In contrast to credits, which often serve as an offset to be used to compensate for environmental harm elsewhere, these “shares” are meant to finance nature-positive actions directly, without a necessary offsetting of the harm.
Consider an equity model, where financial investors put up capital buying shares in large-scale conservation ventures, practically making themselves long-term stakeholders in the living condition and long-term viability of the whole ecosystem – an earnest commitment to a healing growth. Consumers may be driven by charity, to be greener in corporate responsibility or even as a portfolio-diversification measure in terms of climate stability. It constitutes a paradigm change between a transaction-oriented approach to pollution, a practice of giving credit in its place, to a cooperative approach of regeneration through investment. It is a possible solution to the Achilles’ heel of carbon markets – the lack of permanency and the cost of intermediation.
The EU roadmap towards mending Integrity
Realizing the enormous stakes, the European Union is plotting a pathway toward the creation of well-functioning nature markets. In their upcoming “Roadmap towards Nature Credits” (July 2025), multiple priorities are stated – virtually an instruction manual on how not to repeat past mistakes.
First, the use of consistent standards across the EU. This becomes very important in forming trust and scale in a fragmented marketplace.
Second, reduced costs of transactions. Market activity has always been hampered by high prices, market regulation needs to be simplified and well-defined legal systems birthed.
Third, transparent rules regarding offsets, if they have to exist at all, to prevent the mere transfer of ecological harm. The rule here is as wise as the law of “no net loss” of biodiversity which entails more prudence and clarity. Offsets ought to be taken with some reservations and preferably should be handled locally.
Fourth, the increased use of outcome measures, ensuring strong surveillance, and going beyond reporting of activities to such that can be verified as ecological contributions.
Lastly, the emergence of new sources of demand based on sustainable finances and, most importantly, making sure private finance supplements, and does not replace, the funding that governments do. The extent of current private finance is naturally overshadowed by nature-damaging subsidies, the elimination of which should be made a first principle (e.g. flow of €48 billion a year in the EU).
Read Fiore, A., & Grabbe, H. (2025, July 9). Nature markets: How can credits and shares provide durable, additional finance? Policy Brief 20/2025. Bruegel.