Biodiversity Finance

49 Pages Posted: 10 Mar 2023 Last revised: 30 Nov 2023

See all articles by Caroline Flammer

Caroline Flammer

Columbia University; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Thomas Giroux


Geoffrey M. Heal

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 23, 2023


The use of private capital to finance biodiversity conservation and restoration is a new practice in sustainable finance. This study sheds light on this new practice. First, we provide a conceptual framework that lays out how biodiversity can be financed by i) pure private capital and ii) blended financing structures. In the latter, private capital is blended with public or philanthropic capital, whose aim is to de-risk private capital investments. The main element underlying both types of financing is the “monetization” of biodiversity, that is, using investments in biodiversity to generate a financial return for private investors. Second, we provide empirical evidence using deal-level data from a leading biodiversity finance institution. We find that projects with higher expected returns tend to be financed by pure private capital. Their scale is smaller, however, and so is their expected biodiversity impact. For larger-scale projects with a more ambitious biodiversity impact, blended finance is the more prevalent form of financing. While these projects have lower expected returns, their risk is also lower. This suggests that the blending—and the corresponding de-risking of private capital—is an important tool for improving the risk-return tradeoff of these projects, thereby increasing their appeal to private investors. Finally, we examine a set of projects that did not make it to the portfolio stage. This analysis suggests that, in order to be financed by private capital, biodiversity projects need to meet a certain threshold in terms of both their financial return and their biodiversity impact. Accordingly, private capital is unlikely to substitute for the implementation of effective public policies in addressing the biodiversity crisis.

Keywords: biodiversity finance, natural capital, blended finance, impact investing, sustainable finance, public good

JEL Classification: G23; G3; H4; Q14; Q2; Q5; Q57

Suggested Citation

Flammer, Caroline and Giroux, Thomas and Heal, Geoffrey M., Biodiversity Finance (November 23, 2023). European Corporate Governance Institute – Finance Working Paper No. 901/2023, Available at SSRN: or

Caroline Flammer (Contact Author)

Columbia University ( email )

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National Bureau of Economic Research (NBER) ( email )

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Thomas Giroux

CREST-ENSAE ( email )


Geoffrey M. Heal

Columbia University - Columbia Business School, Finance ( email )

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212-316-9219 (Fax)


National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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