Once sidelined by the sustainable investing community, the concept, which attributes economic value to the services that natural ecosystems provide to living creatures, has crept into investors’ lexicon in the past year.
The intersection of nature loss with climate change and human health has also been increasingly acknowledged. Last December, the Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES) – the equivalent of the Intergovernmental Panel on Climate Change (IPCC) for biodiversity protection – estimated in its landmark report that US$25 trillion is lost annually due to the failure of the fossil fuel, agriculture and fisheries industries to account for how their actions fuel the interlinked biodiversity, climate change, health and water crises.
Steve Polasky, co-chair of biodiversity and business assessment at IPBES, told Eco-Business that the fact that an assessment specifically on business’ impact on biodiversity had been initiated signals “a big shift”.
“If you’d asked me five years ago if there would be an assessment specifically targeting the private sector, I would have said – no, there’s just not enough interest. Over the last two, three years, it has really picked up,” said Polasky.
“In a way, IPCC and the climate issue has paved the way for nature and biodiversity issues to come to the fore.”
While environmental, social and governance (ESG) bond issuances saw a slowdown in 2024 – returning to 2020 levels in the pre-ESG boom – those incorporating nature conservation bucked the trend. According to credit rating provider Moody’s, there is a “small but rising share” of green and sustainability bond proceeds going into nature-related uses, which accounted for nearly 14 per cent of issuances in 2024.
“Historically, only a small proportion of proceeds from green and sustainability bonds have gone to nature-related uses, but we expect these volumes to grow as an increasing number of issuers aim to finance such projects through the labelled bond market,” a Moody’s spokesperson told Eco-Business.
Biodiversity-related debt, driven by sovereigns and multilateral development banks, was on track to hit a new record high of US$300 billion last year, based on data from industry group Institute of International Finance.
The launch of Taskforce on Nature-related Financial Disclosures (TNFD)’s guidance in September 2023 was also instrumental in addressing some prior uncertainties that corporations and financial institutions faced in quantifying their biodiversity-related impacts across different habitats. Unlike how climate change is universally measured using a metric tonne of carbon dioxide equivalent or MTCO2e, there is no single, universally-accepted metric for nature impacts.
Since TNFD’s launch, over 500 publicly-listed firms from 54 countries have pledged to start reporting against its framework by FY2025, marking a 57 per cent increase since its early adopters list was first unveiled last January.
But amid stalled United Nations negotiations at the COP16 summit over resource mobilisation, heightened scrutiny over biodiversity credits and other nascent financing mechanisms, as well as the renewables push increasingly encroaching on conservation areas, what’s next for nature financing in the year ahead?
Here are the nine key developments that industry players, academics and civil society members Eco-Business spoke to will be closely watching in 2025:
Conservation-renewables trade-offs
As fossil fuel-reliant countries in Asia aggressively expand their wind and solar energy capacities to meet renewables goals, some projects have encroached on conservation areas and infringed the rights of local communities.
In late 2023, drilling operations for the development of a proposed wind farm linked to Singapore-based energy developer Vena Energy were found in a sensitive karst ecosystem of Masungi Georeserve, a protected area in the Philippines, which aims to boost the share of renewables to over a third of its electricity mix by 2030.
A drone image from late 2023 showing drilling activities within the conservation area by Vena Energy-owned Rizal Wind Energy Corporation. Image: Masungi Georeserve Foundation
Despite the public uproar that ensued, Billie Dumaliang, co-founder and advocacy director of Masungi Georeserve Foundation, the non-profit organisation managing the site, told Eco-Business that Vena Energy confirmed at a technical conference she attended last December that the development is still going ahead, subject to government approvals.
She said that members of the public from other provinces have since reached out to her organisation to recount similar experiences. For instance, last November, local media reported that Vena Energy is eying a wind project that will overlap with the Calbayog Pan-as-Hayiban Protected Landscape, another protected area and one of main water sources for the most populous city of Samar, located in the eastern coast of the Philippines.
Last year, a survey by the United Kingdom (UK)-based non-profit Business & Human Rights Resource Centre found that none of the twelve Southeast Asian clean energy firms it surveyed, including Vena Energy, Philippines’ ACEN and Thailand’s B Grimm – which runs the region’s two largest solar farms – had policies to protect the rights of environmental defenders.
Beyond voluntary disclosures
Despite the majority of Asia’s largest companies identifying topics like water, biodiversity and ecosystem protection in their annual reports, only one in four consider nature to be material to their business and just 13 per cent disclosed their alignment with TNFD, according to a study published earlier this month.
Meanwhile, the amount of financing going to companies most closely linked to deforestation and rights violations have grown in the past year, with little transparency over which banks are financing these activities, said Tom Picken, the director of Rainforest Action Network (RAN)’s forests and finance campaign. Of the tropical forest regions the environmental group looks at, only Malaysia requires companies to disclose their primary banks, alongside outstanding loans, charges and bonds, in their annual financial reports, he said.
There are also currently no laws prohibiting financial institutions from knowingly providing loans to companies involved in illegal logging or deforestation, added Picken. The only country that has made this a legal requirement is France, which introduced a due diligence law in 2017 which large French corporations must comply with. A coalition of non-governmental organisations, including RAN, is currently putting the law to the test in a lawsuit against French bank BNP Paribas, alleging that it violated the law in its provision of financial services to Marfrig, Brazil’s second largest meat packer, which has historically fuelled the deforestation of Amazon.
“We want to see mandated reporting requirements in government regulation, but we don’t want the rules written by the global corporations causing the problem,” said Picken. RAN is one of the civil society groups that has repeatedly raised concerns that nearly half of TNFD’s members face serious environmental and human rights concerns.
In spite of widespread consensus among conservationists and economists to reform harmful subsidies going into the sectors that are driving nature’s decline – one of IPBES’ recommendations in its landmark report – there remains political barriers to doing so, said Polasky.
“[Subsidies] are much easier to put in place than they are to get rid of, as now you’ve got vested interests that want to fight to keep it and there is a lot of money on the line,” he said.
Water coming into focus
With the continued adoption of artificial intelligence (AI) by technology companies, there is growing discourse around how the increased energy demand could drive water scarcity. Many AI developers, like ChatGPT’s creator OpenAI, are currently not required to disclose how much power and water their technologies use.
Last year, the Global Commission on the Economics of Water (GCEW) released a report which put a value on the global water cycle for the first time. It estimated that water scarcity would threaten over half of global food production and lead to 8 per cent gross domestic product (GDP) loss on average by 2050, with lower-income countries at risk of double those losses.
At the report’s launch event, Singapore’s president Tharman Shanmugaratnam called for water-related disclosures to be built into existing reporting frameworks that regulators have endorsed, and for “double materiality” to be required, where companies will have to disclose the impact of their operations on water ecosystems, beyond the financial risks from their dependence on water.
All eyes on (resumed) COP16 and COP30
Following its suspension last November in Cali, Colombia, COP16 will resume in Italy in February. “It’s going to be a really important meeting to see how the resource mobilisation part of the agenda proceeds,” said RAN’s Picken, who attended the last summit and will be present at the upcoming meeting.
Countries previously failed to reach a consensus over the creation of a new global biodiversity fund under COP’s governance – a key ask by developing countries. Developed countries – including Australia, Japan and the European Union, which will be expected to voluntarily contribute to the fund to support biodiversity conservation in poorer nations – opposed its establishment.
“There was a continual push by all developed countries to shift the mobilisation of capital into the private financial sector space,” said Picken. This explains the huge push towards innovative financial mechanisms to deal with the the global biodiversity collapse, he added. Picken also voiced concern that there might be efforts to bring back references to TNFD in COP16’s main decision text, after RAN successfully campaigned to exclude it at the last round of negotiations.
Monica Bae, director of investor practice at Asia Investor Group on Climate Change (AIGCC), told Eco-Business that she will be closely watching the upcoming COP30 climate talks in Brazil, which she expects will “shine the spotlight on the importance of nature and its conservation”, given that the country is home to one of the world’s largest remaining primary tropical rainforests.
”We can expect developments on nature relating to climate adaptation, more specifically nature-based solutions,” said Bae.
Many world leaders, including those from the US and EU, as well as finance executives skipped COP29 in Azerbaijan last year, with the intention of attending COP30 in Brazil this year. Image: International Atomic Energy Agency
China as a bright spot
China became the first country to adopt a “gross ecosystem product” (GEP) , seen as a green alternative to GDP to drive policymaking, in 2020. In capital city Beijing as well as tech hub Shenzhen, local governments have started trialling GEP, with plans to implement it nationwide.
“We all know about GDP, which is the standard for how a country’s economy is doing and whether it is growing. GEP is set up similarly, but it is a measure of ecosystem services being produced and nature’s contribution to the economy in monetary terms,” said Polasky.
Anji, a county in eastern China that has become a sandbox for the country’s green economic initiatives, has also launched the “liangshan” or so-called “two mountains” bank programme – based on a 2005 declaration by Chinese president Xi Jinping that “lucid waters and lush mountains are invaluable assets” – which lends money to projects that will grow GEP alongside GDP, he added.
Asit Biswas, a distinguished visiting professor at the University of Glasgow with decades of experience advising governments on water policy, told Eco-Business that China is also leading in the water space and predicts that by 2030, the country’s water quality “will be almost as good as Singapore’s”.
While water pollution used to be a big problem in the country, it established a “river chief” system in the early 2000s, which makes provincial leaders accountable for the water quality of a particular stretch of water body in the region as part of the key performance indicators they are assessed against by the political party’s disciplinary committee annually, said Biswas.
Intensified scrutiny of novel financing mechanisms
At COP16 last year, the UK and France-led International Advisory Panel on Biodiversity Credits, the UN-backed Biodiversity Credit Alliance and the World Economic Forum launched a new biodiversity credits framework in a bid to legitimise the nascent mechanism. This could potentially be one of the “innovative schemes” referenced in the Kunming-Montreal Global Biodiversity Framework to raise financing to meet the global goal to preserve 30 per cent of the Earth’s lands and oceans by 2030.
While the pioneers of the framework were keen to rule out offsetting and secondary market trading, NGOs call the financing mechanism a “false solution to a false problem” that will delay action on biodiversity loss, just as carbon offsetting has delayed ambitious climate action.
“As we’ve seen with carbon credits, unless you are careful about how you design them and put proper safeguards in place, you can easily get bad actors,” said Polasky. For example, United States’ “wetland banking” scheme, which allows developers destroying a wetland to buy a credit that claims to restore a wetland somewhere else, currently incentivises neither the developer nor the banker to actually conserve the wetlands, given that they both want to buy and develop the credits as cheaply as possible, he said.
“It’s easy to set up schemes. It’s hard to get the incentives and the oversight correct,” said Polasky.
Civil society organisation protesting the use of biodiversity offsets to meet financing goals under the Global Biodiversity Framework at COP16. Image: Campaign to Stop GE Trees
Picken expects to see sustainability-linked loans (SLLs), which offers a lower cost of borrowing to firms that meet certain sustainability targets, continue growing in the year ahead. “We are seeing this tension growing between the market growth and the quality control of them,” he said.
The nascent instrument, which has become popular among Singapore-based commodities giants like Musim Mas and Royal Golden Eagle, has been plagued by transparency and accountability issues due to the lack of regulatory oversight around its issuance in the past year.
More misinformation and political threats to nature
Dumaliang said that misinformation will be a key trend she expects to continue in 2025. Last September, her organisation became a target of a social media disinformation campaign through nearly 100 fake accounts and pages, which the BBC investigated and reported on.
She also shared that while during the pandemic, most of the threats to Masungi Georeserve were physical in nature, she is now more concerned about legal and political threats, especially under the Philippines administration led by Marcos Jr. that was elected in 2022. “We are still surviving, but there has been a lot of push from politicians linked to extractive industries to stop the project so they can continue their business in the land.”
Under US president Donald Trump’s new administration, Polasky also fears that there might be backlash on corporate initiatives on the nature front, similar to what has happened on the climate front. “My fear is that… people would say this is just extraneous stuff, that businesses should get back to just making money. I hope it does not go that way.”
Harmonised nature-related metrics?
As the first round of the EU’s Corporate Sustainability Reporting Direction (CSRD) commences in 2025, all eyes will be on the extent to which firms will begin disclosing on ESRS 4, which covers biodiversity and ecosystems.
Professor Lawrence Loh, director of the Centre for Governance and Sustainability at the National University of Singapore Business School, told Eco-Business that the International Sustainability Standards Board (ISSB), which released the IFRS S1 and S2 – its inaugural standards on sustainability-related and climate-related disclosures respectively – in 2023, is set to release a new nature-devoted standard in the future.
AIGCC’s Bae said that she expects to see greater integration of nature elements in transition frameworks as well as an increasing focus around nature transition plans. At COP16, the TNFD published a draft guidance on the topic. The world’s largest climate finance coalition Glasgow Financial Alliance for Net Zero (GFANZ), which has seen a mass exodus of US banks and major leadership restructuring in the past month, also recently released a consultation paper from its nature in net-zero transition planning workstream.
“The future goal of these two guidances is to have an integrated transition plan which will include elements of climate, nature and social,” she said.
Rise of nature targets
British pharmaceuticals giant GSK, French luxury multinational Kering and Swiss building materials company Holcim became the first three firms to adopt science-based nature targets last November, following a corporate pilot programme by the Science Based Targets Network, a global coalition of environmental NGOs that aims to develop science-based targets for companies and cities.
Polasky said he is hopeful that more companies will step up and make commitments, just like they did when they realised “the consequences of not dealing with climate were going to impose very large costs”.
“Obviously, the nature or biodiversity world is somewhat behind on that, so I think it will take a few more years. But my hope is that people realise that even if you have solved the climate problem, we have not solved the environment problem,” he said. “Climate is the one that’s grabbed early attention. But there are other dimensions, like what we do with freshwater and how we think about habitat loss.”
This story is part of Eco-Business’ Asia Outlook 2025 series. Look out for other stories to come on key trends and developments to watch in the new year.
