Making Nature Bankable: How China Is Unlocking Finance for Ecological Restoration

The brief shows how China is making nature-based projects financially viable by redesigning them to combine ecological restoration with income-generating activities and by using innovative financing tools that spread risk across governments, banks, and insurers. Its core lesson is that protecting nature can attract private capital when ecosystems are treated as long-term economic assets rather than purely public costs

Prepared by researchers from the International Institute of Green Finance at the Central University of Finance and Economics, China Agricultural University, and the Asian Development Bank, this policy brief addresses a central issue in global environmental action: nature-based projects are crucial for climate resilience and biodiversity, yet they struggle to secure financing. The reason is straightforward. Ecological restoration generates broad public benefits, clean air, water security, and carbon storage, but rarely produces steady cash flows or reliable repayment streams. As a result, private investors and banks remain cautious, and public budgets alone are insufficient to meet the scale of investment required.

Globally, the need is immense. International agreements such as the Convention on Biological Diversity and the Paris Agreement recognize ecosystems as critical to sustainable development. However, global investment in nature-based solutions falls far short of what is needed. According to estimates cited in the brief, annual funding must more than double to meet climate, biodiversity, and land restoration goals. Closing this gap requires new approaches to designing projects that allow for the coexistence of protecting nature and generating income.

China’s Policy Shift Toward Ecological Value

China’s experience provides an important case study. Over the past decade, the country has placed ecological protection at the center of national development through the concept of “ecological civilization.” This approach was translated into concrete action plans, including a long-term national strategy for restoring forests, rivers, wetlands, farmland, and grasslands. These policies were reinforced by China’s climate commitments to peak carbon emissions by 2030 and achieve carbon neutrality by 2060.

The brief links this policy framework to measurable environmental improvements, such as better air quality and cleaner surface water. Yet it also acknowledges a hard reality: even with significant government spending, public finance cannot cover the full cost of large-scale, long-term ecological restoration. This constraint has pushed policymakers to look for ways to bring private capital into nature-based projects without undermining environmental goals.

Designing Projects That Earn While Restoring

One of the most important lessons from China is the redesign of nature-based projects themselves. Instead of treating restoration as a purely public expense, many projects now combine ecological protection with income-generating activities. Wetlands are restored alongside eco-tourism, forests are protected while supporting forestry industries, and water systems are rehabilitated in ways that also benefit agriculture and rural services.

This approach is formalized in what China calls the Eco-Environment Oriented Development model. Under this model, ecological restoration forms the foundation of a project, while related industries generate revenue that can help pay for long-term environmental management. The idea is not to exploit nature, but to use it sustainably so that economic returns reinforce conservation rather than compete with it.

Financing Nature by Sharing Risk

Project design alone is not enough. Nature-based projects often take decades to mature and face risks from climate disasters, market fluctuations, and technological uncertainty. To address this, China has experimented with more resilient financing structures that spread risk across multiple actors.

These structures include blending public funding with private investment, expanding what can be used as collateral, and introducing insurance. In practice, this means allowing future revenues from eco-tourism, forestry, or carbon sinks to support loans, recognizing natural resource usage rights as assets, and using insurance to protect against losses from floods, fires, or pests. By diversifying funding sources and reducing exposure for individual lenders, these tools make projects more attractive to banks and investors.

Lessons Beyond China

The case studies in the brief, from coastal restoration projects to forestry carbon finance and insurance-linked loans, show that nature-based projects can achieve modest but stable financial returns when designed carefully. While many examples are still ongoing, they already demonstrate how ecological outcomes and financial viability can be aligned.

The authors emphasize that these lessons are not limited to China. Similar principles are emerging in marine and coastal ecosystems, including coral reef insurance schemes in parts of Asia and the Pacific. The broader message is that making nature-based projects investable does not require weakening environmental standards. Instead, it requires smarter project design, better risk-sharing, and financial systems that recognize the long-term economic value of healthy ecosystems. When these elements come together, nature protection becomes not just an environmental obligation, but a sustainable investment choice.