Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322607 
Year of Publication: 
2025
Series/Report no.: 
Bruegel Policy Brief No. 20/2025
Publisher: 
Bruegel, Brussels
Abstract: 
Natural ecosystems are declining rapidly, ultimately threatening economies, livelihoods and climate stability. The public funding available to protect and restore nature is far below what is needed to maintain healthy, biodiverse ecosystems that provide water, soil, pollination and other essential services. Interest is growing in nature markets as a way to bring in complementary private finance. If tradable financial instruments could represent verifiable ecological improvements, they could channel investment to high-impact conservation efforts and reward land stewards. For nature markets to develop, the assets traded in them need to be underpinned by scientific rigour, long-term durability, transparent governance and equitable benefit-sharing on the supply side, along with the potential for mandates for long-term investment to increase demand. The European Union should establish the right policy and regulatory framework to align markets with environmental policy objectives. This policy brief offers guidance on how to design nature credits and shares that deliver real and lasting value for nature, taking lessons from carbon markets and nature credit pilot schemes. Through its 'Roadmap towards Nature Credits', the EU should prioritise establishment of consistent standards on what a nature credit or share represents, how it is measured and whether it delivers additional ecological benefits. The EU should also explore how to reduce transaction costs, set clear rules for offsets and avoid them transferring ecological harm, encourage the development and application of outcome-based metrics, and foster new sources of demand from sustainable finance, especially risk-reduction strategies and long-term investments. However, private finance is unlikely to reach sufficient scale to supplant public funding, because financial returns on nature projects are low, and the main drivers of demand are likely to be risk-reduction strategies and greening of long-term investment portfolios. Therefore, new financial instruments should not be a reason to reduce funds for nature in the EU, national or local budgets. Moreover, the current scale of private finance is dwarfed by nature-harming subsidies, which must be eliminated to achieve a transition to a nature-positive economy.
Document Type: 
Research Report
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