The authors call on governments, investors and conservation organisers to reimagine nature finance based on a central tenet: raising funds should be a means to an end, not an end in itself.
The paper , published in Global Environmental Change, appears as COP17 of the Convention on Biological Diversity takes place in Armenia, with nature finance high on the agenda.
The authors argue that, despite decades of experimentation and considerable policy and research effort, natural capital markets remain a small and specialised source of finance for conservation and restoration. They also argue that these markets occupy a disproportionate place in debates about how to fund nature recovery.
"Nature's decline is driven by economic systems that still reward its degradation," says co-author Nathalie Seddon , Professor of Biodiversity at the Smith School of Enterprise and the Environment, University of Oxford. "Natural capital markets have brought useful innovation, but they have attracted attention out of proportion to what they are likely to deliver. We need to start from the outcomes that matter: recovering, biodiverse ecosystems and the rights and wellbeing of the people who live with and care for them."
The authors identify five common flaws in natural capital markets: persistent barriers to scaling, a focus on compensation rather than restoration, the prioritisation of financial returns over socio-ecological outcomes, measurement challenges, and justice and equity concerns. The research also highlights how market incentives can marginalise local communities, indigenous knowledge and participatory governance - reinforcing existing inequalities.
These challenges do not negate the contributions of natural capital markets or the progress being made to improve them and enhance integrity, say the authors. But they reveal limitations that better measurement, standards and market design alone cannot overcome.
Dr Theo Stanley , lead author and Research Fellow at the University of Southampton, said:
"Natural capital markets only deliver benefits when they satisfy the demands of the market. Our research suggests that society has invested too much faith in the capacity of markets to deliver diverse and just nature restoration projects. We need to put ecological and social outcomes first and devote much more attention to the wider range of approaches capable of delivering them."
Justin Adams , co-author, Circular Bioeconomy Alliance Fellow and Honorary Research Fellow at the Leverhulme Centre for Nature Recovery, University of Oxford, said:
"After more than 20 years working to bring finance to nature, I know these markets can be a lifeline for projects on the ground. But perfecting them won't change the economic incentives driving nature's destruction. We need to build on what works and find new ways for businesses, governments and communities to invest together in the health and resilience of the natural systems we all depend on."
