Market study: Financing natural coastal protection

Natural infrastructure, such as the planting of mangrove forests, can play an important role in coastal protection in tropical countries. This is more important than ever to adapt to the changing climate and to prevent biodiversity loss. The Netherlands Enterprise Agency commissioned IUCN NL and Wolfs Company to conduct a market study on the methods available to finance natural coastal protection projects. The study shows how coastal protection projects with nature-based solutions can be set up through public and private finance, including carbon credits.

Header photo: Mangrove enrichment planting and reforestation in The Philippines. Photo by Christiaan van der Hoeven

Private finance for coastal protection

In order to make a convincing business case for companies working on coastal protection with nature-based solutions, it is often necessary to attract additional funding. In addition to attracting public funding, an income stream can also be obtained from tradable carbon credits. Our market study investigates how this kind of ‘blended finance’ can be structured to make an attractive business case for companies and investors.

Attractive to investors

‘Coastal protection projects can be made more attractive for international investors in various ways’, says Maxime Eiselin, Expert Nature-Based Solutions at IUCN NL. ‘For example by aggregating projects to increase scale, applying layered financing mechanisms reforming public policies and incorporating nature-based solutions in public procurement processes.’ But there are also opportunities for improvement in the area of carbon credits. ‘We need a standard procedure to determine the positive climate impact of natural coastal protection and how this translates into the impact and price of carbon credits,’ says Eiselin.

Landscape approach

OWe also identified the most important guidelines and tools for setting up such projects with a landscape approach. In this way, natural coastal protection benefits both the climate, biodiversity and local prosperity in the developing countries where it is deployed, as well as the funders of the projects. Eiselin: ‘These shared benefits of nature-based solutions must be properly identified to make them more attractive to investors.’

Recommendations to finance coastal protection

‘All actors active in the market of natural coastal protection projects have a role to play to further develop attractive blended finance models,’ says Eiselin. The market study contains five recommendations to achieve this:

1. Create awareness by demonstrating the benefits of nature-based solutions;
2. Build a central knowledge platform with funding entities;
3. Establish relationships with funding organizations and project partners;
4. Improve access to grants for feasibility studies;
5. Develop additional revenue streams to attract more private investments

Webinar: Financing Nature-based solutions in developing countries

Our study was presented during a webinar, in which we looked at innovative financing approaches and provided practical guidelines for developing business models for these projects. A recording of the webinar can be watched here.