Examples of NBS Project Financing
Although current experience shows that local and central governments remain the most likely funders of NBS, as awareness grows and measurable commercial benefits increase, other key types of funders have begun to participate in NBS funding through different funding types (see Table 5-12). Guiding questions for determining viable financing models are given in Appendix A8.
Table 5‑12: Example of NBS funders and funding types
Funder | Funding Type | Example |
  Municipalities | direct fund grant  (non-repayable) | The water utility Anglian Water paid (£800million) for wetland development near wastewater treatment sites. Millions of liters of treated wastewater pass through the wetland to be further cleaned by the wetland plants before it’s returned to the River Ingol (Anglianwater, 2020). London Borough of Hammersmith & Fulham, Greater London Authority funded (£266,000) nature-based sustainable urban drainage systems implementation in Queen Caroline Estate in London (also with EU LIFE programme) (Susdrain, 2020) |
 Central Govt | direct fund grant (non-repayable) | Austrian Government’s Climate and Energy Fund is used to invest in various projects for transition to an energy-efficient and climate friendly smart city concept including various NBS projects (Open4innovation, 2020) |
 Philanthropic | grant (non-repayable) | The Global Environment Facility (GEF) has approved a $2 million grant for a new venture in partnership with the MAVA Foundation, the International Institute for Sustainable Development (IISD), and the United Nations Industrial Development Organization (UNIDO), which aims to increase investment in nature-based infrastructure including wastewater treatment (Smart Water Magazine, 2020) |
 Private Sector | debt/equity  (repayable) | The DC Water Environmental Impact Bond (Blended Finance) included investment from Goldman Sachs (as well as the Calvert Foundation, and outcomes payments from the DC Water and Sewer Authority) to fund the construction of green infrastructure to manage stormwater runoff for ultimate sewage flow management ($25 million USD) (Goldman Sachs, 2020) This Environmental Impact Bond structure allows the water authority to provide upfront capital while sharing the underperformance risk of green infrastructure investment with the investor. Investors receive an enhancement to return or pay penalty depending on the outcome (efficiency), despite the substantial investment made. |
Utilizing promising financing mechanisms can effectively channel private funding and transition financial responsibility from governmental authorities to private sources. Within the array of financial mechanisms and instruments outlined in Appendix A9, notable options include: i) subsidies, ii) impact bonds, iii) crowdfunding, iv) biodiversity offsets, and v) green bonds. These innovative financing avenues hold potential for driving Nature-based Solutions forward.
Example 1: Blended Finance
NbS Project | Milan Green Roof/Walls |
Funder | Milan Municipality-private funding-EU funding |
Financing Mechanism | Blended Finance (mainly grant funding and direct funding) |
Description | Milan Municipality subsidizes the 25-35% of the green wall cost of public-private building owners, EU programme provides technical assistance and monitoring devices (2019-present) (Clever Cities, 2020) |
Example 2: Crowdfunding
Crowdfunding can be an alternative financing instrument to raise NBS awareness in Black Sea Region where financial pledges (usually private investors) are collected via an online platform without involving any financial institution or a bank.
Each supporter contributes a relatively small part of the total value that the project owner wishes to raise. Such raising of funds is often based on the ‘all or nothing’ principle, meaning that if the predetermined target amount is not raised, the funds are returned to the supporters.
NbS Project | Stadfarm Crowdfunding, Germany |
Funder | Citizens, investors |
Financing Mechanism | Equity crowdfunding, €350,000 for a 7% equity stake in the company |
Description | Project uses aquaponics systems to sustainably produce fish and vegetables in a closed water cycle to save water, land and reduce greenhouse gas emissions. They generate revenue from selling fish and vegetables to restaurants and citizens (Seedrs, 2020) |
The EU lacks a binding regulation for crowdfunding but provides information on types and benefits (European Commission, 2019). Local governments can enhance urban transitions through crowdfunding, as seen in Ghent. Their platform fosters citizen engagement in climate solutions, with public-private funding synergy (Ghentresidentsplatform, 2020).
Example 3: Impact Bonds
Environmental and Social Impact Bonds: Investors pay for the up-front costs of a project and are repaid with interest by local or central government on basis of outcomes only if pre-defined environmental or social outcomes are achieved.
Since financial and performance risks are transferred to investor by this instrument and if there are measurable outcomes that trigger payments, it will bring private investors on boards, as well as encouraging municipalities and other government bodies to invest in NBS.
NbS Project | Buffalo Sewer Authority, USA |
Funder | The City of Buffalo (outcomes payer), Ralph C. Wilson Jr. Foundation and the Community Foundation of Greater Buffalo (investor) |
Financing Mechanism | Environmental Impact Bond ($30 m) |
Description | The EIB targets the deployment of green infrastructure on private properties with large amounts of impervious surfaces, to reduce stormwater runoff and eliminate the effects of combined sewer overflows, to incentivise private property owners to agree to install and maintain green infrastructure for this purpose, charitable foundations fund the building of these NBS (BuffaloSewerAuthority, 2020) |
Example 4: Green Bonds
Green Bonds: Green bonds are debt instruments used to finance environmentally beneficial projects that are issued by local and national governments, multilateral development agencies and banks such as EIB. The challenge of green bonds generally being structured for large scale investment, rather than smaller-scale scattered programmes.
In addition, biodiversity offsets known as measures to compensate for negative impacts, for example by protecting waters or restoring wetlands, are increasingly being used by governments and the private sector. Biodiversity offsets are conservation actions intended to compensate for the residual, unavoidable impact on biodiversity caused by projects, to ensure at least a no net loss of biodiversity and, where possible, a net gain.
Presenting an NBS portfolio in different regions of the country, country wide NBS program, NBS related carbon offsets protocols, protected areas, etc. can help to create an enabling environment to raise capital for green bond.
NBS Project | NbS are incorporated into flood risk mitigation projects (about USD 248 million), e.g. “the Zandmaas and Grensmaas projects” |
Financing Mechanism |  |
Description | The Netherlands issued a 20-year sovereign bond for USD 6.68 billion in 2019 and approximately 29% of it were earmarked for climate adaptation and sustainable water management. Among them, the entire portfolio of green-grey water management infrastructure projects meets green bonds eligibility criteria, and, whilst not specifies in the funding allocations, NbS projects are also prioritised. NbS with grey infrastructure schemes was viewed as a strategy to ensure social and environmental benefits. Promising NbS including opportunities to mobilise private investment include sustainable urban drainage schemes, aquifer recharge, wetland creation and restoration and natural flood management. |
Below, a few successfully implemented and serviced NBS projects are catalogued. The purpose of showcasing these projects is to emphasize various potential ways of securing financial support and identifying sources of funding for similar initiatives. The next sections discuss the importance of economic valuation and monitoring tools for the facilitation of financing options. Some examples of CBA for NBS projects are provided.
Examples of Effective Funding Approaches
Table 5‑13: Funding approaches for selected NBS projects
NBS Project | French vertical-flow treatment wetlands (French VFTWs), Orhei Municipality, Moldova |
Funder (s) | The World Bank (design and supervision), jointly by EIB, the Moldavian Environmental Ministry, and the World Bank (plant realization) |
Financing Mechanism | Blended Finance, €3.4 million (2013) |
Description  | The biggest secondary treatment entirely based on constructed wetland (CWs) in the world (26,000 inhabitant and food processing industry), total gross area is about 5 ha., The Orhei CWTP consists of usual pre-treatment and an equalization with pre-aeration; the primary sedimentation phase has been skipped, because it's carried out directly at the secondary treatment stage by the so-called French system. The system consists of 4 lines operating in parallel independently, each composed of two VF stages in series (Global Wetland Technology, 2013). |
NBS Project | The Emscher Project, Germany |
Funder (s) | National-level government, Local government/Municipality, EIB, corporate investment, NGO funds |
Financing Mechanism | Blended Finance, earmarked public budget, and direct funding or subsidy (EUR 5.2 Bn, of which 1.85 Bn financed by EIB) |
Description  | Europe’s largest river restoration. The Emscher and its tributaries had been turned into open sewers during industrialization in 19th century. In 1991, with political decision for clean-up, underground sewers have been installed to carry waste away from the river and promote its re-naturalization. Also, river/creek restoration, 4 main WWTP (about 5 M P.E) construction and flood prevention activities are done (Urban Nature Atlas, 2020). |
NBS Project | Eau De Paris Biodiversity, France |
Funder (s) | City of Paris municipal water authority |
Financing Mechanism | Loan-based. The project entails a total cost of EUR 5 million, with an EIB loan of EUR 3.75 million provided through the Natural Capital Financing Facility (NCFF). The NCFF is a collaborative initiative between the European Investment Bank and the European Commission, funded under the LIFE programme — the European Union's dedicated funding instrument for environmental and climate-related initiatives. |
Description  | The Biodiversity Strategy of Eau de Paris is being implemented as a part of its multiannual investment programme (2021-2025). It covers protection/restoration of wetlands used for water abstraction, restoration of creeks used to drain surrounding areas, and the creation of buffer zones along areas of excessive nitrate for absorption (European Investment Bank, 2022). |
NBS Project | Belize’s ethereal Marine Protected Areas |
Funder (s) | 1) Mirova (through the Althelia Sustainable Ocean Fund), 2) IUCN (through its Blue Natural Capital Finance Facility), and 3) Blue Finance (a specialized impact investment project developer for MPAs) |
Financing Mechanism | Blended finance for Marine Protected Areas, as well as catalytic grant funding |
Description  | This case study focuses on the blended finance facility structured for financing interventions in the Turneffe Atoll of Belize. BNCFF (Blue Natural Capital Financing Facility) is a social enterprise working with different governments and Marine Protected Area (MPA) co-management entities to strengthen the implementation and financing of revenue mechanisms for five MPAs globally. Blue finance structures blended finance facilities that bring together grants and debt to fund the early-stage investments of the MPAs. The revenues generated from a range of sustainable sources, such as eco-tourism fees and sustainable fisheries, can create tangible returns for investors, while ensuring the financial sustainability of the MPAs (IUCN, 2020). |
Assessing Impact and Enhancing Investment for NBS
Measuring the impact and conducting cost-benefit analyses for Nature-Based Solutions projects are crucial steps in overcoming financial barriers and minimizing risk in public investments, while also stimulating private sector engagement. NBS, renowned for their diverse benefits, can be up to five times more cost-effective than conventional grey infrastructure solutions (Plos, 2016). However, there is currently a lack of comprehensive impact assessment studies and cost-benefit analyses in both Black Sea riparian countries and other regions. Such analyses are pivotal for agencies to accurately evaluate the value of nature when making regulatory and funding decisions.
Promising progress has emerged on this front, notably with the COP27 announcement in November 2022. The US federal Government unveiled "A Roadmap for Climate Progress, Thriving Nature, Equity, & Prosperity," outlining proactive measures and recommendations to expedite NBS implementation. A significant stride is the establishment of a dedicated technical working group on the Frontiers of Benefit Cost Analysis, aimed at aiding agencies in conducting thorough cost-benefit analyses for nature-based solutions (White House Council on Environmental Quality et al., 2022). Simultaneously, the National Strategy for a system of natural capital accounts is being developed, intending to integrate nature's value into the country's financial records, thus enabling consistent tracking of the economic advantages stemming from investments in NBS.
The process of cost-benefit analysis empowers investors to construct compelling business cases for environmentally sustainable "green" solutions, yielding tangible financial returns while concurrently advancing environmental and social sustainability objectives and adhering to regulatory mandates. Below, a step-by-step approach is outlined that can be adopted for structuring viable NBS projects (Figure 5‑12) (Brill et al., 2021).
Benefit Identification
During the project's design phase, NBS designers should establish the project's scope and delineate the potential benefits to ensure project success. Subsequently, in the implementation phase, the previously identified benefits should be quantified, validated, or assessed to confirm the project's financial viability for diverse stakeholders. It is crucial to involve stakeholders and beneficiaries, as well as gather data throughout all project stages.
Benefit Accounting
To accurately estimate and gauge benefits, a range of indicators tailored to the local context and stakeholders' interests is essential. These indicators should align with existing tools for NBS benefit assessment. Numerous companies and tools have been developed to assess the multifaceted advantages of NBS. For instance, "Planetary Computer-Microsoft" enhances data collection, computational capabilities, and machine learning to enhance environmental decision-making. This tool can pinpoint areas of ecosystem degradation necessitating NBS intervention and monitor NBS impacts using environmental data. Similarly, the "ESII Tool" by The Dow Chemical Company and The Nature Conservancy generates models and outputs with an engineering perspective, aiding actionable land use and management choices. It can also be employed to evaluate benefits and trade-offs among different green infrastructure options for specific locations.
Benefit Valuation
The valuation of benefits, encompassing both monetary gains and return on investment, demands a substantial volume of data across various timeframes (e.g., short-term versus long-term monetary gains). Several organizations, including Denkstatt, EcoMetrics, and Rio, are actively supporting endeavors to quantify benefits.
NBS water security project multi-benefits can be categorized under 5 main themes. Benefits of possible NBS accounting methods are summarized in the table below (Brill et al., 2021).
Table 5‑14: Primary NBS benefits summarized across five themes and indicators for benefit accounting
Theme/Benefit | Indicator or Calculation method |
|---|---|
Water quality Improved or maintained (surface/ground) water quality | Modified simple method; Direct monitoring; Revised Universal Soil Loss Equation (RUSLE) |
Water quantity Improved surface water storage, Improved or maintained flood protection/mitigation, Reduced surface water runoff, Improved or maintained groundwater storage | Volume treated method Inundation method, Curve number method Curve number method Infiltration method or Recharge method |
Biodiversity and environment Increased habitat availability (aquatic and/or terrestrial), Increased diversity of plants, Increased diversity of animals, Increased soil health | Measured or estimated protected area or river length Estimated count and/ or number of species based on field counts before and after project |
Socio-economics Improved human health, Improved climate adaptation, Improved opportunities for new jobs, Improved food security, Improved recreation opportunities, Energy reduction, biomass production, biogas production | Physical, mental, emotional health metrics Reduction in number or percentage of climate-related hazards/disaster risk reduction (heatwaves, flooding, drought) Total job availability/change in poverty rate Access to and availability of food Elements bridging water-food-energy nexus |
Carbon Reduced carbon emissions, Improved carbon sequestration | Stock-change or gain-loss methods |
Cursory Cost-benefit Analysis for Case References
Two examples have been chosen (Table 5-15) to illustrate cost-benefit analysis. One represents the world's largest constructed wetland for secondary treatment of municipal wastewater, implemented in a Black Sea riparian country. The second case exemplifies the extensive ecological restoration of the Emscher River in the Ruhr region, standing as the largest initiative of its kind in Europe, contributing significantly to environmental sustainability and climate protection.
Table 5‑15: Cost-benefit summary of selected NBS projects
Orhei CWTP, Moldova | Benefits | Cost |
|---|---|---|
Moldovan government, under a World Bank programme and relative feasibility study, CWTP is constructed to treat municipal wastewater. |
| Construction: € 3,387,000 (2013) Operation (annual): € 85,000 No information on benefit valuation |
Restoration of the Emscher River (1992-2022) | Benefits | Costs |
Emschergenossenschaft is a self-governing, non-profit public corporation, supported and funded collectively by its 181 members from municipalities, mining and other businesses in the Emscher catchment area (865 km², 2.4 million P). The aim is to clean up the Emscher River. Main tasks are wastewater treatment, ecological restoration and maintenance of rivers, flood protection, and ground/rainwater management. |
| Investment costs € 4.5 B No information on benefit valuation |