What is conservation finance? A complete guide

IFAW is a conservation and rescue organization working around the world to preserve and protect wildlife and their habitats. Learn more about our work and how you can get involved. 

In this blog, we explore what conservation finance is, the various funding sources, and how it makes environmental protection financially sustainable. 

What is conservation finance? 

Our planet provides clean air and water, a stable climate, and countless other natural resources that underpin our lives and economies. But whose financial responsibility is it to preserve this balance? Who pays for these resources and the costs of neglecting them? 

Conservation finance tackles this dilemma by making it profitable to protect nature. Its goal is to encourage everyone—from governments to private companies—to step up.  

Public grants currently make up 80% of conservation funding, but market-based models are also needed to fill this gap. Here are some examples: 

• Debt-for-nature swaps: Developing countries can set aside land for conservation in exchange for foreign debt relief. 
• Payments for ecosystem services: Landowners who manage their land sustainably can receive subsidies from companies or governments. 
• Impact investing: Investors can choose to invest in profitable projects with positive environmental impact. 

What are the origins of conservation finance? 

The value of healthy forests and biodiversity isn’t always factored into business decisions. They’re largely considered externalities—costs someone else would bear. 

Conservation finance flips this script. It reframes nature as natural capital—a vital economic asset, just like infrastructure or machinery. This encourages governments and businesses to invest in nature to future-proof their operations and enjoy long-term benefits, like lower water treatment costs and resilient supply chains. And this approach is working. More countries are factoring nature into their economic plans, and private initiatives are gaining traction. 

How are the public and private sectors involved in conservation finance? 

‘Conservation finance’ can refer to both money received from grants and the public, known as funding, and investments that require repayment or return, known as financing. While philanthropic donations and public grants are extremely important to conservation, support from private investors is crucial, too. 

The four categories of conservation finance include government grants, charitable grants and donations, cashflows (earned income) from conservation projects, and for-profit investment. 

Here’s a more in-depth look at these four key sources of conservation funding: 

Government grants 

Around the world, government grants have funded most conservation initiatives. 

In the US, the government is spending more on the environment now than it has in the past. Every year, the US Environmental Protection Agency awards US$4 billion to green projects. Recent federal efforts are notably more grassroots-up. For example, the Inflation Reduction Act supports community-driven clean energy, environmental justice, and climate resilience projects. More local and state governments are also issuing bonds and/or levying taxes to fund conservation efforts. 

The UK is boosting green businesses with £5 billion in grants to reach net zero by 2050. 

Charitable grants and donations 

In the past, most donations were one-time gifts to pay for specific projects or to cover the everyday costs of conservation groups. But there are more ways to give today. Donors—individuals, foundations, and businesses—can now participate in investments tied to conservation goals, issue low-interest loans, and even offer financial guarantees. Learn more about why your donation—no matter how large or small—matters. 

On a bigger scale, some countries work together with philanthropists to set up conservation trust funds and create a steady stream of long-term funding for environmental efforts.  

Cashflows from conservation projects 

Conservation projects can be monetized to unlock new funding streams. For example, national parks might charge entrance fees, while forests might use sustainable logging methods to safely harvest and sell timber. Individuals and companies can also pay to offset their pollution, such as by funding tree planting efforts to absorb carbon dioxide. All this income can then be used to fund even more conservation projects, and it attracts private investors. 

For-profit investment 

More companies and investors now recognise that a healthy ecosystem isn't just good for the planet—it’s good for their bottom line, too. 

Profit-generating ventures such as sustainable agriculture, ecotourism lodges, and renewable energy projects attract private impact investing firms that want to support green projects. Along with blended finance (which combines public, philanthropic, and private capital), these ventures let conservation organizations scale their efforts.  

How can the private sector finance conservation? 

The private sector can use conservation finance to do good for the planet, stay competitive, and meet the growing regulatory demands for sustainable practices. 

Forward-thinking businesses can consider spending on: 

• Defensive expenditures: They can invest in protecting clean water sources and other natural resources to prevent future disruptions to their supply chains. 
• Voluntary carbon markets: Businesses can also fund conservation projects to offset their carbon emissions and achieve their sustainability goals. 

 Meanwhile, investors can explore new conservation finance models such as: 

• Green bonds and sustainability-linked debt: These loans can be awarded to companies that demonstrate a strong commitment to sustainability, allowing investors to indirectly support green efforts. 
• Derivatives: Credit default swaps and similar instruments can be designed to lower borrowing costs for businesses that protect key ecosystems. 

How does conservation finance protect nature and wildlife? How does it mitigate climate change? 

Nature itself is our most powerful tool in the fight against climate change. Here’s how conservation finance helps maintain and restore our natural ecosystems: 

Droughts 

Conservation funds can go to projects that restore and maintain forests and wetlands, which naturally absorb and store rainwater to secure water availability. As an example, after a devastating drought, communities in India regenerated forests to stabilize groundwater levels. Similar projects are underway in Gambia.  

IFAW’s Water is Life project provides pumps to rural communities in sub-Saharan Africa to prevent the human-wildlife conflict that can arise when people and wild animals share the same water sources. We also provided 121,000 litres of water to five villages in Somaliland in 2022 as they faced severe drought. 

Wildfires 

Green finance can also support new activities that reduce the need for artificial fire lines and instead promote natural, low-maintenance barriers. Malta, for example, plants Mediterranean Cypress trees as natural firebreaks. 

In Australia, IFAW embarked on a 15-month recovery project partnered with Great Eastern Ranges to restore habitats and create wildlife corridors across 3,600 kilometres of Australia’s east coast, helping communities, landscapes, and animals recover from bushfires. 

Heatwaves 

Extreme heat claims thousands of lives and cripples livelihoods. Conservation finance can fund urban tree planting initiatives to mitigate the urban heat island effect. These projects help cool cities and reduce energy consumption through natural shade and evapotranspiration. Melbourne, for instance, is planting more trees to cool the city by 4°C. 

Coastal flooding 

By 2050, rising sea levels could displace as many as 300 million people. Conservation finance can fund coastal ecosystems like mangroves and coral reefs, which act as natural sea walls that protect against rising sea levels and storm surges. A village in Tanzania, for example, restored their mangroves to stop seawater intrusion and save their crops. 

Landslides and erosion 

Climate change is causing erratic weather patterns that trigger landslides in many parts of the world. Banks Island in Canada is a stark example, where permafrost thawing has increased landslips by 6,000%. Conservation funding can support reforestation and sustainable land management efforts to anchor the soil, absorb water, and prevent erosion. A great example in action is how the government of Comoros is planting trees to protect farms in mountainous areas. 

Desertification and sandstorms 

Did you know that the Sahara Desert has grown by 10% since 1920, destroying waterholes and arable land? Green funding can pay for projects that maintain soil moisture and fertility to combat desertification and reduce the occurrence of sandstorms. Africa’s Great Green Wall (funded by conservation finance), for example, is on track to restore 100 million hectares of land and create 10 million jobs by 2030. 

Climate change 

Studies show that maintaining natural habitats can prevent 30% or more of the temperature rise we need to avoid. Conservation funding protects and restores these carbon sinks so they can absorb carbon dioxide from the atmosphere and help control global warming. One success story of this type of conservation finance is the Chocó-Darién Conservation Corridor in Colombia, which spans one of the most biodiverse regions on Earth. Financed through the sale of carbon credits, it continues to protect large tracts of forest while supporting indigenous livelihoods and preserving biodiversity. 

Another example is IFAW’s Room to Roam initiative, our ambitious vision for landscape conservation in southern and East Africa. With the goal of connecting elephant habitats, Room to Roam will support the populations of these vital species that serve as ecosystem engineers and help bolster landscapes’ resilience to climate shocks. 

What are the challenges of conservation finance?  

There’s no doubt that conservation finance is a great way to use government and private sector funds to save the planet. But like any initiative, there are some key issues to consider: 

Greenwashing concerns 

It can be difficult to precisely measure how conservation projects actually improve the environment. Understandably, critics worry that green financial products might be overstating their environmental benefits and question whether carbon offset markets truly work. 

An issue surrounding carbon offset markets is the question of additionality, which asks if the carbon mitigation activity would not have happened without the carbon credits. An ‘additional’ project refers to a carbon offsetting initiative that only exists because of the funding it receives from carbon credits. For a project to qualify as a true carbon offset, the carbon reduction achieved by the project needs to be ‘additional’. A project that would’ve happened anyway cannot count as a genuine carbon offset. 

Protocols to review and determine the validity of carbon offsetting projects include the Verified Carbon Standard, Climate Action Reserve, Gold Standard, American Carbon Registry and United Nations Clean Development Mechanism. 

Enhanced transparency and third-party certification processes are needed to increase accountability, boost credibility, and alleviate greenwashing concerns. 

Ensuring fairness 

Conservation efforts shouldn't displace or disadvantage local communities, so conservation funding needs to balance environmental and social goals. This can be done with community-led project planning and benefit-sharing models that involve local stakeholders in key decisions. It’s crucial that conservation efforts at a local scale are driven by the communities themselves, rather than being led solely by outside organisations. To ensure fairness, conservation projects need to respect the land rights of people living alongside wildlife and achieve free, prior, informed consent. 

Beyond money 

Not every contribution nature makes for people can or should be monetized. Wildlife and nature have intrinsic value and in many places around the world hold cultural, sacred, or social values. We should not always seek to put an economic price on these. Similarly, while financial incentives are important, conservation also requires systemic policy changes and grassroots efforts. We can all do our part by supporting policies, businesses, and organizations that protect natural habitats. 

IFAW supports nature-positive investments that protect the health of our only planet. Our goal is to help create a future where animals and people can coexist and thrive. Learn how you can take action for animals.